September 3, 2010

European wheat exports firm on extended Russian ban

As weather-hit Russia indicated it would extend an export ban until 2011, Western European wheat prices firmed on Thursday (Sept 2) on intense export activity driving French and US wheat demand.

Analysts said the news was to be expected after Russia suffered its worst drought in more than a century.

"I do not understand why it is such a surprise, that Russia is extending the export ban. What can they export? Dust?," said Palle Jacobsen, an analyst in Denmark.

Milling wheat futures in Paris rose to their highest levels in nearly a month to test resistance, buoyed by gains in Chicago on the back of the prolonged Russian export halt, although European dealers reacted with more calm.

"It's a clear signal that (Russian) exports are banned for the whole campaign and not until the end of the year. It confirms what the market already knew. Whether exports restart in November 2011 or later, or before, it will all depend from their promptness to react to crop forecasts. The market and climate will decide," a trader said.

Brisk export activity in France following crop damage in Russia and Germany also supported prices.

Data showed that the EU granted export licences for 658,000 tonnes of soft wheat this week, taking the total since the start of the 2010/11 season to 3.34 million tonnes, against 2.86 million at the same time last year.

Tunisia's state grains agency has purchased 50,000 tonnes of optional origin milling wheat on Thursday (Sept 2), much like the French.

The front-month November contract <BL2X0> continued to trade higher than further-away contracts, reflecting intense short-term exports. It was up at 229.75 euros (US$293.9) a tonne by 1601 GMT as it traded at highest levels since August 6. Traders were waiting to see if benchmark prices would close above resistance at 230, which could accelerate the rally.

"Some operators see the market at 250 euros (US$320.56). There is so much export demand that buyers are paying above market prices," one futures broker said.

Within Europe, demand for French wheat was being boosted by buyers switching from German wheat as a rain-soaked harvest slashes the volume of milling-grade crop in Germany.