EU wheat prices mixed on forex, exports, weather

EU wheat prices were narrowly mixed on Friday (May 7) as a euro-fuelled rally in Paris futures cooled while London feed wheat drew support from a falling pound as a British election gave no clear outcome.

 

European wheat markets also failed to get clear impetus from Chicago, where trade was hesitant as operators remained nervous about euro zone debt woes and awaited fundamental direction from USDA monthly crop report.

 

Wheat markets remained watchful of weather conditions that may affect developing crops, with concerns about dryness in France despite recent rainfall and flooding in northern Italy. After testing a resistance on Thursday (May 6) on the back of a tumbling euro that makes euro zone grain cheaper on the world market, benchmark Paris futures gave up some ground on Friday.

 

November milling wheat was down EUR1.75 (US$2.27) or 1.2% at EUR141.75 (US$183.58) by 1556 GMT, pulling back from the resistance of EUR143.5 (US$185.82) tested late in the previous session.

 

"There are two forces at play: sellers who have found attractive levels to sell at, and exports that are strong," said Olivier Merle, analyst with French consultancy Agritel.

 

The slide in the euro to a 14-month low this week has raised expectations of a burst of French exports at the end of the season, which could alleviate large supplies.

 

Foreign exchange factors were also behind higher feed wheat futures in London, which hit its highest level in more than three months before falling back to little changed levels by late afternoon.

 

Dealers said the market was underpinned by an export-enhancing decline in the value of sterling, which sank to a one-year low against the dollar and fell steeply against the euro as results of the UK general election that showed no one party would gain an overall majority.

 

Merchant Frontier Agriculture said other supportive factors helping UK wheat prices included a rare sale of French wheat to Mexico and reports that Spanish port silo operators have relatively low inventory levels.

 

Spain is the largest market for British wheat exports.

 

"That said, nobody is suggesting yet that we won't see a further increase in world supplies by the end of the 2010-11 marketing season and this is bound to limit any upward move meantime," Frontier said.

 

November feed wheat rose early to a peak of GBP109 (US$162) a tonne, its highest level since mid-January, but had fallen back to an unchanged GBP107.5 (US$160.1) by 1508 GMT.

 

In Italy, soft wheat prices were flat on the week at about EUR146-150 (US$189-US$194) a tonne for prompt delivery in northern regions as an earlier moderate pick-up in milling demand ran out of steam, traders said.