January 01, 2013
European wheat futures ended 2012 with an annual rise of 27 percent as gains driven by poor crop weather from the United States to Argentina outweighed a year-end sell-off linked to liquidation by funds and worries over stalled US budget talks. After a shortened session on Monday ahead of the New Year holiday, the benchmark March milling wheat contract on the Paris futures market settled 1.00 euro or 0.40 percent lower at 248.75 euros ($330) a tonne.
On a continuation chart, the second-month reference was up 27.4 percent from a close of 195.25 euros at the end of 2011. The second-month reference price peaked at 279.25 euros in early November, raising expectations the market could scale an all-time high of 300 euros set in September 2007, before pulling back sharply in December to fall to a five-month low of 245.25 euros on December 20.
Front-month January, which expires on January 10, ended Monday’s session down 1.50 euros at 249.75 euros. “The market is down slightly today as expected given the trend in Chicago,” a European trader said. “We’re trading above support levels while we wait to see what happens with the fiscal cliff.”
Stalled US budget talks need to produce an agreement before the end of the year to avert automatic tax increases and spending cuts in the world’s largest economy. “If the tax increases happened in the United States, investment funds could continue to liquidate their positions in grains,” the trader said.
US wheat futures slipped to near a six-month low but remained on course for an annual gain of about 18 percent. In addition to the uncertainty over the US budget talks, the Paris market was left hesitant by the virtual shutdown of the French cash market over the Christmas and New Year period, traders said. Wheat fundamentals continued to be supportive for prices, however, after a year of adverse crop weather that has strained supply in major exporting countries like Russia. “The fundamentals haven’t really changed,” a French futures broker said. “We’re still at pretty decent price levels.”