European wheat prices edged lower on Monday as prospects for rain eased concerns about crop damage in Western Europe after dry weather during the past month.
New crop benchmark December on Paris-based Euronext milling wheat futures, settled 1.4% lower at 189.00 euros a tonne.
"The announcement of a return of favourable rains in Europe for the next two weeks is slightly easing prices," French consultancy Agritel said, adding that after the water deficit of the past six weeks operators were still taking a cautious approach.
"South Russia, where the expected accumulations appear to be very low, will be watched very closely," it said.
European crop monitor MARS said on Monday that sowing and the emergence of spring and summer crops had been hurt by one of the driest starts to spring in Western Europe since 1979.
Winter crops which benefited from rainfall earlier in the season were still in good condition, but more rain was needed to sustain a positive yield outlook, MARS said.
Widespread rain is forecast in France and Germany this week.
"Rain will be very welcome and could arrive just in time to avoid harvest forecasts being cut," a German trader said.
In Germany, cash premiums in Hamburg were stable as traders assessed the result of a wheat purchase tender from Saudi Arabia, a traditional customer for German wheat, while forecasts of rain this week may relieve concern about dry crops.
Saudi Arabia's state grain buyer SAGO on Monday bought 655,000 tonnes of optional-origin wheat in its latest international purchasing tender for July/August arrival.
"Prices in the Saudi tender looked aggressively low and the likely origins to be supplied are difficult to call, but it looks like some Russian new crop wheat is likely to be delivered," one German trader said.
"You would have normally expected Germany, Poland and the Baltic States to have provided much of a purchase like this but old crop supplies are looking tight," the trader said. "If the new crop can be delivered I would bet on Baltic States supplies and some Russian."
Russian wheat was shipped to Saudi Arabia in April for the first time since SAGO opened its tenders to wheat from Russia. .
SAGO on Monday also said it bought 60,000 tonnes of Ukraine wheat from Saudi investment firm SALIC, marking its first purchase from agricultural investments overseas aimed at enhancing the country's food security.
"The question is if these direct purchases start to make up a large volume of Saudi Arabian import needs," one trader said.
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