EU wheat rebounds with US after three-month low

PARIS: European wheat prices rebounded from three-month lows as cross-market sentiment improved on a deal between Greece and lenders, but wheat remained under pressure from crop weather and Black Sea competition.

* The European market also drew support from a bounce in US grains, with corn adding about 2 percent to add to a late recovery on Thursday.

* The grain complex was supported by bargain-hunting and by a steadying in share and oil prices after Greece's agreement with lenders on its austerity plan and as surprise eased over an announcement that consumer nations would release emergency fuel stocks.

* "There has been no significant turn in fundamentals to warrant the sharp price drop, but with macro-economic unease remaining in place and recent selling in the market precipitated by macro-concerns and choppy external markets, the near-term price outlook for the grains is likely to be shaky," Barclays Capital analyst Sudakshina Unnikrishnan said.

* Benchmark November milling wheat was up 2.05 percent at 199.25 euros a tonne by 1253 GMT. It had fallen to a three-month low at 188.00 euros in the previous session before rebounding above a key floor at 186 euros.

* Operators stressed wheat remained weak technically and due to pressure from improved crop weather and increased price competition as Black Sea grain returns to international tenders.

* "Things haven't really changed, there is a slight rebound in line with Chicago. It all looks very tentative," one European trader said. "There has been an accumulation of factors: the economy, oil, the weather."

* Benchmark futures in Paris were still down 22 percent from a contract high of 254.50 euros at the end of May.

* "The market lost so much in a few weeks so what is 2 percent?," another trader, referring to Friday's rebound.

* Feed wheat futures in London also bounced off a three-month low in the previous session, with the November contract up 1.92 percent at 167.25 pounds a tonne.

GERMANY

* In Germany, prices rose in line with the strength in Paris, crossing the psychologically important 200 euro mark, which had been broken during Thursday's fall.

* Standard new crop bread-quality wheat for September and later delivery in Hamburg was offered for sale up six euros on late Thursday levels at 204 euros a tonne with buyers seeking around 202 euros.

* "After the selling yesterday some people are expecting lower prices to bring more purchasing which could be a reason for the bounce today," one German trader said.

* "The market still seems to be seeking a balance between the impact of the return of Russia and Ukraine to export markets and the impact of the drought on European harvests."

* The EU faces more competition in export markets as Russia ends a grain export ban on July 1.

* "Egypt bought French, US and Australian wheat at around $30 a tonne over Russian prices in the tender yesterday," another trader said. . "At this sort of price difference Russia will not be excluded from Egyptian business for long and this will be bearish for prices."

* German weather was mostly good for wheat plants this week with repeated rain bringing more relief to crops after a drought this spring. More rain was forecast and fell on Friday.

* Recent rain has given some help to German wheat after the drought but the country's 2011 harvest is still likely to be down on the year, Germany's largest grain trading house Toepfer International said on Thursday.

Copyright Reuters, 2011