HAMBURG: European wheat surged to new three-year highs on Tuesday in the wake of a rally on US markets before paring most of the gains as the rally in Chicago wheat receded.
Benchmark December milling wheat on Paris-based Euronext, unofficially closed up 0.3 percent or 0.75 euros at 204.75 euros ($239.62) a tonne after earlier hitting 207.50 euros, the highest since July 2015.
US grains rallied on Tuesday on hopes the United States and China would restart stalled trade talks and avert a damaging trade war that has already slowed US soy exports.
“Euronext followed the surge in Chicago which did not hold because there was no reason for such a rally,” a trader said.
Markets remained supported by concerns about damage to crops in the European Union, the Black Sea and Australia.
Ukraine’s agriculture minister said he expects a 12-16 percent drop in wheat crops this year after poor weather.
Sweden and Bulgaria were also forecast to suffer sharp drops in wheat crops.
Premiums on the cash market remained firm as operators awaited the results of Algeria’s tender to buy wheat for October shipment closing on Wednesday.
In Germany, cash market prices in Hamburg were supported by continued concern about Germany’s drought-damaged harvest.
Germany’s farming association on Tuesday stepped up its calls for special aid of around 1 billion euros ($1.17 billion) for farmers because of damage to harvests caused by drought and heatwave. But Germany’s farm minister said the extent of harvest damage is still unclear and the government will wait until the national harvest estimates in late August before deciding on aid.
New crop standard bread wheat with 12 percent protein for September delivery in Hamburg was offered for sale at 6 euros over Paris December, up 1 euro.
Consultancy Strategie Grains forecast the German soft wheat crop at 20.7 million tonnes, down from 22.8 million estimated in early July. Last year it was some 24 million tonnes.
“I think the market is starting to expect a German harvest of under 20 million tonnes,” one German trader said. “Farmers are unwilling sellers as they do not know if they will be actually be able to deliver what they forecast.”
“I expect a reduction in Germany’s wheat exports in the next year. Germany may also make noticeable imports of wheat from France along with Poland and the Czech Republic.”