European Union wheat futures fell on Wednesday after rallying to a three-week high a day earlier, with a raised forecast for French wheat stocks turning attention back to ample grain supplies. French farm office FranceAgriMer lifted its forecast of soft wheat stocks at the end of 2014/2015 to 4.4 million tonnes, a 10-year high. November wheat on the Paris-based Euronext market unofficially closed down 2.75 euros or 1.6 percent at 160.00 euros a tonne.
The contract had risen on Tuesday to 163.00 euros, its highest since September 16, as the market continued to recover from a four-year low of 148.50 euros struck last month. European futures lacked support from the US market, which saw hesitant trading. A sharp rise in Chicago on Tuesday, as investors adjusted positions before crop forecasts from the US Department of Agriculture (USDA) on Friday, had fuelled the run-up in Paris.
"The rally was a bit of short-covering before the USDA report," one futures dealer said. "Today you've got the balance sheet from FranceAgriMer (weighing on the market)." The USDA will release its monthly supply and demand estimates, as well as crop production forecasts on Friday. Analysts polled by Reuters forecast the USDA to estimate this year's US corn crop at a record size.
A fall in the euro in October has helped European prices recover by boosting export prospects. But FranceAgriMer's latest outlook underlined a bearish context as the office raised harvest supply and animal feed demand and exports within the European Union. The agency left unchanged at 8.0 million tonnes its estimate of French soft wheat exports outside the EU, down 34.5 percent on last year.
January delivery, now becoming the main focus of trade, was offered for sale at an unchanged 14 euros over Paris January with buyers at 13 euros over. "I think there is a feeling among buyers that the USDA reports will underline the impact of large US corn and soybean harvests which will be overall bearish for prices," one German trader said. "There is also the impression that early week price strength was technically-based with some short covering ahead of the USDA report and not really fundamentally-based."