July 14, 2011

 

EU wheat rises amid strong CBOT gains

 

 

European wheat futures increased at the open on Wednesday (Jul 13) as prices were keeping up with strong gains on CBOT due to bullish data from the USDA.

 

Paris milling wheat for November delivery jumped 2% to a high of EUR195.25/tonne (US$276.06), before pulling back slightly. At 0905 GMT, the contract was trading at EUR194/tonne (US$274).

 

But the gains were more muted than the 4% rise seen in Chicago as European traders face growing competition from buoyant Russian exports.

 

In a closely-watched report, the USDA Tuesday (Jul 12) raised its estimate for Russia exports to 12 tonnes of wheat, reducing its estimate for carry-out stocks in 2011-12 to 11.1 million tonnes.

 

"Exports are raised for Russia as relatively low prices make Russian wheat competitive into North Africa and Middle East markets," said the report.

 

The arrival of Russia wheat on the world stage has been a major factor in depressing prices in recent weeks. Russia wheat has been trading at around a US$30 discount per tonne to European supplies and has been chosen in several tenders by North African buyers, including the world's largest wheat importer Egypt.

 

European imports are expected to rise one million tonnes to 7.5 million tonnes as Southern European countries look to take advantage of discounted Black Sea wheat. Production is also expected to be 620,000 tonnes higher than thought at 132.1 million tonnes, leaving exports of 15 million tonnes.

 

"With conditions improving across Europe's key producers including France and Germany, we would expect this figure to rise yet again in August," said a FC Stone analyst.

 

Meanwhile, neighbouring Ukraine is forecast to reap one million tonnes less wheat than hoped at 19 million tonnes, due to persistent spring dryness in the north central areas, cutting exports by the same amount to 7.5 million tonnes.

 

The USDA also lowered its estimate for Canada's wheat crop by 3.5 million tonnes to 21.5 million tonnes, and exports by 2.5 million tonnes to 16 million tonnes, as farmers struggle to harvest their lowest acreage since the 1970s.

 

The gap in exports is also expected to be partially filled by the US, where exports are now expected to shrink less than previously thought in 2011-12, to 31.3 million tonnes.