European wheat futures rose on Tuesday on the back of a short-covering rally in Chicago, but volumes were thin as traders awaited a US government crop report that will offer an initial take on global supply and demand next season. December milling wheat, the new-crop benchmark and most active position on Euronext, was 1.50 euros or 0.9 percent higher at 176.50 euros a tonne by 1512 GMT.
The contract was continuing to recover from a seven-month low of 171.00 euros hit a week ago. September was up 1.50 euros at 175.00 euros. It is now the front month after Monday's expiry of the May contract that had been the last 2014 crop reference. "It's above all a day of short-covering and spreads on the US market," one Euronext trader said, noting that wheat was gaining ground in Chicago against corn. Traders were cautious about further gains before the release of the US Department of Agriculture report at 1600 GMT that will include the USDA's first full projections for 2015/16.
The European market also remained curbed by slackening export demand as the end of the season approaches plus favourable crop conditioons for this summer's harvest The French farm ministry on Tuesday kept its estimate of the 2015 soft wheat area at 5.2 million hectares, up more than 3 percent on last year and the highest since 1936.
In Germany, cash wheat premiums in Hamburg were little changed in the run-up to the USDA report at the end of the European trading day. Standard wheat with 12 percent protein content for May delivery in Hamburg was offered for sale at an unchanged premium of 5 euros over the Paris December contract. Buyers were offering 4 euros over. A recent recovery in the euro against the dollar has tempered export sentiment after brisk shipments so far this season.
"The line-up of ships loading wheat for export in German ports seems to be declining this month following the rise in the euro from its low points in mid-April," one trader said. "Meanwhile, the mix of rain and warmer weather is excellent for wheat plants, which is making buyers more relaxed about purchasing extra supplies."