European wheat futures extended gains on Friday, with benchmark prices in Paris hitting a one-year high, as a worsening harvest outlook encouraged buying and pushed futures through chart resistance. An advancing harvest was confirming reduced yields in France, while the market was also bracing for field work to get going in northern European regions hit by drought and heatwaves.
December milling wheat, the most active contract on Paris-based Euronext, settled 4 euros, or 2.1 percent, higher at 193.25 euros ($226.12) a tonne, after breaking through chart resistance at 190 euros at Friday's open. In closing trade it struck its highest since July 10, 2017, at 193.50 euros, close to a life-of-contract peak of 194.00 euros struck on that date.
Euronext spot futures, meanwhile, struck a three-year high of 191.75 euros during the session.
Fading expectations for the European Union harvest were adding to concerns about a sharp potential fall in production in Russia, the world's biggest wheat exporter. "The supply outlook for the EU and Black Sea region is getting more and more tight," a futures dealer said. "It looks like the low end of harvest forecasts are turning out to be correct, with 33-34 million tonnes for France, 20-21 million for Germany, 64-65 million for Russia plus a never ending drought in Australia."
In France, consultancy Agritel forecast this year's soft wheat crop at 34.2 million tonnes, down 6.5 percent from last year and approaching the 33.2 million estimate of Strategie Grains that had stunned the market at the end of June. France's soft wheat harvest was 64 percent complete by July 16, farm office FranceAgriMer said, as field work advanced rapidly.
Crop ratings for maize declined last week, FranceAgriMer said, and traders said the hot, dry weather was a concern and could add to a picture of tightening supply of grain for livestock feed. In Germany, feed wheat prices were especially strong on expectations of drought damage. "The feed grain harvest looks very bad after the drought in Germany and first results of the wheat crop are not encouraging," one German trader said.
"Feed wheat prices are now well over milling wheat." New crop standard bread wheat with 12 percent protein for September delivery in Hamburg was offered for sale unchanged at 7.0 euros over Paris December. Feed wheat prices in Germany's South Oldenburg market for September/December traded well over bread wheat at 18 euros over Paris December.
In Britain, which is also facing a sharp drop in wheat production due to hot, dry weather, spot feed wheat futures in London struck a new five-year high at 175.75 pounds ($230.48) a tonne.
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