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Euro, price dip help EU wheat
Published in The Egyptian Gazette on 26 - 01 - 2010

PARIS (Reuters) - Lacklustre European wheat exports have found some relief in a fall in both the euro and grain prices but this is unlikely to be enough to wrest business from Black Sea competitors or rein in swelling stocks, traders said.
A pullback in global grain markets, prompted by abundant global supplies plus investor jitters caused by US President Barack Obama's plans to curb risk taking by banks, has lured several buyers into the market since the start of the new year.
The drop in the euro, which hit a six-month trough against the dollar last week at $1.4028, has given a potential edge to European wheat shipments, especially versus relatively expensive US grain.
The volume of weekly export licences issued by the European Union for soft wheat has accelerated this month, even if they are still far behind last year's record levels.
"The fall in the euro is a good thing but this benefit still needs to be turned into new deals," one French trader said.
Among the current spate of tenders, European traders were most optimistic about securing business with Saudi Arabia, which bought 440,000 tonnes of wheat of non-disclosed origin.
"I think the weaker euro will make EU wheat more competitive in tenders which involve higher quality demands," a German trader said, citing buyers like Saudi Arabia.
Despite a sharp fall this month, benchmark wheat prices in Chicago remain uncompetitive in major export markets, especially given higher costs for shipping from North America.
However, gains for European exports could be modest as Black Sea origins are expected to keep up their brisk shipments, reinforced by the emergence of Kazakhstan as a major supplier, plus a series of export sales by Turkey.
In its latest tender on January 13, Egyptian state buyer General Authority for Supply Commodities(GASC) bought 180,000 tonnes of Russian and Kazakh wheat, while privately owned Egyptian importer Venus International said it planned to buy about one million tonnes of Kazakh wheat in the year starting in March.
Although the last GASC tender showed French wheat was competitive when offered for loading at two ports, GASC's continued application of a one-port rule -- despite lobbying by French traders and officials -- was hampering French sales.
"It looks like GASC has decided not to change its rules," another French trader said, citing the absence of concessions by GASC after a visit to France. "This could turn into a pretty big handicap for French wheat."
European exporters could get some breathing space from winter logistical snags in the Black Sea. But competition from the region should resume quickly and may be exacerbated by US shipments as the country tries to revive its sluggish exports.
"We can expect an end to the campaign with even more competition from the Black Sea and elsewhere," the trader said. "There won't be enough room for everyone."
Latest projections from leading forecasters have underlined the context of a glut of supplies competing for demand outlets.
The US Department of Agriculture hiked its estimate for global wheat ending stocks by nearly fivemillion tonnes to 195.6 million, while the International Grains Council forecast the third-largest wheat crop on record this year, despite a sharp fall in US sowings.
Without a further slide in the euro or a major weather event to stoke demand, European wheat exports are thus likely only to make a small dent in the mounting surplus that has built up following two successive bumper harvests, traders said.
In its latest monthly forecast, the farm office in France, the EU's biggest producer and exporter of wheat, upped its stocks outlook by 500,000 tonnes to four million.
"Either we carry over stocks to the next campaign, or we offer supplies to intervention," the second French trader said, citing the possibility of rare offers of wheat to public stores in France under the EU's minimum-price scheme.

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