EU wheat futures hit new low on technical selling

Euronext wheat futures extended losses on Friday to strike a new low since last July as a deadline for options fuelled technical selling and outweighed support from improved export prospects. May milling wheat, the most active contract on Paris-based Euronext, settled 3.25 euros, or 1.6 percent lower at 196.25 euros ($221.2) a tonne, after earlier touching its lowest since July 24 at 195.75 euros. Front-month March ended down 3.00 euros at 195.25 euros.
Selling momentum built up on Thursday when the old-crop contracts breached the 200 euro chart floor, and pressure persisted as traders adjusted positions before Friday's expiry of options on March futures. A slide in Chicago wheat, the global benchmark, since Thursday following disappointing US export sales figures, also contributed to the downward movement on Euronext, traders said. "It was a particular set of circumstances and more technical than anything else," one futures broker said.
"I didn't expect the market to fall so far and so quickly." The sell-off surprised traders as it came after positive signs for western European exports, including expected French sales in tender purchases this week by Tunisia and Algeria. But traders say an upturn in demand may be too late to make up for a slow start to the export season in western Europe, particularly as domestic demand for EU wheat was being weakened by cheaper competition from imported feed grains like maize.
"If you remove Romania, the west EU's wheat export performance is pretty poor," a German trader said. Falling Russian prices after a recent rally have also raised doubts as to whether supply in the world's top wheat supplier is as low as thought. In Germany, standard bread wheat with 12 percent protein for February delivery in Hamburg was offered for sale at around 9.0 euros over Paris March against 7.0 euros over on Thursday.
"Sellers are unwilling to follow the sharp fall in Paris," the German trader said. "There is a confused mood in the market today as participants wait to see if Paris bounces back from its lows. Premiums are difficult to assess." Germany's large recent imports of feed grains, along with Paris' weakness, meant feed grain was losing its premium over milling wheat.
Feed wheat in the South Oldenburg market for February/March delivery was offered for sale down 4 euros at around 209 euros a tonne, with buyers seeking 207 euros.