July 10, 2009

European wheat futures rise on short-covering by physical traders as farmers refrain from selling their stocks despite expectations of a decent European harvest this summer.

 

Traders say they are stumped over why wheat futures remain strong given bearish fundamentals in the short-term horizon.

 

As of 1536 GMT Paris November milling wheat was trading up EUR2.50, or 1.8 percent, at EUR143.25 a tonne, with 3,776 lots moved. London November feed wheat rose GBP1, or 0.9 percent, at GBP113/tonne, with 55 lots moved. Paris milling wheat has shown strong support at the US$440/tonne level.

 

European wheat has been "remarkably stable for the last three to four days," said a UK-based trader. He said it was unclear whether prices should fall or rise but he said there was more bearish than bullish news.

 

"Things are in a bit of a muddle," he adds, given that "we have a build up of crop stocks, no exports and an early harvest" on hand.

 

A Paris-based trader said he was perplexed by the fact that farmers were holding on to their stocks and refraining from forward selling their pending harvest since he expects this summer's harvest to be decent and warned that exports into Europe remain a threat.

 

Black Sea wheat traditionally exported to Egypt may this year be re-routed to Spain and other parts of Egypt due to quality issues concerning Russian wheat, the trader said.

 

The increased exports to Europe may cause feed wheat prices to tumble but milling wheat prices may rise because of the quality issues concerning Russian wheat, the Paris trader said.

 

"Egypt could save" European milling wheat prices, he said, because Egypt may be forced to import from Western Europe in order to offset reduced imports from the Black Sea region.

 

Egypt is one of the world's largest grain importers. It consumes about 7 million tonnes of wheat a year and imports about half that amount annually, the trader said.

 

The UK-based trader said it was too early to make a call on the direction of future wheat prices. There is a "big black cloud" hanging over the wheat market at the moment but there will be more clarity once the harvest begins in the ensuing weeks, the trader said.

 

Standard-quality wheat prices in the French cash market delivered at Rouen were up EUR1 at EUR132/tonne from Wednesday.

 

Liffe's Paris November corn traded up EUR1 or 0.9 percent, at EUR137.75/tonne, with 51 lots moved. Paris-based November rapeseed traded up EUR5.25 or 1.9 percent, at EUR278.25/tonne, with 273 lots moved.