July 24, 2012

 

EU wheat prices down on financial markets setback

 

 

Dented by a setback in financial markets linked to the deepening debt crisis in Spain, Western Europe's wheat prices fell on Monday (July 23), while sunnier weather looked set to lead to a pick-up in the pace of harvesting in the region.

 

"The French wheat harvest has resumed following a wet spell and the pace is expected to pick up with dry weather forecast for the rest of the week," Britain's Home-Grown Cereals Authority said in a market note on Monday (July23).

 

"New crop availability will offer some relief to nearby EU prices but variable quality is possible following rainfall," the HGCA added.

 

Benchmark November milling wheat on the Paris-based futures market was down EUR4.25 (US$5.15) or 1.6% at EUR265.50 (US$322) a tonne by 1613 GMT.

 

Last week it touched a contract high of EUR271.50 (US$329) as it notched up a weekly rise of EUR11 (US$13). Despite forecasts for some rain in the US Midwest, grain fundamentals remained bullish, traders said.

 

"Some people say we've priced in fundamental news but I don't think so. We're just having a pause," one dealer said.

 

"In a market that rose so steeply it is normal to catch your breath," another dealer said. "Harvesting is also starting to get into gear in France."

 

Persistent rain in late spring and early summer has raised fears of damage to crop yields and especially quality. The market is watching for clearer signs of the quality of France's main wheat crop but the arrival of hot, sunny weather this week in northern grain belts has reassured operators.

 

November feed wheat futures in London were off GBP3.50 (US$5.43) or 1.8% at GBP191.00 (US$296) a tonne. Standard milling wheat for September delivery in Hamburg was offered for sale down EUR2 (US$2.4) on late Friday (July 20) levels at EUR271 (US$328) a tonne, with buyers at around EUR269 (US$326).

 

"The market has more of a cautious mood after the dramatic rise in domestic and global prices in the last month," one German trader said. "German prices remain well over Paris following recent export demand, although the export side looks quieter.


Germany has had repeated rain in past weeks, stopping the barley harvest and creating concern about quality damage to wheat. Sunshine reappeared after a damp weekend on Monday (July 23) and dry, sunnier weather is forecast to continue up to Friday (July 27).

 

"It is now hoped the barley harvest will resume throughout the country this week," one German trader said. "Sunshine will be welcome news for wheat, which needs to be pushed to ripeness ready for harvesting in the second half of August."

 

German feed wheat for nearby delivery in the South Oldenburg animal feed grains market near the Netherlands was again quoted over milling wheat, offered for sale down EUR5 (US$6.06) at EUR273 (US$331) a tonne for nearby delivery, with buyers at around EUR270 (US$327). Strong demand has kept German feed wheat prices above milling wheat in past months.

 

Rapeseed futures were also lower, under pressure from their lead markets, US soy and crude oil, and harvest progress in France.

 

"In rapeseed, people are realising that yields are not as bad as feared," the dealer said of the French crop.

 

November rapeseed was down EUR5.25 (US$6.36) or 1.0% at EUR518.00 (US$627) a tonne.

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