European wheat prices rose on Tuesday, buoyed by concerns about crops in South America as the La Nina weather phenomenon continued to build, but traders said the market could be overbought and vulnerable to a downside correction. Paris-based milling wheat futures also drew support from covering of positions on the front-month January contract ahead of its expiry next week.
By 1308 GMT, the benchmark March contract was 1.5 percent at 201.00 euros a tonne after hitting a new 3-1/2 months high of 202 euros a tonne. The next resistance was put at 202.50-203 euros. The contract gained more than 15 percent in the past three weeks as concerns mounted about hot, dry weather hurting corn output in Argentina, the No 2 exporter of the grain.
A La Nina weather year can also cause dry conditions in the US grain belt. A severe drought in the United States in 2012 could sharply reduce global food and fuel supplies and give a big lift to grain and soybean futures prices. January milling wheat continued to trade higher than deferred contracts, adding 3.75 euros to 210.25 euros.
"After the rise in the past weeks there is a feeling that the market may be overbought, notably because there is not much news apart from potential damage in Latin America, which still needs to be assessed," a trader said. Activity is resuming on the French physical market after the year-end break. May feed wheat in London rose 4.00 pounds or 2.6 percent to 158.00 pounds, the highest level for the contract since October 25, 2011.
Comments
Comments are closed for this article.