EU wheat hits 10-month high in broad grain rally

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March 09, 2014

European wheat futures climbed to a 10-month high on Friday in a broad rally in grain markets stoked by export demand, weather risks and worries over tensions between Ukraine and Russia. May milling wheat, the most traded contract on Paris-based Euronext, rose as much as 3.2 percent to 212.75 euros a tonne, a level last seen on the contract in early May last year.
It later pared gains in line with the US market to unofficially close up 3.75 euros or 1.8 percent at 210.00 euros. Paris wheat was fired up by an earlier six-month high for US corn and a contract high for US soybeans, fuelled by brisk US exports. Wheat markets also remained supported by the risk that a standoff between Ukraine and Russia over the Black Sea region of Crimea could disrupt both exports and spring sowing, although ports were operating normally for now. "Existing export contracts are being executed, it's business as usual, but new deals are being to left to one side," a trader said of Ukraine.
Wheat also saw spillover support from oilseeds, where worries about adverse weather for South American soybean crops and Malaysian palm oil supported further gains, with May rapeseed in Paris hitting a fresh high in nearly nine months at 419.75 euros a tonne. The buying impetus in grains and oilseeds encouraged the European market to shrug off a 2-1/2 year high for the euro against the dollar, which would make grain from euro zone countries less competitive for export.
Weekly European Union data on Thursday also showed a healthy volume of 563,000 tonnes of soft wheat export licences, close to the average weekly volume so far in what is set to be a record season in 2013/14. German old crop wheat premiums firmed with export hopes and the crisis in Ukraine again underpinning.
"Export hopes are still the main market support," a German trader said. "It could be that some importers may seek to diversify supplies because of the Ukraine crisis. However, shipments to traditional German wheat customers remain strong, with another bulk carrier set to load wheat for Saudi Arabia in the next week." Standard milling wheat for April delivery in Hamburg was offered for sale up 0.5 euro at 4.5 euros over the Paris May contract with buyers seeking 3.5 euros over.