EU wheat prices slip on tough export outlook

Western European wheat prices eased on Thursday, pressured by a fall in Chicago and a stronger euro that underscored a tough export outlook at a time of ample global supply. Price movements were limited, however, by a cautious mood among investors as they waited to see if the US Federal Reserve would announce an interest rate rise later on Thursday, after a policy meeting whose outcome was seen as extremely hard to call.
December milling wheat, the benchmark on the Paris-based Euronext futures market, settled down 1.25 euros or 0.7 percent at 167.00 euros a tonne to mark its third straight daily fall. It earlier touched its lowest in more than a week at 166.25 euros to approach a contract low of 164.25 euros hit at the start of September.
European Union data on Thursday showed the EU awarded its second-largest weekly volume of soft wheat export licences since the start of the season at 525,000 tonnes. But the total so far in 2015/16 was still running well behind last year's pace and traders said west EU producers like France and Germany were losing share to the Baltic states. Baltic supply has added to regular competition from Black Sea origins such as Russia and Ukraine as the EU tries to shift a bumper harvest including record production in France.
"Black Sea 11.5 protein wheat is currently $175 a tonne, some $18 cheaper than French for a superior quality. At today's prices there is no GASC (for French wheat)," one trader said, referring to Egypt's state buyer whose tenders are a benchmark for export competition. "Only a major weather issue or a collapse in the euro would change the long term picture," he said. Analyst firm Strategie Grains on Thursday raised its estimate of this year's EU soft wheat harvest by 3.5 million tonnes to 147.5 million tonnes, now putting it only 1 percent below a record 2014 crop.
An US interest rate rise could bring some relief for western European exporters. "The Fed's interest rate decision could shake up all commodity markets so there is a risk-off mood today," one German trader said. "A weaker euro if the Fed does raise rates would be welcome for exports which are really struggling at the moment against cheap competition from the Black Sea and Baltic Sea." New crop standard wheat with 12 percent protein content for September delivery in Hamburg was offered for sale at 0.50 euro over the Paris December contract against 1 euro over on Wednesday. Buyers were offering 0.5 euro under Paris against level Paris on Wednesday.