The reductions that Europe is considering to grain import tariffs could prompt "significant" shipments into parts of the region, FCStone has said, restating caution over prospects for wheat prices.
The answer to the question being asked around Europe - of whether a suspension of the E12-a-tonne duty on feed wheat imports and E16-a-tonne levy on barley would provoke sizeable inbound trade - was "potentially yes", FC Stone analyst Jaime Nolan said.
"There is interest in one of the market we have been involved with, in Spain," he told an investor call. Spain, whose hot and dry climate makes for erratic domestic production, is one of the European Union's biggest grain import markets.
The proposed concession, in the face of "strong lobbying" by EU animal feed groups, could open the way for the first imports from Australia for years, "but foreign exchange and freight will need to calculate".
It could also "alleviate current pressure" on millers, by reducing competition for grain of borderline quality. The EU is expected on February 24 to decide on any tariff move.
Discount moves to premium
While grain prices have risen worldwide, those in Europe have grown particularly fast, inflated by the region's relatively thin export surplus, compared with the US, and its geographical position, making it the natural successor for import demand displaced by Russia's export ban.
Paris wheat has moved from a discount of some E5 a tonne to Chicago wheat before Russia's ban was announced last July to a premium of some E40 a tonne.
However, historical patterns suggested that Paris wheat prices could now enter a period of seasonal decline which has averaged some 15% of the last three years. The fall is widely attributed to the prospect of the next harvest encouraging farmers to sell stocks to free up storage space.
Even is prices do fall, E250 a tonne "should be a good support level", given firm values of corn, an alternative in feed use.
Smart money
Other factors for investors to watch out for in assessing wheat market movements included dry weather in southern Europe, with parts of France and Italy receiving less than half average rainfall since December, and the progress of wheat tenders from North Africa and the Middle East importers.
The spate of purchases by these buyers, which continued on Monday with news of orders from Tunisia and Iraq, was currently being billed as accelerating trade rather than new stockpiling.
Technically, investors should also watch levels of open interest in wheat ?the amount of contracts that remain open, which for Paris's May contract showed signs of stagnating.
"If we see a decline in open interest white prices are still moving upwards, that could be a sign that the smart money is moving out of the market," Mr Nolan said.
