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EU wheat slips further with no let-up in euro strength

Reuters, 04.08.17

PARIS, Aug 2 (Reuters) - Paris wheat futures extended losses on Wednesday to trade around contract lows as a fresh 2-1/2 year high for the euro against the dollar blunted support from an earlier bounce in Chicago.

Growing signs of a bumper harvest in Russia were also offsetting poor U.S. spring wheat conditions, although the risk of rain damage to the German harvest remained a question mark for market supply, traders said.

Benchmark December milling wheat, the most active contract on the Paris-based Euronext exchange, fell as much as 1.75 euros, or 1.0 percent, to 169.50 euros a tonne.

This was a level not seen since early June and just above a contract lifetime low of 169.25 euros.

Front-month September set a new contract low of 164.75 euros, a touch below a previous low of 165.00 euros and a weakest spot price in nearly three months.

However, both contacts closed above the session lows as the market held onto chart support levels, with December futures settling at 169.75 euros and September at 165.00 euros.

"It was really the euro that was weighing on Euronext even while Chicago was trading slightly higher," a futures dealer said. "We're testing a key technical level around 169.75 euros."

The euro set a new 2-1/2 year high against the dollar at $1.1871. A higher euro makes grain from countries like France more expensive overseas.

Euronext wheat had traded slightly higher earlier in the day with support from a bounce in U.S. futures after a one-month low on Tuesday, although Chicago wheat later inched lower.

Russian agriculture consultancy IKAR on Tuesday increased its estimate for this year's wheat production in major exporter Russia to a record 74-77 million tonne range.

The end of the wheat harvest in France, the European Union's biggest grower, was confirming reasonable yields and very good quality.

Consultancy ODA Groupe said French wheat was showing excellent milling quality in terms of protein content and test weights, while average-looking yields should bring production to 37.3 million tonnes, up from last year's weather-hit crop of just 28 million tonnes.

"France really has good export prospects for this season because the quality is there and prices are competitive," ODA's Paul Gaffet said.

A series of cargoes loading for Algeria in northern France was illustrating the availability of milling-grade wheat.

Port data also indicated a first cargo of barley in almost a year was scheduled to load for China later this month.

But while a fast French harvest escaped significant damage from summer rain, there remained concern that the German crop will show deterioration from soggy conditions.

Traders and analysts said it was still too early in the rain-delayed German harvest to assess weather impact although further showers forecast in the week ahead were fuelling uncertainty.

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