European milling wheat futures were firm on Thursday, mainly driven by short covering on the front month contract which expires next week, and supported by strong equity markets. Traders short of 100 lots on the November contract need to provide a storage certificate by Friday, which attracted heavy buying on the contract and lead its premium over the following contracts January and March to extend their rise to 7.00 euros and 9.00 euros respectively.
"It's even tighter now with a very high spread," one trader said. But traders noted that the benchmark contract January, traded at 186.00 euros a tonne by 1257 GMT, remained in a range of 180 to 190 euros a tonne, which has prevailed since the beginning of October. The market was awaiting a supply and demand report by the US Department of Agriculture next week, they said. But grains markets remained susceptible to macro-economic news and global economic uncertainties arising from Europe's debt crisis, they said.
Chaos over Greece's role in the euro zone swept financial markets on Thursday with early losses in stocks and the euro turning to hefty gains on hopes Athens might ditch its referendum plans. A surprise interest rate cut from the European Central Bank added to the mix, boosting stocks and setting Wall Street up for more gains. The United Nations' food agency said on Thursday it expected agricultural commodity markets to remain tight with high and volatile prices despite improved supply and weakening demand, raising its estimates of global grain output this year.
In Germany, the EU's second-largest wheat producer after France, prices rose in line with the strength in Paris with brisk demand from the feed sector pushing feed wheat prices above milling grains in parts of the country. Standard new crop bread-quality wheat for January delivery in Hamburg was offered for sale up two euros at around 193 euros a tonne with buyers at around 191 euros.
"Demand for milling wheat remains poor with consumers apparently with good supply cover and export demand likely to be covered by Russia and Ukraine in coming weeks," one German trader said. "Nearby prices for feed wheat are sometimes above milling wheat because of low milling demand. Some stock holders who are worried about whether their wheat will meet quality demands after the rainy summer are selling milling wheat as feed wheat."
Feed wheat for November/December delivery in the large South Oldenburg market in north west Germany close to the Netherlands was offered for sale at 201 euros a tonne on Thursday with buyers offering 199 euros. "Milling wheat for November delivery in Hamburg is quoted at around 194-196 a tonne and some people are deciding to pay a 7 euro a tonne trucking charge and sell their milling wheat as feed in South Oldenburg," one trader said.
"As no improvement to the export outlook can be seen at the moment, some players do not expect a major recovery in German cash prices in the immediate future." Czech milling wheat for November delivery was also reported to have traded at 192 euros a tonne in Hamburg, also helping to slacken local milling demand.