October 6, 2010

EU wheat exports still lively despite stronger euro

European wheat futures jumped on Tuesday (Oct 5) on the back of strong gains in US grain futures and other commodities, shrugging off a rally in the euro that could hamper Europe's wheat competitiveness on world markets.

Benchmark November on Euronext wheat futures closed at EUR205.75 (US$283.3) a tonne, up EUR6.50 (US$9.01) or 3.26% after hitting an intraday high of EUR206 (US$285.56). The next resistance level is estimated at EUR208 (US$288.28).

On Monday the benchmark wheat contract in Paris hit a two-month low of EUR196.25 (US$271.94) a tonne, driven by a slide in US grains due to raised estimates of corn supply, an initial reaction to Canadian crop data and technical elements.

Some operators pointed out that many fundamentals remained bullish, including brisk export demand for French grain after drought-hit Russia froze exports.

"Despite the high level of the euro, if you look at the incessant stream of loadings, it's clear that importers continue to favour French origins," a trader said.

US corn, wheat and soy rose on Tuesday (Oct 5) as the US dollar slumped to an eight-month low and crude oil prices climbed, helping grains claw back some of last week's losses.

Expectations that the US would increase the money supply boosted the euro, making commodities priced in US dollars more appealing.

The market will remain volatile until the release on Friday of the US Department of Agriculture's (USDA) world supply and demand report and US crop outlook, with the yield estimate for the US wheat crop closely watched, traders said.

In London, November feed wheat futures were up GBP5.95 (US$9.47) at GBP155.00 (US$246.64) a tonne. The UK's 2010 wheat harvest is estimated at 14.8 million tonnes, up 5% on the year, the UK farm ministry reported on Tuesday (Oct 5).

Germany's market rose sharply, supported by the rise in Paris, coupled with belief that recent price falls were overdone, traders said. Repeated rain since early August has damaged the quality of Germany's wheat crop, and a much larger volume than usual is likely to be only feed quality.

The poor crop quality in Germany remains a long-term supportive factor," a trader said.

Wheat prices in Italy fell, catching up with previous losses on major international markets, traders said. EU wheat imported into Italy fell EUR7-EUR15 (US$9.70-US$20.79) on the week, depending on quality, while US and Canadian imports lost EUR8 (US$$11.09).