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EU wheat retreats from 2-week high as commodities slide

EU wheat retreats from 2-week high as commodities slidePARIS: European wheat futures fell sharply on Tuesday, pressured by broad losses in commodity markets as a surprise currency devaluation by China unsettled investors. December milling wheat, the most active contract on the Paris-based Euronext market, was down 4.00 euros or 2.1 percent at 186.00 euros a tonne by 1558 GMT.

On Monday, it had touched its highest since July 23 at 190.50 euros. “All commodities are being affected by the drop in the yuan, wheat particularly so because yesterday’s rally had no real basis given that we’re getting quantity and quality in the European harvest,” one Euronext dealer said.

China’s devaluation supported the dollar, the main currency for commodity markets, while fuelling worries about a faltering Chinese economy that is a bellwether for global demand for raw materials. Spillover pressure from other commodities put attention back on bearish fundamentals for wheat, with consensus that France’s harvest would yield a record-large crop with decent quality.

Traders continued to assess conditions for maize, with improving weather in the southwest but more yield losses feared in eastern zones.

The farm ministry on Monday put this year’s grain maize crop at 13.2 million tonnes, down 28 percent on a record 2014 volume, in its first estimate of 2015 production.

The forecast was at the low end of market estimates and some traders said crop conditions had improved in parts of France with the return of rain in late July, with crop risks now greater in central and eastern Europe.

In Germany, cash premiums in Hamburg were cut to reflect the strength in Paris on Monday and a positive German harvest outlook.

New crop standard wheat with 12 percent protein content for September delivery in Hamburg was offered for sale at 1 euro under the Paris December contract against even Paris on Monday.

Buyers were seeking 2 euros under Paris against 1 euro under on Monday.

Harvesting in the final northern regions was interrupted by overnight rain in some areas but is expected to resume rapidly as high temperatures and dry weather are expected up to Friday.

Copyright Reuters, 2015

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