May 8, 2012

 

EU wheat slightly down as elections raise economic fear

 

 

As French and Greek elections cast doubt on politicians' commitment to austerity plans aimed at tackling the euro zone debt crisis, Euronext milling wheat futures were stable to slightly lower on Monday (May 7), traders said.

 

However, prices received some support from the weaker euro, which favours exports of European products. Hesitation in the grains market was reinforced by uncertainty about the approaching harvest. After frost damage in the winter and dry weather in February, recent wet weather raised concerns of disease that could cut wheat yields.   

 

"The weather is relatively good. We went from deep pessimism to more serenity but uncertainty on the final production remains, which limits the selling pressure," one trader said.    

 

By 1132 GMT, Paris-based new-crop milling wheat benchmark November was down 0.1% at EUR195.50 (US$255) a tonne, rebounding from a low of EUR193.50 (US$252) at the open.      

 

The May contract, which expires on Thursday (May 3), was down 1% at EUR217.75 (US$284). Rapeseed prices were also lower, mainly pressured by weak crude oil.         

 

"The technical correction imposed by the fall in oil prices is ruling the market in the short term," a Euronext trader said. "But fundamentally there is no change. The European balance will be widely in deficit, be it for seeds or oil."           

 

By 1210 front-month August was 0.5% lower at EUR470.00 (US$612) a tonne after falling to EUR466.75 (US$608) at the open, which prompted some buying interest.    

           

In Germany, German feed wheat was again offered for sale at prices above milling wheat because of strong demand from animal feed makers, continuing a recent pattern of high feed prices. Standard milling wheat for May delivery in Hamburg was offered for sale little changed from late Friday levels at around EUR231 (US$301) a tonne with buyers at around EUR229 (US$298), once more holding well over Paris prices.    

 

Feed wheat for nearby delivery in the South Oldenburg animal feed grains market near the Netherlands was offered for sale above milling wheat, unchanged at EUR237 (US$309) a tonne with buyers at around EUR235 (US$306). 

 

"High demand for feed wheat continues to drive the market," a German trader said. "It looks like the pattern will be repeated again this week with milling wheat sold for feed."       

 

Animal feed wheat prices have unusually risen above bread-quality wheat prices in parts of north Europe in recent weeks as feed makers scramble for extra supplies. German new crop prices are well below old crop after rain in past weeks helped relieve parched crops. Standard milling wheat for Hamburg delivery in September was offered for sale at EUR205 (US$267) a tonne with buyers at EUR203 (US$264). 

 

Traders noted that new crop feed wheat was also quoted over milling prices, with feed wheat for September-December delivery in South Oldenburg offered for sale at EUR208 (US$271) a tonne with buyers at EUR206 (US$268). After a wet weekend, warmer temperatures with showers and thunderstorms are forecast for much of Germany up to Friday.       

 

"The concern about dryness damage to crops seems to be easing," a trader said."

 

In Spain, Spanish physical wheat has held steady for three weeks as market attention has shifted to corn and record soy meal prices. Dealers said they awaited concrete offers of domestic new crop, which is due as of in mid June in the northern grain belt.     

 

"May deliveries are probably very much covered, but what is certainly true is there is little interest in the cereal market at present, and if little is said about old crop, even less is said about new crop," a report said from the Mercolleida agricultural exchange.   

 

Prompt feed wheat was quoted at EUR230 (US$300) per tonne in leading grains port Tarragona, unchanged since mid-April. Imported new crop was offered at EUR212 (US$276) per tonne for September delivery.  

 

Offers of domestic new crop were reported at EUR216 (US$281)-tonne in central Spain, or EUR12 (US$16) below old crop. Dealers noted that the old-new crop spread in May is usually EUR20 (US$26).

 

"So it (the offer) looks more like merchants sounding out the market again than anything with much of eye on reality," the Mercolleida report added.