EU wheat extends retreat in U.S. holiday lull

PARIS

, Feb 20 (

Reuters

) -

Euronext

wheat futures edged lower on Monday to extend a retreat from a six-month high struck last week, with a holiday closure on U.S. markets helping European prices to consolidate. May milling wheat, the most active contract on the Paris-based Euronext exchange, was down 0.75 euros, or 0.4 percent, at 173.25 euros a tonne, just off an earlier one-week low of 173 euros. The contract had touched its highest since August at 176.75 euros last week before encountering chart resistance at 177 euros against a backdrop of ample supplies and broadly favourably crop conditions.

Chicago

futures, the benchmark for global grain markets, did not trade during Monday's

Presidents Day

holiday, depriving Euronext of U.S. impetus. "We were due a consolidation phase after the market hit some highs last week," one futures dealer said. "There's also a lack of investment flows today with the U.S. holiday." Grain markets were also awaiting U.S. government crop estimates this week to gauge the extent of an expected drop in U.S. wheat sowings and a shift from corn towards soybeans. The absence of serious weather threats to wheat crops in the northern hemisphere was also limiting upside to prices.

Frost

damage in the European Union remained limited, the

EU

's crop monitoring service said on Monday. However, rain would be welcome in central and northeastern Europe after recent low precipitation levels, it added. In

France

, farm office FranceAgriMer had estimated in a report on Friday that 92 percent of soft wheat crops were in good or excellent condition. In

Germany

, cash market premiums in

Hamburg

were again raised to compensate for falling Paris prices. Standard wheat with 12 percent protein content for March delivery in Hamburg was offered for sale up 0.5 euros at 3.50 euros over the Paris May contract. Buyers were seeking 2.50 euros over. "There was an unwillingness to follow Paris down today, but with the U.S. on holiday there was a risk-avoidance mood," one German trader said. "Overall winter weather in Germany remains non-threatening to wheat. With only about six weeks of winter to go, hopes are rising that crops will come into the spring in good shape." Meanwhile, there was disappointment that water levels on the

Rhine

and

Danube

rivers had again fallen, hindering shipping and raising transport costs for grains. Rain is forecast this week in central Europe, which should help to raise river levels and boost soil moisture for crops. (Reporting by

Gus Trompiz

and

Valerie Parent

in Paris and Michael Hogan in Hamburg; Editing by David Goodman)