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EU Wheat Prices Rise as Heatwave Threatens Crops
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UK: July 19, 2006


LONDON - European Union wheat prices extended recent gains on Tuesday amid growing concern about the impact of a scorching heatwave on northern European crops, dealers said.


"The heatwave is destructive for the wheat that is in the north of France and northern Europe that has yet to mature," one trader said.

"In the regions where the wheat has matured, the main threat is the arrival of destructive storms," another added.

French November wheat futures hit a new contract high on Tuesday, up 1.25 euros on the previous close at 125.25 euros a tonne.

French traders said the high temperatures were mostly a threat for the wheat plants that were still developing in northern France, a major growing area.

They said that despite improving results from crops just south of Paris, there was speculation of probable downward revisions of the French and European crop sizes.

However, traders said the latest harvest results were not as disappointing as those at the weekend in eastern France.


BETTER RESULTS

"As the harvest advances, the results are better," one said, adding he expected harvest to start in the key Picardie region in the north by the end of the week.

"South of Paris, it's good. Protein content is around 12 percent and specific weight between 76 and 80 kilos per hectolitre," he added.

Forecasters are predicting storms coming across France from the west from Wednesday onwards, although temperatures are expected to remain high.

The nervous market conditions also affected maize, with November futures up 3.00 euros to a new high at 132 euros.


STAYING HOT

London feed wheat futures also set a new contract high on Tuesday on growing concern about the impact of hot weather on this year's crop, dealers said.

"If you look out of the window you have your answer (as to why prices are rising). There is a lot of concern about the potential quality and yield of crops across Europe," one London-based dealer said.

Scorching-hot weather was expected to continue for the next two or three days, according to Britain's Met Office, with temperatures expected to reach 36 to 37 degrees Celsius (about 98 degrees Fahrenheit) in some areas.

November feed wheat futures rose 90 pence to a new contract high of 81.25 pounds a tonne, with prices climbing almost 7 pounds since late June.

Dealers said concern in Britain centred on the key growing area of East Anglia where conditions were already dry before the latest heatwave.

Benelux feed wheat prices surged, reflecting the rally in other main European markets caused by the hot weather.

"The quality is deteriorating and we still don't know how much damage the weather has caused. There are too many question marks at the moment," one Dutch trader said.

Demand for feed wheat remained strong in the Netherlands, despite the surge in prices as feed makers had to cover their needs after postponing purchases last months, traders said.

August feed wheat was offered at 125 euros a tonne cif Dutch ports and Sep/Dec at 130 euros, up 10 euros from last week.

In Belgium, August wheat was quoted at 118 euros a tonne delivered by truck and Sep/Dec at 122 euros, up 3-4 euros on the week. Traders said demand in Belgium was sluggish as the price rally kept buyers sidelined.


REUTERS NEWS SERVICE


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