Wheat prices in western Europe were flat to higher on Friday, holding onto strong gains this week linked to export prospects despite key US government supply forecasts that were more bearish than expected. Benchmark futures in Paris rose slightly to stay near contract highs and the highest levels in 4-1/2 years on the continuation chart.
January milling wheat was up 1.75 euros or 0.64 percent at 277.25 euros a tonne by 1715 GMT, close to a contract high of 279.25 euros set on Thursday that was also the highest level for a second-month contract since March 2008. The rise marked the seventh daily gain in eight sessions, a run broken only by a flat close on Thursday.
The bullish momentum, linked to European export prospects that have been reinforced by a weaker euro and harvest worries in the southern hemisphere, allowed the market to shake off a fall for Chicago wheat following the US Department of Agriculture’s bigger-than-expected forecasts of US and world wheat stocks. Operators had been expecting lower numbers for world wheat supply after weather problems in Australia and Argentina. “We’re a bit surprised at the price reaction,” a French futures dealer said. “You can sense that the market just doesn’t want to settle down.”
The rally has brought Paris prices within range of an all-time peak of 300 euros, although traders said strong resistance at 280 euros could prompt consolidation next week, especially if surprising gains in US corn futures after the USDA report were to fade.
Weakness in the euro, which hit a new two-month low against the dollar on Friday, continued to underpin Paris prices by making the grain from the euro zone cheaper on dollar-priced export markets. Weekly data on Thursday showed the European Union cleared a hefty 421,000 tonnes of wheat export licences this week, keeping the volume so far this season up on the year.
In crop news, weekly data from French farm office FranceAgriMer showed winter grain sowing was now in its latter stages, with 80 percent of wheat and 93 percent of barley sown by November 5. But analysts said heavy rain in the past month may cause some wheat area to be lost, a trend that could be even more pronounced in Britain.
Feed wheat futures in London saw gains trimmed following the USDA data after earlier setting contract highs May feed wheat stood 0.50 pounds or 0.22 percent higher at 227.00 pounds a tonne after earlier setting a contract high of 229.10 pounds. The contract was on track for a weekly gain of 3.5 percent.
“Only 10 days ago UK wheat was close to export parity, but a round of concerted buying by domestic processors has driven UK prices back to import parity,” farmers co-operative Openfield said in a market note on Friday Dealers noted a poor quality UK harvest had made millers increasingly reliant on imports. Millers continue to explore different origins and specifications of imported wheat and for the moment finding a replacement for soft wheat is proving to be the biggest challenge,” Openfield added.
Demand from British wheat buyers was supporting German prices. “There has been steady demand in German ports from British buyers this week for high quality wheat grades,” one trader said. This was adding to healthy export prospects for German wheat from outside Europe as rival exporters faced harvest problems.