European wheat up on concerns over U.S. drought

Fri Jan 18, 2013 8:18am EST

AMSTERDAM, Jan 18 (Reuters) - European wheat futures rose on Friday as
worries over drought-affected U.S. wheat crops kept attention focused on global
supply tensions.
    * But gains were modest as the market consolidated after rallying this week
in the wake of lower-than-expected U.S. wheat area estimates last Friday from
the U.S. government.
    * Benchmark March milling wheat on the Paris futures market was up
1.25 euros or 0.50 percent at 249.25 euros a tonne by 1221 GMT to approach
psychological resistance at 250 euros.
    * The market hit a four-week high on Wednesday at 255.50 euros but failed to
break technical resistance at this level.
    * "The market climbed a good bit this week," a French futures dealer said.
"We're looking for new direction."
    * Chicago wheat also edged higher on Friday to put it on course for
its biggest weekly gain since July. 
    * Last Friday's smaller-than-anticipated estimate of U.S. winter wheat
sowings by the U.S. Department of Agriculture triggered a rebound on wheat
markets after a year-end sell-off driven by liquidation by investment funds.
    * A persisting drought in some wheat-growing areas of the United States has
fuelled supply fears after poor weather already dented harvests in major
exporters like Russia and Argentina in the past year.
    * "The drought in the U.S. Plains is the Sword of Damocles hanging over the
market," the dealer said. "The little bit of rain that they've had is not going
to resolve the situation."
    * An official cut to Argentina's wheat harvest on Thursday due to harsh
weather together with talk of potential Russian imports also underlined
tightening global availabilities. 
    * But French traders said comments by analysts SovEcon that French wheat was
competitive against domestic supply to the Russian city of St Petersburg did not
make such deals likely. 
    * "As of today it's something of a theoretical calculation," a French trader
said. 
    * "The first thing the Russians would do is to take some Kazakh and
Ukrainian wheat. There are also some bits and pieces left in the Baltic
countries. We would come last and that would mean the situation is really bad
over there."
    * Weekly European Union data on Thursday showed 340,000 tonnes of soft wheat
export licences were awarded this week, keeping the total this season well above
the level in 2011/12. 
    * However, in a sign of waning competitiveness of EU wheat, mainly in
southern EU markets, the EU also cleared licences to import 89,000 tonnes of
wheat under its quotas, including 51,000 tonnes for a sub-quota of U.S. wheat.
 
    
    GERMANY
    * German wheat retained large premiums over Paris because of export hopes
and a lack of farmer selling with high feed wheat prices also providing
background support.
    * Standard milling wheat for January delivery in Hamburg was offered for
sale down 1 euro but over Paris at 265 euros a tonne with buyers at around 263
euros, with prices still adjusting to late falls in weakness in Paris trade on
Thursday.
    * "There is a lack of willingness to sell with people starting to expect
rising prices in coming months as the global harvest news continues to be bad,
such as we have just received from Argentina," one trader said.
    * "The poor Argentine crop raises questions about where Brazil will buy its
milling wheat and could also bring into question the status of advanced sales of
Argentine milling wheat to North Africa and South Africa."  
    * Brazil is traditionally a huge buyer of Argentine bread-quality wheat.
    * 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 down 1 euro but above milling wheat at 269
euros a tonne with buyers at 267 euros.
    * "There is talk about more feed wheat imports by Germany and other North
European countries from the U.S. or South America because of current high
prices," a trader said. 

 * Prices as of 1310 GMT
                                                                                                               
  Product             Last    Change   Pct Move End 2011 Ytd Pct 
 
  Paris maize         241.50     0.50    +0.21   197.25    22.43
  Paris rape          464.00     2.75    +0.60   421.50    10.08
  CBOT wheat          783.75     2.50    +0.32   671.25    16.76
  CBOT corn          727.50     3.00    +0.41   654.75    11.11
  CBOT soybeans      1434.50     4.25    +0.30  1207.75    18.77
  Crude oil           95.30    -0.19    -0.20    98.83    -3.57
  Euro/dlr              1.33     0.12    +9.84     1.30     2.71
 * All grain and oilseed prices for second position. Paris futures prices in
Euros per tonne, London wheat in pounds per tonne and CBOT in cents per bushel.



 (Reporting by Gus Trompiz in Paris, Michael Hogan in Hamburg and Ivana
Sekularac in Amsterdam)