European wheat futures dipped on Tuesday, equalling a recent 3 month low, weighed down by high stocks and the prospect of more competition from export rivals Russia and Argentina. March wheat futures in Paris were down 0.50 euros, or 0.4 percent, at 174.25 euros a tonne at 1710 GMT, after equalling a three-month low of 174.00 euros set last Thursday.
"We keep grinding lower and can't find much relief to the upside," one futures dealer said. "There are weather risks but the market is not really buying them so as long they are 'what if' compared with the tangible reality of high stocks." News from Russia and Argentina, two exporters, has added to bearish sentiment, dealers said. In Russia, the agriculture ministry called for an export tax to be cut or scrapped, according to Interfax.
"Markets have so far reacted bearishly to this news, as a lower tax could spur on the Russian export pace, in turning adding pressure to global wheat prices," AHDB analyst Arthur Marshall said. Traders also expect increased competition from Argentina following the devaluation of the country's currency and the scrapping of a wheat export tax. The market was underpinned, however, by concerns that mild weather has left many crops without the protection of snow cover, heightening the risk of winterkill if there were to be a sudden drop in temperatures.
"The heavy supply situation of the 2015/16 season seems in our view to be well priced in by the market, which will have to start looking towards the 2016 harvest," consultancy Agritel said in a note. "The abnormally high temperatures being registered across the northern hemisphere are raising a number of questions." This could add to early development problems in Ukraine, where Agritel forecast wheat production could drop by one-third next year to 17.2 million tonnes after drought cut sharply the crop area.
Feed wheat futures in London were higher, buoyed by the weakness of sterling, with May up 0.6 percent at 117.50 pounds a tonne. Sterling slumped to a 10-week low against the euro on Tuesday, boosting the competitiveness of UK exports to key euro zone customers such as Spain and the Netherlands.