January 9, 2019 / 5:03 PM / 12 days ago

EU wheat eases as euro rise underscores export challenge

PARIS, Jan 9 (Reuters) - Euronext wheat futures edged lower on Wednesday, pressured by a sharp rise in the euro that underlined overseas competition for west European wheat despite a flurry of export demand.

March milling wheat, the most active contract on the Paris-based Euronext exchange, was down 0.75 euros or 0.4 percent at 205.25 euros ($236.71) a tonne by 1649 GMT.

The euro climbed to its highest since October against a broadly weaker dollar, reflecting increased risk appetite as extended talks between U.S. and Chinese officials boosted hopes for a resolution of the countries’ tariff dispute.

The higher euro and signs of competition from Russian and U.S. wheat were tempering hopes that European Union wheat would see an upswing in exports after a slow start to the 2018/19 season.

A 550,000-tonne purchase by Algeria in a tender on Tuesday was expected to yield substantial sales for French wheat in its main export market. But U.S. wheat was seen as in contention to fill part of the order, traders said.

A tender being held by top wheat importer Egypt on Wednesday meanwhile drew competitive offers of Russian wheat despite recent expectations that rising prices and ebbing supply would limit Russia’s export activity in the latter part of the season.

“The west EU’s export outlook does not look encouraging with the strength of the euro today unwelcome,” one German trader said.

“French wheat was offered in the tender from Egypt today but so were huge volumes from Russia, so the competition to EU wheat from the Black Sea continues to be intense.”

Farming agency FranceAgriMer trimmed its forecast of French soft wheat exports outside the European Union this season, saying it expected strong competition from U.S. and Argentine wheat.

Overall EU soft wheat exports are running 25 percent below last season’s level.

Weekly Euronext data showed financial investors increased their net long position in the exchange’s milling wheat futures and options in the week to Jan. 4.

In Germany, cash premiums in Hamburg were little changed.

Standard bread wheat with 12 percent protein for January delivery in Hamburg was offered for sale unchanged at 3.0 euros over Paris March.

Feed wheat in the South Oldenburg market for January onwards delivery was offered for sale above milling wheat at around 218 euros a tonne with buyers at around 217 euros. ($1 = 0.8671 euros) (Reporting by Valerie Parent in Paris and Michael Hogan in Hamburg; Writing by Gus Trompiz; Editing by Jan Harvey)

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