EU wheat slides with Chicago as USDA report eases supply jitters

[PARIS] European wheat futures fell nearly 3 per cent on Monday, tracking steep losses in Chicago after a closely followed US government crop report made smaller than expected cuts to global wheat supply and projected record U.S. soybean and corn yields.

December milling wheat, the most active contract on Paris-based Euronext, settled 6 euros, or 2.8 per cent, lower at US$235.47 a tonne.

Chicago wheat, the global benchmark, fell sharply for a second day as investors continued to react to Friday's U.S. Department of Agriculture (USDA) monthly crop report.

While attention on Friday had been focused on USDA's bigger than expected projections for US soybean production and end of season stocks, selling in wheat continued on Monday as traders saw an opportunity to book profits after a recent rally to multi-year highs linked to weather damage.

A falling euro had helped underpin Euronext on Friday but spillover pressure from the US market and technical factors, including the filling of a chart gap to the downside, encouraged the European market to pull back on Monday, traders said.

"Only some new fundamental factors could challenge this scenario and send prices back up towards recent highs," a Euronext futures dealer said.

However, many European traders were sceptical of the USDA's world wheat outlook, with widespread surprise that the agency left unchanged its harvest forecast for drought-hit Australia.

"A lot of the numbers in the USDA report should be taken with caution, especially Australian production. For the EU, it's obvious that an ending stock of 10 million tonnes is hardly viable," one trader said.

The USDA reduced sharply its estimate of European Union wheat production but traders said it would have to cut projected exports much further to balance tightening supply.

Weekly EU data showed the bloc had exported 1.3 million tonnes of soft wheat since the start of the 2018/19 season on July 1, down 43 per cent from a year ago.

In Germany, among the EU countries worst affected by dry, hot weather, cash premiums in Hamburg were raised to compensate the fall in Paris.

"It is a very difficult market today with sellers unwilling to accept the sharp reduction in outright prices in view of the heavy damage suffered by the German harvest from the drought and heatwave," one German trader said.

New crop standard bread wheat with 12 per cent protein for September delivery in Hamburg was offered for sale up 1 euro at 5 euros over Paris December.

Feed wheat in Germany's South Oldenburg market for September/December was offered for sale well over milling wheat at around 226 euros a tonne, with buyers seeking 224 euros.

REUTERS