European wheat futures hit two-week low

European wheat futures fell to a two-week low on Friday as weak US prices, favourable crop prospects and short-term export competition outweighed risks raised by a new Russian wheat tariff. December milling wheat, the new crop benchmark and most active contract on the Paris-based Euronext exchange, settled 2.25 euros, or 1.4 percent, lower at 177.75 euros ($195.24) a tonne. In late trade it touched its lowest since May 15 at 177.50 euros.
The closing level could add selling pressure next week as the market breached a support zone between 179 and 180 euros that had held earlier in the week. Chicago wheat also fell to a two-week low as forecasts for drier weather in the US Plains eased concerns about crop damage after heavy rain, while some precipitation was forecast for dry parts of Russia in the coming days. US and western European prices were also curbed by stiff competition from Black Sea origins, as shown by a tender on Thursday in which Egyptian state buyer GASC booked July cargoes from Russia and Romania.
"For the market to move higher and break chart resistance there would need to be a weather incident in the Black Sea region," said Michel Portier, head of consultancy Agritel. "We can expect some price pressure in line with what we saw in the GASC tender, with strong competition from Russia, where the prospect of a new tax will make exporters nervous about forward positions and encourage sales at the start of the season."
Russia, one of the world's largest wheat exporters, announced on Friday the terms of a new export duty from July, replacing a tariff it applied from February to mid-May, in a move to stop exports surging if the rouble drops steeply. The news did not spark a price reaction because Russian export rates are currently well below the threshold that would trigger a significant duty, but traders said it could have an impact later in the 2015/16 season that starts on July 1.
"The rouble could easily slip to 60 against the dollar. With the same FOB price you would end up reaching the tax threshold," one trader said. On Friday the rouble traded at about 52 to the dollar. German cash wheat premiums in Hamburg were little changed and demand was thin as buyers hoped for price falls on positive harvest prospects. Standard wheat with 12 percent protein content for June delivery in Hamburg was offered for sale at an unchanged 1 euro over the Paris December contract. Buyers were offering level Paris.