European wheat futures rose for a second day on Tuesday as weather risks in the United States encouraged short-covering after recent price lows. The run-up to the Easter holiday, which will see the Euronext futures market and local cash markets close on Friday and Monday, was also prompting some participants to adjust positions.
May milling wheat on Paris-based Euronext was up 1.75 euros, or 1.1 percent, at 155 euros a tonne by 1634 GMT, having earlier touched its highest in almost a week at 156 euros. The benchmark was recovering from a two-week low of 152 euros at Friday's close, which had taken it close to its contract-lifetime low of 151 euros.
Large short positions held by investment funds have left grain markets prone to rallies at the start of the northern hemisphere spring, a time when traders are sensitive to weather developments. "A weather market can take off one way or the other, so people are making some precautionary adjustments, even if there isn't any new demand in the market," a French cash broker said.
Worries about cold, dry conditions in part of the US wheat belt earlier pushed Chicago futures higher for the third day in a row before prices edged down during the US session. The European market also drew some support from a weaker euro as investors turned to the dollar and other assets perceived as safe havens after Monday morning's attacks on an airport and metro train in Brussels.
The overall supply outlook remained bearish, however, with favourable crop conditions in Europe putting it on course for another large harvest that could keep stocks high. In Germany, cash premiums in Hamburg were little changed, with a lack of farmer selling supporting the market despite the Euronext rally. Standard wheat with 12 percent protein content was offered for April delivery at an unchanged 1 euro above the Paris May contract. Buyers were seeking a price level with Paris.
"Farmers are dissatisfied with the current level of Paris prices, which are well below those at the start of the year," one German trader said. "There is steady exporter demand, with a good line-up of ships being loaded in German ports. But it is difficult to get sufficient volumes of sales offers from farmers to meet the demand despite the perception that large old-crop inventories are still being held on farms," the trader said.
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