August 25, 2010

 

EU wheat edges lower

 

 

European wheat markets were slightly lower on Tuesday (Aug 24), resisting the slide in the commodities complex and equities markets, as a tighter supply and demand outlook supported prices.

 

Russia's grain export ban following its drought has opened up opportunities for other European exporters on the international market and cut world supply estimates.

 

"There is enough grain in the world but most of the carryover stocks are in China, India and the US - and China and India are not going to rush to dump their stocks on the world market," a UK-based broker said. "No one's going to starve but the market is a lot tighter than it was."

 

Milling wheat futures in Paris were slightly lower but resisted tracking the extent of the drop in Chicago and saw losses limited on the front-month contract by robust export demand, stoked by Russia's freeze on grain exports and a decline in bread-quality supply from rain-hit harvests in northern Europe.

 

"Northern Europe is going to be the feed wheat market," one trader said, stressing that the good quality of the French crop was allowing it to dominate shipments of milling wheat.

 

After concerns that Russia's severe drought could drag on into the sowing season, the market was cooled by comments by a weather forecaster that rain in recent days had improved conditions for winter-grain sowing in some drought-affected areas of European Russia.

 

Wheat prices were also dampened by weakness in outside markets amid concerns about the US economy and a fall in corn prices after a higher-than-expected progress rating for this year's US crop.

 

Traders reported fresh import interest from Yemen and Libya, while also predicting another tender from Egypt's state buyer should US prices close lower. Fresh weakness in the euro was also boosting export sentiment, traders said.

 

Benchmark November milling wheat <BL2X0> was down EUR0.25 (US$0.32) at EUR214 (US$271.87) a tonne by 1731 GMT. Next support was put at EUR208.50 (US$264.88).

 

Cash market prices stayed well above Euronext levels in the wake of the heavy export demand. <WHEAT/RTR>

 

High French prices were prompting feed makers in Brittany to book imports of feed wheat, traders said, stressing such imports were EUR6 (US$7.62) a tonne less than crop from central France.

 

Some 20,000 tonnes of feed wheat were due to be shipped to the north-western port of Brest in the first half of September, with half of the volume from the Baltic countries and the rest from Germany and the UK, traders said.