Argentina woes seen keeping EU wheat prices firm
By Valerie Parent and Sybille de La Hamaide
PARIS, Dec 4 (Reuters) - European wheat prices are likely to stay firm on strong export demand and frost damage in Argentina, but analysts said on Tuesday a new rally to 300 euros ($442.3) a tonne was unlikely.
European wheat prices have gained more than 15 percent in less than three weeks on the foot of strong U.S. wheat futures, due to strong global demand and thin stocks.
The rise recently got an extra boost from news that Argentina -- one of the main origins supplying international demand in coming months -- would halt exports while assessing damage from a cold wave that hit top growing areas last month.
Initially imposed for five days, Argentina's decision to close its wheat export registry temporarily was extended for another 15 days starting from Dec. 5 [nN03451264].
Euronext milling wheat futures <0#BL2:>, which have been bullish since mid-November, were mixed on Tuesday with benchmark January slightly higher at 247 euros a tonne.
Although prices were seen staying firm, boosted by poor supplies and strong demand, most observers said they did not expect them to go back to the 300-euro top of early September.
"I think we could rise further, to around 255/257 on January, a broker said. "But to go to 300 we need stronger demand and some panic."
A European trader said: "A panic move must not be excluded in light of the demand that still needs to be covered."
Turkey, Pakistan and India are in the market for large wheat purchases and Egypt, Morocco and Tunisia are expected soon <GRA/TEND>.
On the supply side, the United States has committed most of its grains, Russia and Ukraine have tightened their borders and Argentina's final crop is being questioned with some analysts putting the potential loss at up to 2 million tonnes.
"There are supplies available until February but after that none," a French trader said.
STAND-IN
Argentina is one of the top five global wheat suppliers and about 7 million tonnes have already been registered for export.
Last year, it exported 10.5 million tonnes of wheat from a harvest of 15.2 million tonnes, according to the U.S. Department of Agriculture (USDA). If Argentina's export restrictions were to be extended, demand would have to switch elsewhere, notably to cover some of India's wheat purchases which were initially planned to come from Argentina.
Many eyes turn to Europe as a potential challenger.
But James Dunsterville, analyst at Geneva-based Agrinews, stressed that EU wheat would not be the only one to benefit from although Argentina's lower sales.
"Argentina is going to effect psychologically, but it isn't going to boost necessarily demand for French wheat," he said.
"Most of the time Argentina wheat exports and French exports don't really match a lot together. The replacement of Argentine wheat, if there is any, is more likely to come from either Canada or Australia," he added.
Bearish factors for EU wheat also included an expected rise in global output next year with farmers encouraged by soaring prices and, in Europe, by the Union's move to scrap the obligation to leave 10 percent of the land fallow.
Analysts also pointed to a potential switch in commodities indices from wheat and soybeans -- seen near their tops -- towards maize (corn) or sugar, which could still benefit from a strong ethanol demand.
The move could take place during the traditional year-end sell off and slowdown in activity, they said.
(Additional reporting by Tamora Vidaillet; editing by Michael Roddy)
((sybille.delahamaide@reuters.com, Reuters Messaging: sybille.delahamaide.reuters.com@reuters.net +331 4949 5145))
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