EU wheat rises as hot spell takes hold in Europe

FILE PHOTO: A French farmer harvests wheat, during sunset, in Bourlon, France July 19, 2018. REUTERS/Pascal Rossignol/File Photo
FILE PHOTO: A French farmer harvests wheat, during sunset, in Bourlon, France July 19, 2018. REUTERS/Pascal Rossignol/File Photo

Sybille de La Hamaide and Michael Hogan

European wheat prices rose on Monday as a heatwave set to last all week in western Europe raised the risk of yield losses although good crop development in many regions was likely to limit damage, traders said.

Front month September milling wheat on Paris-based Euronext unoficially closed 1.5% higher at 183.50 euros ($209) a tonne.

 "In France and Europe, everyone has in mind the scenario of hefty 2019 wheat production. But the heatwave that starts could cause significant damage," consultancy Agritel said in a note.

It stressed that the heatwave was set to be longer and with higher temperatures than one in early July 2015 that sent prices €20 higher on Euronext, before falling immediately with record wheat yields.

"A risk premium could therefore be reintegrated into the European market."

Refinitiv Agriculture Research analysts said the heat would be detrimental for crops in reproductive development looking to rebound from last season's crippling drought, noting temperatures would be over 10 degrees above normal.

Activity was low on the cash market where operators were closely watching temperature forecasts.

"It seems inevitable that yields will be hit, notably in regions in the north where wheat is less developed but in other parts of the country the hot spell comes at a time when grain filling is well advanced which should curb potential damage," a broker said.

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In Germany, traders said they were taking a relaxed view of a heatwave expected in the country this week.

Much of Germany is forecast to receive strong sunshine and temperatures of over 35 degrees Celsius throughout this week, peaking at over 40 degrees on Wednesday.

"Temperatures this high could clip yields a little but overall the market does not seem to be worried about the situation in Germany," one German trader said.

"There could be a moderate cut in yields but wheat received a lot of rain in the past few weeks, some of it very heavy, and ground moisture is sufficient to help plants resist a short burst of heat."

"Compared to the drought last year the heatwave is not much of a problem in my view. Overall Germany and west Europe is still on course for a much larger harvest than last year."

Standard bread wheat with 12% protein for September onwards delivery in Hamburg was offered for sale unchanged at €4 under Paris December. Buyers were seeking at least €5 under.

Premiums remain under Paris because of large harvests expected in the Baltic Sea and Black Sea regions, with Germany's rival exporters offering cheaper export prices.

Reuters


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