A weakening euro might come to the aid of Europe's flagging wheat exports early next year, Rabobank has said, as the continent was shut out from a huge Saudi Arabian wheat tender.

The dollar looks set to reverse its decline which has seen the Russian rouble appreciate 17.5% since March and the euro gain 21.7%, a report from Rabobank said.

The Australian dollar has, in the last eight months gained 43% against the dollar "significantly impacting Australian wheat export competitiveness versus that of US wheat".

But Rabobank currency forecasts "suggest there may be some easing in the euro-dollar relationship in early 2010 based on a currently overvalued euro and an anticipated recovery in the dollar", the report added.

"This may erode some of the export price competitiveness benefiting US wheat exports relative to other origins, including the European Union."

Loss-making farmers 

Nonetheless, the bank stood by its forecast of a 31% slide to 17m tonnes in European wheat exports in 2009-10, a figure 3m tonnes below US Department of Agriculture forecasts.

Compared with Chicago futures, European wheat prices had shown a "sharp appreciation" thanks to the euro's strength.

"In order for EU wheat prices to become more competitive, domestic prices must decline," Rabobank said.

"This scenario appears unlikely as EU growers are reluctant to sell at current prices, which are below the cost of production in most regions."

Canadian success 

The comments came as Saudi Arabia opted to buy all of a 550,000-tonne wheat tender from Canada. The last Saudi tender, of 440,000 tonnes in July, included European and US wheat.

The latest Saudi purchase, for delivery between December and February, follows the kingdom's decision to abandon plans for self-sufficiency in wheat.

Also on Monday, Algeria, which turns to France for most of its cereals supplies, deferred a tender for at least 50,000 tonnes of wheat.

Algeria is believed to have found the prices tendered, of at best $215 a tonne or so, unpalatable. Some traders blamed the relatively high prices on the strength of the euro and others on small print which would have reduced Algeria's liability for unloading delays.