EU wheat firm

European wheat futures firmed on Thursday on the back of dollar-fuelled gains in US markets and a bullish export outlook, reinforced by Ukraine's adoption of export quotas, traders said. However, operators remained cautious after wild price swings in the past week and ahead of a closely watched US Department of Agriculture (USDA) crop report on Friday.
Milling wheat futures in Paris rise as brisk exports led the market to shrug off a new eight-month high for the euro against the dollar near $1.40. Benchmark November milling wheat on Euronext was up 4.00 euros or 2.0 percent at 208.00 euros a tonne with the market rebounding strongly after hitting a two-month low at 196.25 euros on Monday.
"The fundamentals haven't changed, we know what they are and they're not bearish," one European trader said. Ukraine said on Thursday it would limit grain exports for the rest of this year, but it needed a few days to clarify the volume of the quotas and their terms.
First Deputy Prime Minister Andriy Klyuev told reporters the total quota volume could reach 3.0 million tonnes, including 2.0 million of maize and 500,000 tonnes of each wheat and barley. But the Ukrainian agriculture minister later said that the government may adjust the volumes of quotas at a meeting next week.
Ahead of Ukraine's announcements on export limits, traders had reported precautionary purchases of up to 500,000 tonnes of European Union barley in anticipation of the Ukrainian quotas. EU exports of barley and wheat since the start of the 2010/11 season in July are running well ahead of year-earlier levels as buyers have turned away from Black Sea producers because of an export ban by drought-hit Russia and uncertainty over shipments from Ukraine.
This week the EU granted export licences for 480,000 tonnes of soft wheat, taking the total this season to 6.8 million tonnes compared with 5.1 million tonnes a year ago. For barley, the award was for 118,000 tonnes, which brought the total to 1.5 million tonnes, compared to just 289,000 tonnes a year ago. Feed wheat futures in London were higher, supported by gains in both Paris and Chicago, while a decline in the value of sterling against the euro has also boosted the export outlook.
"It (the weak pound) definitely helps. Things are looking tight on the S and D (supply/demand balance)," one London dealer said, adding strong early exports could create supply tightness later in the season. November feed wheat rose 2.25 pounds to 157.30 pounds a tonne. The pound hit a five-month low against the euro on Thursday. The bulk of UK wheat exports are to countries in the euro zone with Spain the largest customer.
The first official supply/demand balance for UK wheat is due to be issued early next week. Earlier this week the government issued its first UK wheat crop estimate which saw a rise of 5 percent to 14.8 million tonnes, higher than some had anticapted.
"We do not think the figure (14.8 million) was achieved, particularly due to the very high yields...forecast for Scotland where significant amounts are still being combined," UK merchant Gleadell said in a market note on Thursday. Gleadell estimated the UK wheat crop was around 14.4 million tonnes.
Germany's market rose in line with Paris but with gains limited by a lack of purchase interest in some regions. Standard new crop bread-quality wheat for October delivery in Hamburg was offered for sale up three euros at 211 euros a tonne with buyers at 207 euros.
"We were drifting up following Paris today but with overall market uncertainty continuing following the dramatic price swings in the past week." "Rises were limited by the lack of buying interest. People are also uncertain ahead of the USDA report on Friday which could bring more turbulence to the grains markets."