EU wheat posts 13pc rise in 2020 to close near two-year highs

PARIS: European wheat ended the year near a two-year high on Thursday after EU prices were supported in 2020 by a buying spree from China at a time of lower supplies and Russia's decision to impose a wheat export tax, traders said.

Front-month March milling wheat on Paris-based Euronext closed 0.2% higher at 213.50 euros a tonne after a shortened session on Thursday ahead of the New Year holiday. Markets will be closed on Friday.

That was slightly lower than Wednesday's two-year high for a spot contract of 214.50 euros, when prices were also supported by a rally on US grains markets after Argentinean authorities said they would limit corn exports.

Over the year, spot futures on Euronext, including the current March contract, showed a 13% rise from the 188.75 euro close at the end of 2019.

That compared to a rise of 14% on the Chicago Board of Trade's front-month wheat contract.

"Further than COVID-19, it is China that was the main driver on EU markets this year," a trader said.

China's massive appetite for grain, partly due to a rebuilding of its pork industry after a swine disease epidemic, fuelled sharp price rallies in the EU as traders struggled to meet massive export demand amid dwindling supplies.

Europe harvested a smaller cereal crop this year and rival wheat exporter Russia will apply a 25 euro ($30.57) per tonne tax on wheat exports from Feb. 15 until the end of the marketing season, part of efforts to stabilise domestic food prices.

Concern over the impact of the new coronavirus on grain demand was weaker than on many other markets, notably in the spring, as it became clear that demand for staple food would not be severely impacted.

"Despite the crisis, people had to eat," another trader said.

In Germany, thin market participation on the last day of the year made premiums difficult to assess.

"The sudden rise in Euronext futures coupled with the firmness in the euro will be a burden for new EU export sales early in the new year, just as Russia's export tax in February had increased optimism for new sales," one German trader said.

"Unfortunately, this also means Argentina is suddenly back in the picture as a supplier to buyers of EU wheat, like Algeria."