European wheat futures fell to a two-week low on Thursday in a broad retreat on grain markets after a closely watched US government crop report projected higher than expected supplies and as weather forecasts looked more favourable. December milling wheat, the most active contract on the Paris-based Euronext exchange, settled down 3.50 euros, or 1.9 percent, at 181.25 euros ($206.34) a tonne.
It earlier touched its lowest since June 30 at 180.75 euros, after a chart gap created at the open generated selling pressure. European prices took their cure from a sharp drop in US wheat following Wednesday's US Department of Agriculture (USDA) crop report.
The USDA's July report showed higher than expected US wheat supplies, partly due to a smaller than anticipated cut to production of weather-hit spring wheat, and a steep upward revision to Russian wheat production. The prospect of some rain relief in parched northern US wheat belts, and of drier, warmer weather in France after a rain-drenched week also eased crop concerns.
"The supply outlook for the European continent as a whole is looking comfortable and with the harvest adding supply pressure there is a move to exit some positions," a futures dealer said. "Weather developments in the next two weeks will nonetheless be crucial."
French farmers had harvested 29 percent of this year's soft wheat crop by July 10, up from 6 percent a week earlier, farm office FranceAgriMer said on Thursday. At European Union level, Strategie Grains cut its monthly estimate of EU soft wheat production by nearly 1 million tonnes to 140.7 million tonnes as it factored in the impact of extreme heat last month.
In exports, the first EU data for the 2017/18 season showed the bloc exported 217,000 tonnes of soft wheat over July 1-11, compared with 863,000 tonnes in the year-earlier period. In Germany, cash premiums in Hamburg rose to compensate for the fall in Paris futures. Standard bread wheat with 12 percent protein content was offered for sale at 3 euros under the Paris December contract for September delivery in Hamburg against 4 euros under on Wednesday.
"The attention is firmly on the wheat harvest which is now starting in the early southern areas and should spread north in coming days," one German trader said. "We have had a very rainy start to July and sunshine is urgently needed to allow crops to dry out and for the final areas to ripen." Some improvement in crop weather is forecast for the coming week in Germany but more rain was still expected.
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