Benchmark wheat futures in Paris rose slightly on Thursday to hold above 2-1/2 month lows, as a continued rebound in Chicago and a fall in the euro offset a bearish backdrop of ample global supply and stiff export competition. Traders were also increasingly looking ahead to next week's policy meeting of the US Federal Reserve, after shrugging off Wednesday's supply-and-demand forecasts from the US Department of Agriculture (USDA) as confirming ample global supply.
March milling wheat, the most active contract on Euronext, was up 0.50 euros, or 0.3 percent, at 177.50 euros a tonne by 1645 GMT, as it edged away from a low of 175.75 euros touched on Wednesday. Chicago futures extended a short-covering rally, despite a bounce in the dollar on Thursday and a bigger than expected projection for global wheat stocks in the USDA's monthly crop forecasts.
The European market also found relief as the euro eased after rallying to a one-month high against the dollar. Wheat traders were focused on the Fed meeting, which could bring the first US interest rate rise in nearly a decade and trigger further fluctuations in exchange rates.
"We need the euro to fall as the market has become heavily dependent on the euro-dollar rate," a French cash broker said. "Exports outside the EU are crucial for French wheat, to Algeria of course but also to Indonesia, given that sales within the EU are very slow." The rebound in the euro in the last week has dampened French wheat export hopes after a recent run of sales, including the rare Indonesia shipments, and put the spotlight back on a record harvest that is expected to double French stocks.
Weekly European Union data showed 563,000 tonnes of soft wheat export licences, down sharply from a season's high of 1 million tonnes last week. Traders reported a purchase of at least 500,000 tonnes of wheat by Algeria, which should include some wheat from France in its main export market. But reaction was tempered by aggressive prices that traders said suggested some of the deal could be sourced in Argentina, where plans by the new government to liberalise the economy are expected to stir export flows. Front-month December on Euronext saw volatile movements in thin volumes on its final day of trading. It was up 4.00 euros at 170.00 euros after earlier falling to a contract low of 161.50 euros.
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