European wheat futures tumbled on Thursday to their lowest level in almost five months as year-end selling accelerated, fuelled by a slide in Chicago and worries about stalled US budget talks. With cash markets quiet ahead of the year-end holiday period and fundamentals still supportive, the losses were driven by nervous investors who preferred to cut positions after a year marked by weather-linked gains in grain prices, traders said.
"All the ingredients are there for profit-taking," Pierre-Antoine Allard of French grains consultancy Agritel said. "The investment funds started the selling movement, but now the commercial trade is following." Benchmark March milling wheat in Paris closed down 5.00 euros or 1.97 percent at 248.25 euros ($330) a tonne. It earlier slipped to 245.25 euros, its lowest since July 24. The equivalent contract in Chicago fell by a similar amount to its lowest level in nearly six months.
Weak corn exports and a big acreage forecast for the next US crop, which private consultancy Informa Economics on Wednesday put at the highest level since 1936, created some fundamental pressure on grains, but traders said the sell-off reflected mainly the cutting of positions in a cautious mood before the holiday slowdown. "The market is only paying attention to bearish news and ignoring bullish news like the cold in southern Russia and the rain in Argentina," a French cash broker said.
Strength in the euro, which hit an 8-1/2 month high against the dollar on Wednesday, also was putting a curb on Paris futures, although traders said export demand remained healthy as western Europe was one of the few available suppliers along with the United States. The European Union this week awarded 566,000 tonnes of soft wheat export licences, the fourth-largest volume this season, official data showed on Thursday, suggesting demand was still strong despite competition from cheaper US supply. In oilseeds, Paris rapeseed futures sank to their lowest in almost nine months as US soybeans were dented by news of further cancellations of exports. February rapeseed ended 6.50 euros or 1.44 percent lower at 444.75 euros a tonne, after earlier dropping to 441.75 euros.
GERMANY German wheat followed the sharp trend down but remained at large premiums over Paris as sellers sought to resist Thursday's futures drop. Standard milling wheat for January delivery in Hamburg was offered for sale down 5 euros but well over Paris at 264 euros a tonne with buyers at around 263 euros. "The sudden fall in Paris futures was a shock to the market today as there seemed to be no specific reason visible for this meltdown apart from possible end of year clearouts of long positions and the strong euro," a German trader said.
"Premiums over Paris held firm as sellers think the sudden fall is not justified by the fundamentally good export picture." Germany's winter wheat sown area for the 2013 harvest has expanded by 7 percent on the year to around 3.1 million hectares, Germany's national statistics office said on Thursday.
"Overall the plantings increase gives the first concrete indication of a larger harvest in 2013, provided there is no major frost damage this winter or dryness damage in the spring," the trader said. Repeated demand and tight supplies kept German feed wheat around the same level or even above milling prices, but prices were marked down sharply to reflect falling futures markets.