January 03, 2013
European wheat futures rose on Wednesday in the first session of the new year as they factored in a late recovery in the last Chicago session and joined in a broad market rally after the US budget deal. Benchmark March milling wheat on the Paris futures market was up 3.75 euros or 1.5 percent at 252.50 euros a tonne by 1238 GMT. The rise also reflected technical underpinning as the contract faced chart support.
“We’re making up for the pick-up at the end of the New Year’s Eve session in Chicago but we don’t really have clear direction yet as we wait to see what happens on the US market later,” a futures dealer said. Chicago grain futures resume trading at 1530 GMT after the New Year holiday. The lack of a price lead by US futures made some European market participants reserved on Wednesday. On Monday, Chicago wheat pared losses towards the end of the session while corn turned positive.
An agreement between US leaders to stave off the so-called “fiscal cliff” of sweeping tax increases and spending cuts sparked strong gains across equity and commodity markets on Wednesday. Paris benchmark wheat prices ended 2012 showing 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. Traders said EU wheat fundamentals remained supportive, despite the steep losses in December, with European wheat continuing to attract demand even at a premium to US supply.
“The demand is still there, the importers are making inquiries on a daily basis,” one export trader said, referring to north and sub-Saharan African countries. Paris rapeseed futures also rose, with the February contract up 4.75 euros or 1.0 percent at 461.00 euros per tonne.
The benchmark rapeseed contract was bolstered by the breaking of technical resistance at 458.75 euros and a two-month high for palm oil futures in Malaysia, traders said. German wheat was once more quoted at large premiums over Paris, but with prices once more seen as largely nominal with many market participants still on holiday. Standard milling wheat for January delivery in Hamburg was marked up in line with the rise in Paris, offered for sale nominally up 4 euros and well over Paris at 269 euros a tonne with buyers at around 267 euros. “A large number of market participants are still on holiday and I think the market will not get back into full speed until next week,” one German trader said. “The fact that Chicago prices were not available for most of Wednesday also created a risk-off mood.”
The high German price premiums remained because of the good export outlook, with the EU expected to gain business early in the new year as Russia and Ukraine leave the export markets after their poor crops in summer 2012, traders said. Traders were also relieved at a fall in Rhine water levels which meant river shipping was running normally. Repeated demand and tight supplies again kept German feed wheat around the same level or even above milling prices. Feed wheat for January-March delivery in the South Oldenburg market near the Netherlands was offered for sale up 4 euros at 276 euros a tonne with buyers at 272 euros.