European wheat futures extended gains on Thursday as US prices rallied on signs of overseas demand, although the rise in Europe was curbed by a steadier euro and a backdrop of slow French wheat exports. December milling wheat on Paris-based Euronext settled 1.75 euros or 1.1 percent higher at 161.25 euros a tonne, just off a one-week high of 161.50 euros touched in late trade.
CME Group's December EU wheat contract rose 1.50 euros to 166.75 euros a tonne, retaining its clear premium over Euronext. Chicago wheat futures jumped 3 percent as investors shed short positions, encouraged by export demand around the world. Saudi Arabia announced a tender to buy hard wheat, while Egypt and Algeria were holding purchase tenders on Thursday. In Germany, export hopes supported cash market premiums. "Saudi Arabia is tendering for a hefty 595,000 tonnes of hard wheat and regularly buys a lot from Germany," one German trader said. "Algeria could buy several hundred thousand tonnes with Germany looking one of the alternatives to France."
"With this month's USDA report now out of the way we could see more activity from importing countries." Standard wheat with 12 percent protein content for October delivery in Hamburg was offered for sale at 3 euros over the Paris December contract against 2 euros over on Wednesday. Buyers were seeking 2.5 euros over Paris.
Weekly European Union export data showed Germany and Romania continued to lead France in the volume of soft wheat export licences requested so far this season. The EU awarded 526,000 tonnes of soft wheat export licences this week to bring the total so far in 2016/17 to 7.3 million tonnes, up 17 percent on the year-ago level. The market was digesting news that Syria's state grain buyer concluded a deal to purchase 1 million tonnes of Russian wheat, as reported by a Syrian government source. Reaction was cautious given the very low sale price cited of 150 euros ($170) a tonne, cost and freight, and since a government source in Russia only confirmed it was considering a 100,000 tonne aid deal.
"At that price, it basically needs to be subsidised," a grain analyst said. "They'll do it a boat at a time if they have financing for it." Price movements in EU futures also remained limited by a slow French market following the small summer crop.
In monthly supply-and-demand estimates, farm office FranceAgriMer left unchanged its forecast for French soft wheat exports outside the EU at 4.7 million tonnes, down 63 percent from last season, while trimming intra-EU shipments. The euro, which has supported EU wheat this week, turned higher against the dollar after touching its lowest since July earlier in the day.