Draghi Lending EU Wheat Farmers a Helping Hand as Euro Tumbles

  • French wheat becomes more competitive than Black Sea varieties
  • Euro at 7-month low to dollar may help boost EU wheat exports

Mario Draghi may have done just enough to help European farmers offload their pile of wheat.

With the European Central Bank president fueling speculation his board will ease monetary policy next week, the euro tumbled to a seven-month low against the dollar. That’s boosting the competitiveness of European wheat against grain from the Black Sea region and could potentially accelerate exports that are running 29 percent behind last year’s.

French wheat has been trading below its Ukrainian counterpart since Nov. 12, while the price is close to that of Russian grain, according to data compiled by Bloomberg. As Europe harvested a record crop in the 2015-16 season started in July, silos in France, the biggest grower, are filling up.

"French wheat is one of the cheapest in the world," Edward de Wismes, a broker at Aurel BGC in Paris, said by e-mail Monday. "The lower euro helps, this is clear, but the problem is the lack of demand."

EU wheat becoming more competitive

The euro fell to the lowest since April on Monday, after Draghi said Friday that the ECB will do what it must to raise inflation “as quickly as possible.” The Governing Council meets in Frankfurt on Dec. 3 for its next monetary-policy decision.

While a cheaper euro will help EU exports, demand needs to pick up, Matt Ammermann, a commodity risk manager at INTL FCStone, said by e-mail.

A lower single currency could help boost exports after French silos operated by Senalia, Nord Cereales and Socomac stopped taking in grain for delivery against the benchmark contract on Euronext, known as Matif. Europe issued licenses to export 8.17 million metric tons ton of soft wheat from the start of the season July 1 through to Nov. 17, according to data from the European Commission, the bloc’s regulatory arm.

“Despite a weaker euro, EU markets remain pressured by a lack of export business, especially in France," Gleadell Agriculture Ltd., a trader based in Gainsborough, England, and owned by Archer-Daniels-Midland Co. and InVivo, said in a report on its website Friday. "The three French Matif futures delivery silos have all closed their doors."

Wheat Prices

Milling wheat from Ukraine was trading Friday at $198 a metric ton, about $2 more than French futures for March delivery on Euronext on the same day, data from UkrAgroConsult showed. Russian grain for loading at the port of Novorossiysk was at $195.50 a ton. Russia is set to overtake the U.S. as the world’s largest wheat shipper.

The price of EU wheat in dollars fell to $194.12 a ton Monday. The difference between French grain loading at the port of Rouen and Black Sea supplies would be even bigger as physical prices are at a discount of more than 7 euros a ton to futures, according crops office FranceAgriMer.

European wheat has started to win business in Egypt, the world’s largest buyer, in the past few tenders. France sold 180,000 tons since Oct. 29 while Poland shipped its first cargo to the Middle Eastern nation, Bloomberg calculations showed. Still, sales of Russian wheat to Egypt this season are six times higher than for French grain.

"The Black Sea have a lot to sell," de Wismes said. "With a lower euro, they will need to be more aggressive."

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