EU wheat firm as support level holds, US rises

Wednesday, 22 February 2012 23:28

HAMBURG: European milling wheat futures rose on Wednesday as dealers were encouraged that technical support levels held after a sharp fall on Tuesday while an early Wednesday rise in U.S corn futures also helped the market steady.

* Paris' benchmark May wheat contract was up 0.50 euros or 0.2 percent at 206.00 euros a tonne at 1709 GMT. The contract continued to hold support around 205 euros that had held during a late sell-off on Tuesday which saw the contract close down 6 euros.

* Paris front-month March was up 0.75 euros or 0.3 percent at 212.50 euros. New crop November was up 1.0 euro or 0.5 percent at 193.00 euros.

* EU benchmark wheat prices in Paris had tumbled on Tuesday, hit by losses for corn in Chicago as dealers anticipated big corn plantings ahead of US government projections later this week.

* "Market operators will now focus on planting intentions for soybean and corn in the United States," French analysts Agritel said in a note.

* The US Department of Agriculture's outlook conference on Thursday and Friday is expected to reveal a government forecast that the US corn acreage in 2012 will be the largest since 1944. There is also speculation large new soybean sales to China will encourage farmers to plant more beans.

* "We're seeing the market price in planting levels for US corn and soybeans," a French futures dealer said. "If there are any surprises we could see a return to buying in cereals."

* The hesitant tone in grain markets ahead of the USDA acreage estimates was encouraged by a choppy euro-dollar rate and subdued equity markets.

* The export scene is also becoming more positive as competition from the Black Sea region subsides. French traders are expecting a flurry of loadings next month as ports handle recent sales, notably to Algeria.

* French wheat sales to Algeria have also been boosted by switching from South American origins due to quality issues. Traders said two cargoes scheduled for loading at Rouen fell into this category, bringing to 75,000 tonnes the volumes switched and shipped through Rouen this month.

* Senalia, a silo operator at Rouen, said that it would be able to handle all upcoming loadings, despite the closure of one silo after a crack was found. Loadings would be assured by rotating between other silos, it said in a statement.

* In oilseeds, European rapeseed futures were little changed, facing pressure from weakness in their lead markets, US soybeans and crude oil, but supported by tight European rapeseed supplies.

* Paris May rapeseed was unchanged at 457.25 euros.

GERMANY

* German wheat was little changed in cautious business following sharp price falls on Tuesday with milling wheat being sold for animal feed because of continuing high feed grain prices in parts of the country.

* Standard quality milling wheat for March delivery in Hamburg was offered for sale flat on late Tuesday levels at 213 euros a tonne with buyers at around 211 euros. Prices had fallen by five euros on Tuesday.

* "There is very thin market participation with both buyers and sellers unnerved by the sharp price falls on Tuesday," one German trader said. "Market participants are also unwilling to deal ahead of the USDA crop meeting tomorrow and Friday."

* The deep frosts this month have caused some canals and rivers to freeze up and inland logistics remains disrupted. The Danube and a series of other small rivers and canals were still blocked by ice on Wednesday, but the warmer weather could help to free inland waterways in coming days.

* Demand from animal feed producers kept German feed wheat prices close to milling wheat in parts of the country, a pattern seen in past weeks. * Feed wheat for nearby delivery in the South Oldenburg market near the Netherlands was offered for sale at 213 euros a tonne, with buyers at around 211 euros.

* These are attractive to farmers in north German regions close to South Oldenburg and milling wheat is currently being sold for animal feed, traders said.

* Falling exports of Black Sea feed grains, especially from Ukraine, are pushing more demand back to the EU, traders said.

SPAIN

* Spanish dealers were unable to say when reported sales of 200,000 tonnes of US wheat were due to arrive in the import-dependent country.

* According to trade talk, dealers had asked the EU to allow them to switch origins from the Black Sea because severe cold and frozen ports prevented them from executing import licences awarded under the tariff rate quota (TRQ) scheme. Under the TRQ scheme, the EU permits grain imports at cut customs duties to ensure supplies in major consuming countries.

* To make this change without paying penalties, importers were said to have requested Brussels to declare force majeure on the shipments.

* "If Ukrainian ports remain frozen, there's an argument that it is force majeure, but it's too early to tell," the source said.

* Spanish government sources meanwhile said they had submitted no requests to change origins because most dealers had had no problems importing from the Black Sea.

* A German trader commented: "US wheat looked competitive but the volume into Spain from the US may now be reduced to around 66,000 tonnes as EU prices have fallen and so present a better alternative."

* Spanish quotes for prompt feed wheat in leading grains port Tarragona were unavailable, but April delivery was offered at 223 euros/tonne, up 1 euro from Monday.

ITALY

* Wheat prices in Italy, a major grain importer, were little changed after falling at a major weekly trade on Tuesday with traders expecting further falls in bread wheat prices due to weak milling demand.

* " Mills are well covered with supplies and don't buy much," one Italian broker said. "Bread wheat may fall again tomorrow in Bologna, but higher grade wheat may be unchanged on support from millers who need it to improve their mix," referring to a weekly session at Bologna's grain exchange on Thursday.

* Italian Bread quality soft wheat was traded at about 230 euros a tonne for prompt delivery, in line with prices set at a weekly session of Milan's grain bourse on Tuesday.