Markets

European wheat futures up on strong demand

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The gains allowed old-crop wheat prices inParisto end the week virtually unchanged, after losses early in the week followed by a bounce on Thursday and Friday.

May milling wheat was 3.25 euros, or 1.55 percent, higher at 213.50 euros a tonne by 1646 GMT.

USwheat rose with help from a weaker dollar and spillover support from soybeans as concerns about a drought-affected South American crop came back to the fore.

In exports, the European Union granted export licences for 440,000 tonnes of soft wheat in the last week, the highest volume since mid-November.

Total wheat export licences since the beginning of the 2011/12 season were now at 10.3 million tonnes, of which more than 1.5 million tonnes were granted in the past four weeks.

"For something that is supposed not to be very competitive, that's a lot (of licences)," one trader said at a grain gathering in the resort ofDeauvilleonFrance's northern coast.

Morocco's state grains authority launched a tender to buy 180,000 tonnes of soft wheat in a move that could bring more business from a regular buyer of French wheat.

Private Moroccan buyers have also bought large volumes as the country anticipates a drought-hit local crop, andFranceis expected to win some extra sales despite sizeable deals for South American wheat this month.

Domestic demand infrancewas also good, French analyst Offre & Demande Agricole said. "For wheat, millers and feed makers are coming back on the market for deliveries in April and May," it said in a note.

Concerns about the impact of dry weather on European crops, notably inFrance, continued to support new crop prices with November up 2.00 euro at 203.75 euros a tonne.

Rapeseed futures rose in step withUSsoy and with additional support from crop concerns in easternFrance, part of the main producing region.

GERMANY

German wheat rose sharply as concern grew about winter damage to crops, adding to upward price pressure from strong export sales and continued high feed wheat prices.

Standard quality milling wheat for March delivery inHamburgwas offered for sale up 4 euros at 223 euros a tonne, with buyers at around 220 euros. "Concern about winter kill is growing, with concern that we might be seeing up to two million tonnes cut out of grain harvest forecasts," one trader said.

New crop milling wheat for September delivery inHamburgtraded up 5 euros at 209 euros, and offered for sale at 210 euros a tonne, with buyers around 209 euros.

Feed wheat for nearby delivery in theSouth Oldenburgmarket, near theNetherlandsborder, was offered for sale above milling wheat at 225 euros a tonne, with buyers at around 222 euros.

"Background export demand looks robust following recent sales toIranwith large numbers of EU export licences awarded on Thursday," another trader said.

"There is also a feeling that a large volume ofGermany's 2011 crop has already been sold; there are some estimates that only 15 percent of the old crop is available for sale in some areas."

The unexpectedly low feed grain exports in past weeks from the Black Sea region have transferred buying interest back to EU feed wheat, with Spanish purchasers recently buying German feed wheat.

UK

Feed wheat futures inLondonwere higher, with May up 1.75 pounds, or 1 percent, at 172 pounds a tonne. The contract is on track for a loss on the week of about 0.3 percent.

"TheUKmarket is looking tight on old crop, with close to two million tonnes of our exportable surplus estimated to have been shipped by the end of February,"UKmerchant Frontier Agriculture said in a market note on Friday.

"What remains should be easily disposed of in the remaining four months of the campaign, and a late flurry of ethanol demand cannot be ruled out," the report added.

Bio fuels company Vivergo Fuels has said it expects a major new biorefinery, which will consume more than one million tonnes of wheat a year, to enter commercial operations in late spring.

Copyright Reuters, 2012