Euronext wheat futures jump as French crop forecast cut

Euronext wheat futures jumped on Friday as traders reported that consultancy Strategie Grains had slashed its forecast for this year's French wheat harvest. December milling wheat, the most active position on Paris-based Euronext, settled 4.50 euros, or 2.5 percent, higher at 181.75 euros ($212.25) a tonne, after reaching a two-week high of 182.50 euros in late trading.
After a slight morning rise, Euronext prices climbed abruptly in afternoon trading as traders cited Strategie Grains' publication of a French crop update to its clients. The widely followed research firm cut its forecast of 2018 French soft wheat production by over 4 million tonnes to 33.2 million, according to traders, well below other market estimates and also well down from a 2017 crop of 36.6 million.
Strategie Grains' website indicated a client update entitled "France: crop tour results - soft wheat production sharply revised down," but the firm declined to comment further. Traders were sceptical about the size of the reported forecast cut but the news fuelled background concerns about weather problems in several major wheat-producing countries. "There are grounds for a lower global crop but I can't imagine France having its crop cut by more than 8 percent year on year," one futures dealer said.
France has in the past month seen torrential rain followed by a hot spell in recent days, which had raised some concern about possible crop damage, although official crop ratings have declined only slightly. In its latest weekly cereal crop ratings on Friday, farming agency FranceAgriMer estimated that 74 percent of soft wheat crops were in good or excellent condition by June 25, down 1 percent from a week earlier.
Reaction to Strategie Grains' French estimate outweighed pressure from a surge in the euro against the dollar, and a higher than expected estimate of US wheat acreage in a closely watched US Department of Agriculture (USDA) report, traders said. In Germany, cash market premiums in Hamburg were cut to compensate for the rise in Paris.
New crop standard bread wheat with 12 percent protein for September delivery in Hamburg was nominally offered for sale at 2 euros over Paris December against 3.5 euros over on Thursday, but with levels difficult to assess in late afternoon trade.
Dry, hot weather continues to damage wheat crops in north and east Germany, increasing fears that estimates of the country's 2018 harvest will be cut again, traders and analysts said on Friday.