European wheat prices dropped on Monday, weighed down by a fall on US markets after a bearish US government report last week pointed to ample supplies, although strong demand limited the fall, traders said. May milling wheat on Paris-based Euronext, was down 1 percent at 172.00 euros a tonne in strong trading, with nearly 29,000 lots chaning hands by 1708 GMT, above the average in recent weeks.

Traders said that a fall below the support of 171.75 euros could bring the contract to the next support level of 170 euros. Algeria's tender to buy wheat for shipment in May and the purchase by Saudi Arabia's state buyer (SAGO) of 735,000 tonnes of wheat, of which some was expected to be sourced in Europe, limited the fall.

"We had been waiting for Algeria. The news that it is back is limiting the fall compared to Chicago," a Euronext trader said. Wheat on the Chicago Board of Trade was off more than 2 percent. A fourth panamax was awaited to load barley for Saudi Arabia as part of a hefty purchase for 1.5 million tonnes sealed early February.

In Britain wheat exports slowed in January and are running behind last season's pace, customs data showed on Monday. German cash market premiums in Hamburg were little changed, with support from expectations that part of Saudi Arabia's purchase would be sourced in Germany.

Standard wheat with 12 percent protein content for March delivery in Hamburg was offered for sale at a premium of 4 to 4.5 euros over the Paris May contract. Buyers were seeking 3.5 euros over. "There are expectations a pretty large slice of the Saudi purchase in the tender today will be sourced from Germany but I think this was largely priced in last week," one German trader said. "However, it was disappointing to see such strong competition in the Saudi tender from wheat from the United States and Poland."

In Poland prices rose due to strong demand and reluctant farmer selling, with the Saudi tender also supportive. "It is hoped that Poland will deliver at least two or three shipments each of 60,000 tonnes in the Saudi tender," one Polish trader said. "However, the remaining wheat stocks are getting smaller and domestic millers are waking up to this, increasing prices to secure some quantities."

Export prices for 12.5 percent protein wheat rose by 10 zlotys on the week to 760 zlotys a tonne (175 euros) for March delivery to port silos. Domestic prices for 12.5 percent protein wheat rose by 20-25 zlotys for March delivery to 685-745 zlotys a tonne.

Polish exports remain brisk. Some 14 percent protein wheat will be loaded in coming days for the tender from Turkey's TMO last week, traders said. One vessel with 58,000 tonnes of wheat left Gdynia in recent days for Jeddah in Saudi Arabia, and one vessel with 15,000 tonnes left for Bilbao in Spain.

Copyright Reuters, 2017