MILAN: European wheat futures fell for a second straight session on Tuesday as a pullback in US prices outweighed bullish fundamentals in Europe, traders said.
Chicago wheat shed about 1 percent to add to a 3 percent drop on Monday as forecasts of rain in US growing belts boosted supply prospects. Corn and soybeans extended losses as operators booked profits after multi-month highs.
The pullback in Chicago wheat had overturned a recent upward trend and was raising the risk of a bigger correction, traders said.
Losses were limited, however, by technical support levels in both Chicago and Paris.
"Chicago has run out of steam with the rainfall and profit-taking ahead of the March 30 report," a futures dealer said, referring to the US Department of Agriculture's closely watched planting estimates.
May milling wheat on the Paris-based futures market was down 1.50 euros or 0.71 percent at 209.00 euros a tonne by 1654 GMT.
A support zone was seen at 206-207 euros, corresponding to the lower end of an upward channel that has held since December.
New-crop November was down 2.00 euros or 0.99 percent at 200.00 euros testing psychological support at 200 euros.
Paris prices also remained underpinned by steady demand and concerns about dry weather in France and in other parts of western Europe.
"There are grounds for a rebound in the short or medium term - a weather market, a tight French supply balance and premiums on the cash market," another dealer said.
Despite competition from cheaper origins like Argentina, French wheat was expected to win some business from Morocco as the north African country seeks to cover an expected plunge in its local harvest.
In oilseeds, European rapeseed futures eased as US soybeans continued to see liquidation after a six-month high on Monday.
May rapeseed was down 5.00 euros or 1.04 percent at 473.75 euros a tonne, as it retreated further from a contract high of 483.25 euros set on Friday.
GERMANY
German wheat was pushed down by the drop in Paris but strong feed wheat prices again gave background support to milling wheat.
Standard quality milling wheat for March delivery in Hamburg was offered for sale down two euros at 217 euros a tonne with buyers at around 215 euros.
Demand from animal feed producers kept German feed wheat prices around or even above milling wheat in parts of the country, repeating a pattern seen in past weeks.
Feed wheat for nearby delivery in the South Oldenburg market near the Netherlands was offered for sale above milling wheat at 223 euros a tonne with buyers at around 221 euros.
"Feed wheat demand remains strong which is underpinning milling wheat prices at a time of thin demand from mills," one German trader said. "But German prices in South Oldenburg are now about 5 to 6 euros above Dutch prices which may start to cool the market a little."
"But in the meantime some farmers are selling milling wheat as feed."
Feed wheat demand continues to meet tight supplies in northern German regions with recent export sales to Iran, keeping German prices well over the Paris market, traders said.
The unexpectedly low feed grain exports in past weeks from the Black Sea region have transferred buying interest back to EU feed wheat, with Spanish purchasers recently buying German feed wheat.
Demand from flour mills was said to be restrained partly because of poor profit margins on flour following the rise in wheat prices since the beginning of this year. But some mills were thought to have a supply requirement in April, traders said.
Expectations of a good German grains crop this summer were helping to keep German new crop prices well below old crop, but expectations are hardening that some winter damage has been suffered.
New crop milling wheat for September delivery in Hamburg was offered for sale at 203 euros at tonne with buyers around 202 euros.Germany's 2012 wheat crop will rise 6.3 percent on the year to 24.2 million tonnes from 22.7 million tonnes in 2011, the German Farm Cooperatives Association said in its first harvest forecast on Mar 8.
There is talk that about 300,000 hectares of grain may have been lost which would mean about 2 million tonnes, but it is hard to say how much of this is wheat," a trader said.
ITALY
Wheat prices in Italy, a major grain buyer in Europe, bucked the downturn on international markets and rose on the back of scarce supplies of national wheat, traders said.
Bread wheat added 3 euros on the week to 231-233 euros a tonne for prompt delivery, including delivery charges, while maize gained 2 euros to 207-208 euros a tonne, they said citing prices at a key weekly trade session of Milan's cereals bourse.
"There is practically no national wheat available on the market, but some people need to cover their contracts," one trader said of price rises on the local market.
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