News
17.12.2009
EU wheat subdued on CBOT drop
Wheat prices in major western European markets were flat to lower on Tuesday, dampened by a dollar-driven fall in Chicago and sluggish export demand. Milling wheat futures in Paris continued to take their cue from the Chicago Board of Trade, where US wheat eased under pressure from abundant supplies and the dollar's rise to a 10-week high against the euro.
A decline in the euro is in principle positive for the European market by making exports from the region cheaper on the world market, but the dollar-driven Chicago trend remained the dominant influence, operators said. "We followed Chicago when the euro was rising and we'll follow it as the euro falls," one Euronext broker said.
However, spillover support from rising crude oil and US soybeans, which climbed on the back of strong demand from China, helped limit losses on wheat markets. On Euronext, January milling wheat slipped 0.50 euros or 0.38 percent to 129.50 euros a tonne by 1703 GMT in light volumes as trading reflected a slowdown in the French market in the run-up to the Christmas and New Year holidays.
The expiry of January options on Tuesday was not expected to have much bearing on Euronext prices as they represented only a small portion of open interest, operators added. Feed wheat futures in London were little changed with the market hovering just above a six-week low set on Monday. Dealers said a rise in the value of sterling helped to keep a lid on the market, adding UK wheat exports remained well below last season's levels.
The May contract stood unchanged at 110.25 pounds a tonne at 1550 GMT. The contract had slipped to 109.50 pounds on Monday, its lowest since late October. Germany's market was little changed with buyers and sellers often unwilling to deal, traders said. Standard bread quality wheat for January delivery in Hamburg was quoted unchanged at 129 euros a tonne.
German prices have lost their price premium over Paris in December, which traders said illustrated the sluggish pace of German exports. "Mills in north Germany are believed to have good supply cover up to March 2010 and feed makers appear to have covered their needs for the Christmas period," one trader said. "Exports are seen as the main market outlet but are not seen as likely with the euro's current strength," he added.
"The euro's fall to $1.45 was welcomed but a drop to at least $1.30 is seen as needed to make a significant difference to export prospects." Traders in France, the European Union's leading wheat exporter, were also cautious about the export outlook after changes to tender rules by key customer Egypt. French traders and officials are lobbying Egypt's state buyer GASC to relax a new requirement to load 60,000-tonne shipments at one port only, which has pushed up the cost of French bids.
Reuters
