EU wheat prices rise but mood remains nervous

LONDON: Wheat prices in western Europe rose on Monday in step with US grains and wider markets as operators took buying opportunities after recent losses.

* But gains in Paris were modest as investors remained nervous about the risk of a deepening euro zone debt crisis and a global economic recession.

* "We're searching for direction like the oil and equity markets," a grain trader said. "Everyone is wondering if we have sold too much or not enough."

* Benchmark November milling wheat was up 1.50 euros or 0.78 percent at 193.00 euros a tonne by 1605 GMT, as it held psychological support at 190 euros.

* The contract had hit a six-week low on Friday before trimming losses as Chicago wheat bounced on concerns about drought affecting wheat sowing in the United States.

* Paris-based wheat futures drew support on Monday from a bounce in US wheat and corn, driven in turn by technically oversold conditions plus a weaker dollar.

* Traders said cash prices in France, which have fallen less than futures this month, were being underpinned by a thin volume of offers from farmers discouraged by the market pullback.

* Feed wheat futures on Liffe also rose with November up 0.75 pound or 0.5 percent at 157.25 pounds a tonne. The contract remains down around 10 percent since the end of August.

* "Global macroeconomics have taken agriculturals on a downward trend in contradiction to the underlying fundamentals," Britain's Home-Grown Cereals Authority said in a market note on Monday.

* With longer term uncertainty heightened by the threat of a La Nina weather pattern, recent market movements may not depict underlying physical conditions," the report added.

* Feed barley cash prices, meanwhile, had risen above wheat rates in France, with the market continuing to be driven by export demand as slow Ukrainian shipments linked to an export tax opened up opportunities for European barley, traders said.

* A barley tender being held Algeria for November shipment could bring more business for French barley.

* Weakness in the euro, which earlier hit an eight-month low versus the dollar before rebounding, was also helping exports, traders said.

LIBYA SHIPMENTS

* Data from French ports also showed more wheat shipments for Libya, with one cargo loaded on Friday and another scheduled this week.

* Sources said last month that Libya's interim government bought 120,000 tonnes of French wheat using funds unfrozen by France.

* In the maize market, warm and sunny weather seen over the weekend was set to continue this week in France and help accelerate maize harvesting.

* Initial harvest reports suggested the crop could top 15 million tonnes on the back of record yields, traders said.

* However, operators said an expected big European crop could be curbed by the impact in eastern countries of hot summer spells.

* In addition to EU producers Hungary and Romania, Serbia could also see its harvest downgraded, French maize growers group AGPM said in a note, putting the country's maize crop at 5.5-6 million tonnes against 7 million in the US Department of Agriculture's current projection.

* In Germany, wheat prices were steady following the recovery in Paris and the stronger opening by US futures in Chicago on Monday.

* Low selling by farmers and regional traders after Germany's poor crop this summer again kept the German market well above French levels.

* Standard new crop bread-quality wheat for October and later delivery in Hamburg was offered for sale unchanged at 203 euros a tonne with buyers at around 200 euros.

* "The mood remains nervous with the trends in the outside markets providing the main cause for concern again as the Greek debt crisis continues," one German trader said.

* "Equity markets were recovering today which helped. But some grain price forecasts are starting to be reduced, such as Morgan Stanley today, which dampened sentiment."

* The lower volume and poor quality of this year's German crop continues to keep Hamburg prices well above Paris because holders of higher quality stocks are unwilling to sell, traders stressed.

* Competition from Black Sea region continues to weaken EU wheat prices but background support is coming from higher feed wheat demand in turn generated by expensive maize and barley, German trader Toepfer International said on Monday.

Copyright Reuters, 2011