EU wheat drops with Chicago but exports cushion fall

PARIS: European wheat prices fell on Thursday following a slump on US markets but held above technical support levels, underpinned by a weak euro and good export demand.

Chicago wheat futures dropped to their lowest nearby price in five months on Thursday, under pressure from the stronger dollar and huge global supplies.

In Europe, May milling wheat, the benchmark on Euronext's established No. 2 contract, was down 0.75 euro or 0.4 percent at 185.50 euros a tonne by 1642 GMT after touching a one-week low of 184.75 euros. Traders put the next support at 184.25 euros a tonne.

The fall in prices has prompted a pick-up in activity in a markets that had seen thin trading volumes this week.

"The debacle in Chicago attracted some volumes," one trader said.

Among supportive news, Ukrainian weather forecasters said on Thursday the 2015 winter wheat harvest was likely to fall to 21 million to 22 million tonnes from around 24 million last year due to a smaller yield.

The European Union this week granted export licences for 505,000 tonnes of soft wheat, taking the total since the beginning of the 2014/15 season to 21.3 million tonnes, compared to 20.8 million by the same stage last season.

GERMANY

In Germany, old crop cash wheat premiums in Hamburg were firm, adjusted to compensate for falls in Paris as the weak euro brightened the export outlook.

Standard wheat with 12 percent protein content for delivery in Hamburg in March was offered for sale at a premium of 6 euros over the Paris May contract against 5 euros over on Wednesday. Buyers were offering 5 euros over.

New crop was offered for sale at an unchanged 7.50 euros over the old Euronext No. 2 contract.

German premiums remained underpinned by strong exports, with traders estimating a hefty 800,000 to 1 million tonnes of wheat will be exported by Germany in March following around 800,000 tonnes in February.

"The destinations for German wheat in March include Saudi Arabia, Iran, Algeria, Yemen and Morocco," a trader said. "The weaker euro means we should not be pessimistic about EU export prospects."

Traders said they believed some of the Iranian purchases of EU wheat reported on Thursday would be loaded in the German port of Rostock between March 10-25.

Trading in the new Euronext premium wheat contract was again disappointingly low, with volumes too thin to justify switching new crop business to the new contract, traders said.