London wheat hits 2-year high, Paris gains as dryness fears mount


Wheat prices in Europe gained support from worries over dry weather threatening this summer's crop, as well as evidence of smaller-than-expected stocks, with London futures hitting their highest in nearly three years.

Front-month Paris wheat futures put in their weakest close in four months on Tuesday, but prices have rallied over 2% since then.

May Paris wheat futures were up 0.6% in afternoon deals, at E165.75 a tonne.

And in the UK, were wheat prices are getting long-term support from the weak sterling, front-month futures touched £149.50 a tonne, the highest on a spot contract basis since May 2014.

May London wheat futures later eased back to £149.25 a tonne, a gain of 0.5% on the day.

Dry weather raises worries

"Markets are supported by the dry conditions in place in a good part of Europe and with the revision of balance sheets by FranceAgrimer," Paris-based consultancy Agritel said.

"On a climatic point of view, we record now a multi-month's rain deficit of about 30 to 50% in France, depending on the region," Agritel said.  "The same trend is also observed in other parts of Europe at varying degrees."

Dryness fears are also supporting UK wheat prices.

"Many UK farmers particularly in the South and East are hoping for rainfall over Easter following a dry spell as spring crops try to establish," said CRM AgriCommodities.

Yields could be hurt

Analyst Strategie Grains only slightly trimmed its estimate for the 2017-18 EU wheat crop, by 100,000 tonnes to 143.8m tonnes, leaving production up some 6% year-on-year.

But the analyst warned that production could be hurt if rains do not arrive in areas where soil moisture is low from a dry winter, even after some helpful March showers.

"Without more rain, the current good harvest outlooks could quickly alter in the event of a prolonged dry spell," Strategie Grains said.

Spain, northern and eastern France, Belgium, and parts of Hungary, Bulgaria, and Austria were among the areas affected.  

Increased export hopes, tighter stocks

Strategie Grains also raised its forecast for European Union soft wheat exports, citing increased shipments to Turkey, which recently halted imports of Russian wheat.

Turkey, the second ranked importer of Russian wheat, excluded the country from a duty-free scheme last month, forcing flour mills to turn to Europe for wheat supplies.

Stratagie Grains forecast EU soft wheat exports in 2016-17 at 23.5m tonnes, up 300,000 tonnes last month's estimate.

This week FranceAgimer revised down its estimate of French wheat stocks by 360,000 tonnes, to 2.60m tonnes, mostly because of increase in on-farm consumption.


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