European wheat climbed to a more than 6-month high on Tuesday as concerns mounted that Russia may restrict grain exports to avoid a surge in internal prices linked to the slump in the rouble. By 1725 GMT January on Euronext's Paris-based milling wheat futures was up 4.25 euros or 2.2 percent at 194.25 euros after earlier climbing to a peak of 196.50 euros, the highest level for the contract since May 23.
Traders are concerned that Russia may be forced into take steps to limit exports as domestic bread prices climb. "The market is not pricing a ban but important restrictions," an Euronext trader said. Russia had used a protective duty on wheat exports in 2008, but recent comments from officials suggest that Moscow will try to keep out of trouble with trade powers and the global export market by using less heavy-handed measures.
"There are more noises now as a result of the issues that are going on in Russia. If it does decide to impose some sort of restrictions on its exports then that would feature into higher prices," said Capital Economics analyst Hamish Smith. The rouble plunged more than 11 percent against the dollar on Tuesday in its steepest intraday fall since the Russian financial crisis in 1998 as confidence in the central bank evaporated after an ineffectual rate hike.
It has now fallen close to 20 percent this week, taking its losses this year against the doollar to more than 50 percent "With a currency that slides even more, we wonder if they won't go further in restricting exports," another trader said. May feed wheat futures in London rose 1.55 pounds or 1.1 percent to 139.00 pounds a tonne after earlier rising to a 2-week high of 140.05 pounds. Dealers said UK wheat exports had picked up after a slow start to the season although there were concerns the strength of sterling against the euro may limit sales to traditional customers in the eurozone such as Spain and the Netherlands.
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