February 2, 2012

Cold weather pushes EU wheat futures to new high

Worries about a cold spell in Europe harming early maturing winter crops sent Euronext milling wheat futures to a fresh seven-month high on Wednesday (Feb 1).

Front-month March wheat, which gapped EUR3.25 (US$4.28) at the open, was 1.9% higher at EUR219.50 (US$289) a tonne after hitting EUR221.50 (US$292) a tonne earlier in the session, a price unseen since mid-June last year.

The move in old-crop contracts was accelerated by short-covering, Euronext traders said. The next resistance was pegged at EUR224 (US$295) a tonne.

New-crop November was 1.4% higher at EUR199.50 (US$263) a tonne.

"The market pays for a risk premium, and everyone follows through. But it could be overdone as the damage in western Europe still needs to be confirmed," one trader said.

He noted that the cold snap had arrived gradually in France, while it was quicker and thus more harmful in Germany.

Cold weather was also threatening grain crops in eastern Europe, mainly in Ukraine, which was facing record frosts after suffering from a severe drought in July-November.

Ukraine's state weather forecaster said on Wednesday (Feb 1) the winter grains harvest could fall by 42% to 58%, or 10 million to 14 million tonnes due to poor weather during sowing and wintering.

The frosts also dramatically slowed the pace of grain exports from the country's Black Sea ports, traders said on Monday (Jan 30).