EU wheat ends 2017 with fifth straight annual loss

European wheat futures ended 2017 with a fifth straight annual loss due to abundant world supplies, notably in major competitor Russia, and after a strong euro hampered export demand this season. Front-month March milling wheat on the Paris-based Euronext exchange settled 0.2 percent lower at 159.00 euros a tonne on Friday. Activity was light with just 11,500 lots traded on the entire milling wheat complex.
Spot prices fell 5 percent compared to the end of 2016. The contract had settled at 168.00 euros a tonne on December 30, 2016, the last day of that year's trade. In contrast, the benchmark contract on the Chicago Board of Trade was on track to finish 2017 in positive territory after dropping for the last four years, supported by concerns about supplies of high quality wheat and reduced plantings in the United States.
European wheat has been pressured this year by poor exports on world markets, outpaced by heavy flows of Russian wheat after a record crop in the world's top wheat exporter. A strengthening in the euro, which climbed almost 14 percent against the dollar in 2017, has added pressure, making grain from Western European countries such as France more expensive in dollar-priced export markets, while rain damage to Germany and Poland's harvests cut their surplus of bread wheat.
"We've been clearly undercut by Black Sea wheat," one trader said, pointing to tenders by Egypt's state buyer as an example. Apart from four French cargoes, Egypt, the world's largest wheat importer, mainly bought Black Sea wheat in 2017, with this season's purchases nearly all for Russian origins.
European Union soft wheat exports in 2017/18 were running 25 percent below last year's level by mid-December, when the European Commission last published its grain export and import data. In Russia, grain exports were running at a record pace.
French exporters also noted farmers' reluctance to sell their wheat in the hope of better prices. "It is a pity to see that the quality of French wheat this year would have allowed us to do nice things but farmers' retention prevented us from feeding the market to the benefit of Black Sea origins," one French exporter said.
"French wheat will find a market at some point, it all lies in the price and farmers' willingness to put it on the market. Let's hope that in 2018 reason will prevail on speculation."