European wheat prices will remain in the doldrums unless exports pick up sharply as a weak dollar, high freight rates and uncertainty over EU subsidies continue to haunt the market, traders said on Friday. After big harvests in Europe, exporters are finding it tough, with strong competition from traditional wheat suppliers such as the United States and Argentina, but also from producers such as Ukraine and Russia.
"The market is difficult to assess, you have a weak dollar and high freight rates, and buyers with little 2005 cover. Brussels is unpredictable and there's the Christmas slowdown," Geneva-based analyst James Dunsterville said.
"There are quite a few balls in the air."
With French wheat at around 106/107 euros for December, it is already close to European Union intervention levels, a price that translates to around $146 FOB at current exchange rates.
Egypt, one of the world's biggest wheat buyers, last month purchased US wheat at near $143 and Argentine around $116 FOB.
Market watchers said recent falls on the Chicago futures market spelled more trouble for EU shippers.
"They (the United States) get a double whammy benefit in terms of weak commodity market and a weak currency, which makes them extra-competitive on boats," said Richard Whitlock, wheat director at UK grain trader Banks Cargill.
But the outlook is not totally bleak. Countries in north Africa, where Europe enjoys a freight advantage, could issue buying tenders again before the end of the year, traders said.
"There's no doubt they must come to the market sooner or later because they haven't bought anything for beyond the middle of January. They need to make a move," one French trader said.
Traders cited potential tenders in December from Tunisia, Morocco and Algeria as well as more purchases from Egypt.
Moroccan industry sources said the cereal authority (ONICL) had comfortable cover in terms of stocks for four months.
But it was likely to tender in December to buy 100,000 to 150,000 tonnes of soft wheat under a 400,000-tonne quota set for this year's EU-origin imports part of a deal signed in 2003.
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