European wheat futures hit a contract low on Monday, extending last week's losses on bearish supply data, as forecasts for drier weather in France also weighed on prices. Paris futures were lower after the US Department of Agriculture's (USDA) monthly supply-and-demand report confirmed ample supplies in its update on Friday. Euronext November milling wheat was down 2 euros or 1.1 percent at 178.50 euros a tonne at 1544 GMT, having earlier dipped to a contract low of 178.00 euros.
"There's nothing bullish at the moment," a London-based broker said, noting the next support level for November Paris milling wheat was at around 168 euros. Grain prices are expected to weaken further due to favourable growing conditions. Updated weather models look "near perfect" across the US Corn Belt during the key pollination stage of development.
"The supply situation depicted by the USDA in its latest report is even rosier than before," Commerzbank said in a daily note. "As a result, US stocks as of the end of 2014/15 are also set to grow even more sharply and reach an eight-year high." "Although a considerable inventory build had been anticipated, market observers were nonetheless surprised by the upward revision," Commerzbank said. Rain in parts of Europe had been a supportive factor last week but dealers said concerns were easing, particularly in France.
"In parts of France they've had a bit of rain but forecasts show it will be drier this week," said the London-based broker. "It's not a problem yet (for the wheat crop), you literally have to have two or three weeks of solid rain. It's mainly in Eastern France that they're having the problems where its more corn and rapeseed."
German cash wheat premiums remained supported as rain continued to fall in much of Germany only a weeks before the harvest start. Standard new crop wheat with 12 percent protein content for delivery in Hamburg from September was offered for sale at 6 euros over the Paris November contract, against 5.5 euros on Friday. Buyers were offering an unchanged 5 euros over Paris. "Some premiums are being adjusted to compensate for the fall in futures markets after the USDA report on Friday," one German trader said. "There is also concern about rain which fell in much of Germany for most of last week and the weekend which is also forecast again for much of this week."
"The rain has interrupted the barley harvest and there is concern about the repeated rain at a time when wheat needs sunshine to push it towards ripeness and good quality. But the level of concern is limited as a return to sunshine would give wheat plants time to recover."
