EU Wheat Facing Tougher Competition as Black Sea Prices Decline

  • Russian, Ukrainian prices now on par with French futures
  • Wheat market susceptible to currency moves this week: FCStone

European wheat is losing its competitive edge over Black Sea supplies once again.

Russian wheat for loading at deep sea ports fell to $193 a metric ton last week, according to Moscow-based market researcher SovEcon, about 0.3 percent below futures traded in Paris. Russian prices had been 2.3 percent more expensive than French futures two weeks ago, data from researcher IKAR showed. Ukrainian grain prices also slipped last week.

Black Sea prices have fallen alongside the ruble just as the euro has strengthened, making European Union supplies more expensive to buyers using other currencies. Competition is increasing at a time demand for European grain is lagging, with licenses to export soft-wheat from the 28-country bloc running 21 percent behind last year.

“They will be more competitive going forward than they have been in the last few weeks," Kieran Walsh, a broker at Paris-based Aurel BGC, said by e-mail, referring to European supplies. "But export demand is relatively muted."

Milling wheat futures for March delivery lost 0.4 percent to 175.50 euros ($192.45) a ton by 2:31 p.m. on Euronext in Paris. While futures are on par with Russian supplies, French wheat for loading at the port of Rouen was cheaper, at 169.45 euros a ton on Friday, according to the Office National Interprofessionnel des Grandes Culture, or ONIGC.

Currency Moves

Wheat will be “highly susceptible” to foreign-exchange moves this week, as the Federal Reserve considers raising interest rates for the first time in almost a decade, Matt Ammermann, a risk manager at INTL FCStone Inc., said in an e-mailed report.

In Ukraine, prices for wheat with 12.5 percent protein content have fallen due a weaker import demand, UkrAgroConsult said in a report e-mailed Friday. Supplies from the country cost $192.50 a ton that day, $3 less than a week earlier, its data showed. Russian and Ukrainian wheat benefits from lower freight rates than for French supplies, boosting the appeal to key buyers including Egypt, the world’s largest wheat importer.

‘Fierce Competition’

"With new crop Black sea prospects seen improving, and cheaper Russia wheat prices, export competition will remain fierce," Gleadell Agriculture Ltd., a trader based in Gainsborough, England, and owned by Archer-Daniels-Midland Co. and InVivo, said in a Dec. 10 report on its website.

Licenses to export European soft wheat since July 1 totaled 10.33 million tons by Dec. 8, according to the European Commission. That compares with 13.1 million tons a year earlier.

European countries are also facing competition from as far away as Argentina. Algeria, traditionally a buyer of French wheat, may have bought about 600,000 tons of grain from both France and Argentina, according to farm adviser Agritel.

Wheat for March delivery lost 0.4 percent to $4.8875 a bushel on the Chicago Board of Trade. Corn for the same delivery month was little changed at $3.75 a bushel, while soybeans declined 0.3 percent to $8.715 a bushel.

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