EU wheat extends rally after Chicago jumps to near 5-year high

PARIS: European wheat prices soared on Thursday on hopes of a boost in demand after dry weather in the US Plains and in other major producing countries pushed Chicago prices to near five-year highs.

Benchmark December milling wheat on Paris-based Euronext unofficially closed 1.7% higher at 207.00 euros ($242.1) a tonne after touching a new contract high of 207.25 euros.

It has gained more than 20 euros over the past month.

"The market is factoring signs that dry weather could hamper wheat crops in many large growing regions," a trader said.

Euronext prices extended gains after the open on US markets where most active wheat was up 2.6% at $6.12-1/2 a bushel after rising as high as $6.16-3/4 in early trade.

Argentina's Rosario grains exchange cut its estimate for the country's 2020/21 wheat crop to 17 million tonnes, from 18 million previously, citing dryness and frosts.

Consultancy Strategie Grains raised its outlook for soft wheat exports from the European Union and Britain in 2020/21, citing better competitiveness on world markets after a rise in Black Sea wheat prices.

In Germany, traders continued to debate the result of Algeria's wheat tender this week, the first in which Black Sea wheat could realistically participate.

"Price talks in the tender were long and I think negotiations will get even tougher when Russian companies are fully registered to participate in the Algerian tenders," another trader said.

"Low crude oil prices compared to last year mean the Algerian government is under pressure to save money and grain purchases are one area where this pressure will be felt."

Traders said they believed the wheat was likely to be sourced from the European Union as Russian wheat was too expensive.

"Baltic States November 12.5% protein wheat is about $8 a tonne cheaper than Russian 12.5% and German 12.5% is about $7 cheaper so Russia is not seen with a chance in this tender," a trader said.