PARIS: Euronext wheat rose sharply on Friday, tracking another jump in Chicago futures as a worsening drought in the US Midwest created concern about grain supply prospects.
Dry weather in northern Europe and uncertainty over the duration of a Black Sea grain corridor from Ukraine also underpinned European prices. The gains in wheat surprised traders given rain forecast next week in Europe and with large stocks and cheaper prices in top exporter Russia, leading some to view the rally as driven by investments funds covering short positions in grains. September wheat on Paris-based Euronext was up 2.5% at 240.75 euros ($262.97) per metric ton at 1550 GMT, after earlier touching its highest in nearly six weeks at 234.25 euros.
Chicago wheat climbed about 4% in US trading, adding to a 5% rise on Thursday, as spreading drought in the Midwest stoked fears about corn and soybean yields.
“A weather market for grains started in earnest this week,” consultancy CRM Agri said in a note. “Meanwhile, Russia maintained uncertainties over next month’s renewal of the Black Sea grain initiative.”
In France, the condition of soft wheat declined for the third week in a row but 85% of crops were still rated good or excellent, data from farm office FranceAgriMer showed. There was more concern about other parts of northern Europe, where rainfall next week will be important, traders said. Senior Russian officials said on Friday the Black Sea grain deal could not be extended under current circumstances when it expires in mid-July.
However, traders have already factored in a possible breakdown of the corridor after repeated criticism from Moscow, while also anticipating continued large exports from Russia. Algeria, a major market for European wheat, had been expected to return with an import tender in the coming days but the weather rally in prices may lead it to wait, traders added.
In rapeseed, August futures on Euronext were up 6.2% at 472.50 euros a metric ton, near an earlier two-month top, buoyed by weather-fuelled gains in soybeans and other oilseed markets.
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