EU wheat prices up on world markets

European benchmark wheat prices added to prior gains on Thursday and fended off export-punishing strength by the euro due to broad-based gains on global commodities and financial markets. Additional support came from concerns cold weather in eastern Europe was threatening crops, although traders were split on assessing the level of snow cover.
Expectations that Russia might curb exports also helped drive prices higher. "On top of the general firmness, we now see the traditional weather market elements," a trader on the Euronext exchange in Paris said. Analyst ProAgro said on Thursday major exporter Ukraine's grain harvest was likely to come in at about 40 million tonnes in 2012, down from a record of 56.7 million tonnes in 2011 due to a fall in acreage due to bad weather during while winter crops were being sown.
By 1254 GMT front month March milling wheat was 0.7 percent higher at typically the world's third largest exporter, 209.50 euros a tonne on Euronext, just shy of a 4-month high of 210.00 euros reached on Tuesday. The cash market saw a fall, however, in the premium on Euronext prices to offset the rise on futures market and gains by the euro.
The euro hit a five-week high against a broadly weak dollar on Thursday, supported by the Fed decision and speculation of progress in Greek debt negotiations. Physical wheat in major importer Spain drifted up in line with recent movements on world futures markets, but bid/offer spreads were still wide with few deals settled due to low demand and consumers awaiting the arrival of cheap Ukrainian wheat.
Dealers also reported farmers were retaining domestic old crop wheat and demand was low due to a seasonal lull in the breeding cycle in what is home to Europe's biggest pig feed industry. "The (Ukrainian) wheat is coming, they still have time. Some of it has been sold, some hasn't, but no one is buying right now," a dealer said. "The market is dispirited. There is a lot of uncertainty and every one wants prices to fall."
Prompt feed wheat in top grains port Tarragona was quoted at 214-218 euros a tonne, up about 1 euro since Monday. Benchmark wheat prices have risen about 18 euros higher than on December 20, which explains lack of buying interest amongst hard-pressed livestock farmers facing a new recession in Spain.
Germany's market firmed as Paris rose again with export hopes and continued feed wheat demand in north Germany supporting. Standard bread-quality milling wheat for February delivery in Hamburg was offered for sale up two euros at 210 euros a tonne with buyers at around 209 euros.
"The markets seem to be supported by the perception of more export demand being transferred to west Europe," one German trader said. "Regardless of whether the rumours of Russian grain export restrictions are true, Russia seems to have made very heavy sales and will have to move wheat supplies from areas much more distant from its ports, which will continue to raise Russian prices on international markets."
"Argentina has also suddenly dropped out of the export market because of the uncertainty about its crop and government export policy." "This means there is a growing lack of liquidity in global grain export markets and the west EU could start winning business again despite the stronger trend in the euro in past days."