EU Starts Slowly With Wheat Subidies

Last week the European Union granted export refunds worth a relatively low four euros per metric ton for 134,000 tons of wheat, its first such subsidies in 18 months, official data showed.

The relatively low subsidy level provided light support for U.S. wheat futures markets and knocked French futures lower. Traders in France had earlier bid for almost 575,000 tons of free-market wheat at refunds ranging between 2.87 and 14 Euros a ton.

Traders told Reuters News Service the low bids reflected the fact the initial refund licenses would be used for business already signed, and that exporters had placed small bids to be sure of winning the licenses.

"Anything the trade gets for those deals is money they didn't expect," one analyst said.

Traders also noted that several vessels that had been due to leave for destinations such as Egypt had been delayed in French ports until after the results of the tender as exporters were hoping to obtain refunds before the ships sailed.

The EU agreed to open up subsidies again last month in an attempt to head off a large buildup of wheat in its own intervention stockpiles that already stand at 4.2 million tons.

With Argentine wheat priced around $15 cheaper in Europe's markets in North Africa, at least an 11-Euro ($14.34) refund will be needed for EU exporters to compete and reclaim lost market share in coming weeks.

And the prospect of export subsidies has not yet stopped sales into EU intervention stores. In France, grains office ONIC said this week that wheat offers had jumped 225,600 tons from January 25-31 to total 532,800 tons.

Editors note: Richard Brock, The Corn and Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

To see more market perspectives, visit Brock's Web site at www.brockreport.com.