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Monday 24 September 2018

EU wheat prices rebounds with Chicago as supply doubts persist

The price of wheat for bread rose by a fifth between March and July (Gareth Fuller/PA)
The price of wheat for bread rose by a fifth between March and July (Gareth Fuller/PA)

Valerie Parent, Gus Trompiz and Michael Hogan

Euronext wheat rose sharply on Monday in step with Chicago futures in a technical rebound from a six-week low, encouraged by further signs of tightening supply in major export regions.

Benchmark December milling wheat on Paris-based Euronext settled up 4.25 euros, or 2.2 percent, at 202.00 euros ($234.36) a tonne.

The contract pulled away from Friday’s low of 196.00 euros, a level not previously seen since late July, to rise back above the psychologically significant 200 euro threshold.

Chicago wheat also recovered from a six-week low before the weekend to add around 2 percent, with the run-up to closely watched U.S. government crop forecasts on Wednesday encouraging investors to adjust positions.

Wheat markets had rallied last month amid speculation that top wheat exporter Russia would restrict shipments given dwindling reserves, before being cooled by the absence of immediate action by the authorities.

But the country’s deputy prime minister in charge of agriculture on Monday said the Russian grain crop would allow exports of 30 million tonnes, a figure some traders have cited as a potential ceiling after which export curbs could be imposed.

“The (recent) price pullback goes against fundamental tensions on the world market and will disappear once Russian export flows ease,” consultancy Agritel said in a note.

A sharp reduction to Australia’s official forecast for its wheat harvest later this year also shifted attention back to weather losses in major exporting zones.

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Weekly European Union data showed that soft wheat exports from the bloc since the start of the 2018/19 season in July had reached 2.7 million tonnes, down 41 percent from a year ago.

In France, there was renewed talk that animal feed manufacturers in the major livestock region of Brittany in the northwest could import maize from eastern Europe in the face of high local premiums.

In Germany, wheat export activity remained slack after Germany’s drought-hit harvest, with domestic feed demand continuing to drive the market.

“Premiums in Hamburg have hardly moved in past weeks which illustrates the lack of (export) demand,” one German trader said. “People are hoping for a new Saudi Arabian wheat tender.”

Saudi Arabia is a major outlet for German wheat. The Middle Eastern country bought a massive 1.5 million tonnes of feed barley on Monday and is expected to return to the market soon for wheat.

New crop standard bread wheat with 12 percent protein for September delivery in Hamburg was offered for sale little changed at 4.5 euros over Paris December.

Feed wheat in Germany’s South Oldenburg market for September/December was offered for sale well over milling wheat at around 216 euros a tonne, with buyers seeking 213 euros.

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