August 6, 2018 / 7:15 PM / a year ago

EU wheat resumes rally with weather concerns in focus

PARIS (Reuters) - Worries over severe weather in Europe drove Paris wheat futures higher on Monday after prices hit multi-year highs last week.

Benchmark December milling wheat BL2Z8 on Paris-based Euronext, settled 3 euros, or 1.4 percent, higher at 214.75 euros ($248.01) a tonne.

It had earlier been little changed, consolidating below Thursday’s life-of-contract high of 219.25 euros, which also marked a 5-1/2 year peak for a second delivery month BL2c2 on Euronext.

A sharp rise in Chicago wheat Wv1 during U.S. trading, as investors factored in global weather risks, encouraged the rally to resume on Euronext. [GRA/]

“The general feeling is that the market is going to rise further,” a French cash broker said. “People are watching Matif (Euronext) climb and there aren’t many sellers around.”

Heatwaves and drought have withered crops in northern Europe, while dryness followed by torrential rain has raised doubts over the size and quality of Russia’s harvest.

Concern about parched conditions in Australia was adding to concern.

The heatwave in western Europe was forecast to break in the middle of this week and bring showers and cooler temperatures, although it may benefit later-developing maize rather than wheat being harvested.

In Germany, cash prices in Hamburg were again underpinned by weather damage.

“Wheat harvesting is coming to an end in the final areas of north and east Germany but farmers are unwilling to sell their new crop,” one German trader said.

“I think traders are now expecting a German wheat crop under 20 million tonnes but perhaps over the 18 million tonnes forecast by the farming association.”

Germany’s farming association last week forecast that the country will harvest about 18 million tonnes of winter wheat in 2018, down around 25 percent on the year.

New crop standard bread wheat with 12 percent protein for September delivery in Hamburg was offered for sale unchanged at 5 euros over Paris December.

Feed wheat remained well over milling wheat, with feed compounders thought to have been surprised by the sudden deterioration of the harvest.

Feed wheat prices in Germany’s South Oldenburg market for September/December were offered for sale at 226 euros a tonne, with trade also reported at 226 euros. January-June 2019 delivery traded at 230 euros.

Weekly European Union data showed that EU soft wheat exports in the 2018/19 season that started on July 1 were down 37 percent from a year ago at 1.2 million tonnes.

In a monthly trading report, Euronext said average daily volume for its commodities derivatives, mostly wheat, reached 84,113 contracts in July, up 35.1 percent from the previous month and 19.6 percent higher than in July last year.

($1 = 0.8659 euros)

Reporting by Gus Trompiz and Clement Rouget in Paris and Michael Hogan in Hamburg, editing by Alexander Smith

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