Europe's wheat market is paying less attention to more volatile US prices as tough competition from Russia and Ukraine this season has shifted its focus to cheaper shipments from the Black Sea, analysts said on Friday.
US wheat prices, basis December futures, have climbed from below $3.20 a bushel at the end of August to near $3.50 on the back of tightening domestic supplies.
Such a move would normally push up prices in Europe, but Paris November futures have barely moved in the past two months, stubbornly trading in a narrow range close to 108 euros a tonne.
"The US market has no influence at the moment on the EU market, which is closely following what's happening in the Black Sea," analyst James Dunsterville of AgriNews in Geneva said.
And the latest tender from Egypt, one of the biggest wheat buyers on international markets, shows why.
The main state buyer GASC bought 175,000 tonnes, comprising 55,000 tonnes of US hard wheat at $173.95 FOB, 60,000 tonnes of French wheat at $126.87 and 60,000 tonnes from Russia at $114.75 for delivery in the first half of November. "Competition with Black Sea origins remains very tough, even though (Russian) prices appear to have risen a little in the last major deal," France's Co-operative Federation said.
Egypt often buys from the United States, and GASC figures show that origin topping the list of suppliers for the 1.155 million tonnes bought since July 1 with 465,000 tonnes. But they also show Russia, a relative newcomer in Egyptian tenders, now in second place with 360,000 tonnes, edging traditional supplier France into third with 270,000.
French exporters say European Union export subsidies, currently set at a maximum of eight euros a tonne, have been insufficient to counter the competition from Black Sea shippers.
Ukraine, the other major Black Sea exporter, has also been making inroads into markets in North Africa and elsewhere.
Ukraine exported a record 816,900 tonnes of wheat in September, up 43.8 percent from 568,100 tonnes in August, analysts said this week, quoting preliminary official data. Analysts expect exports around five million tonnes this season, up from 4.3 million in 2004/05.
Serhiy Feofilov, director of UkrAgroConsult agriculture consultancy, told Reuters Ukraine was likely to export three million tonnes of wheat in the July-December period, leaving two million for export in the second half of the season. In September, Ukraine exported mostly to North Africa, the Middle East and Europe. It sold 87,000 tonnes of wheat to Algeria, 62,000 to Israel, 54,000 to the United Arab Emirates, 52,000 to Spain and 50,000 to Egypt.
But the EU trade expects Black Sea prices to start rising, based on lower planting news from the region.
The Russian farm ministry has also said winter grain sowing has been slow and analysts say drought might cut the area by up to two million hectares and also hit quality. This is likely to narrow the differential between European and Black Sea wheat over the coming months, particularly as the ports in the region are susceptible to freeze over the winter.
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