Euronext wheat futures closed little changed on Friday as technical resistance on price charts curbed a rally fuelled by lower than expected US government supply forecasts that had pushed the market to a 5-1/2 month high. March milling wheat on Paris-based Euronext settled unchanged on the day at 171.75 euros a tonne.
It earlier rose to 172.75 euros, a level last seen on August 22, as it reacted to a 2 percent rise for Chicago futures at Thursday's close. However, the Euronext spot contact failed to break clear of a chart resistance zone around 172 euros. Second-month May stayed in positive territory, settling up 0.4 percent at 173.50 euros, as some participants switched from the front month ahead of next week's expiry of options on March futures.
In a closely followed crop report on Thursday, the US Department of Agriculture (USDA) reduced its projections for US and world wheat inventories, lending support to a wheat market in which investors have large short positions. "Chicago rallied strongly yesterday following the USDA report, and so it was logical for Matif (Euronext) to gain more ground this morning," one futures dealer said.
"But there's still chart resistance at 172 euros." Despite the USDA's supply cuts, forecast global wheat stocks at the end of 2016/17 remained at a record level. "After the USDA cut global wheat ending stocks, we caution against the longevity of this bullish sentiment," Rabobank analysts said in a note. German cash market premiums in Hamburg were marked down to compensate for the earlier gains in Paris which sparked selling interest in parts of Germany.
Standard wheat with 12 percent protein content for February delivery in Hamburg was offered for sale down 1 euro at 4.5 euros over the Paris March contract, buyers were seeking 3.5 euros over. "The rise in Paris generated some of the highest outright prices seen since last summer and several stockholders decided the levels were attractive enough to sell," one German trader said. "There is also a feeling that inventories of high-quality wheat in Europe are not as big as some had believed."
The European market was also being underpinned by weakness in the euro, which slipped to a three-week low against the dollar, as this improved export prospects. The weaker euro would also help EU offers in a 400,000 tonne tender from Ethiopia, which is still being negotiated with no purchase yet made, traders said. Offers will also be submitted over the weekend in a revised tender for wheat from Iraq.
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