January 21, 2011

 

EU wheat production problems diminish optimism

 

 

EU wheat production has been predicted to be lower by Strategie Grains, the analysis group that cited weaker prospects for harvests in the western region, in a report projects little hope for fall in wheat prices.

 

The influential analysis group lowered its estimate of this year's soft wheat output by 900,000 tonnes to 135.6 million tonnes.

 

While still higher than last year's 127.4 million tonnes, the revised forecast reflected farmer's inability, thanks to bad weather, to capitalise on high prices as significantly as they had intended, and ramp up wheat sowings.

 

Strategie Grains highlighted official estimates which, for instance in Germany, have pegged winter wheat area unchanged at 3.26 million hectares after wet weather hampered sowings.

 

The curbs on farmers' ability to lift winter seedlings will be made up in part in spring plantings, the group said, lifting its estimate for the EU corn crop by nearly 600,000 tonnes to 58.6 million tonnes.

 

Moreover, Strategie Grains, in a further fillip to ideas on grain supplies, hiked its estimate for wheat stocks at the close of the 2010-11 crop year by 1.2 million tonnes, citing the potential for higher values to price European supplies out of the market.

 

"The extremely tight situation on the EU market and the sustained level of export activity continued to keep EU prices high," the group said.

 

"Consequently, in mid-January, EU prices in dollars became much higher than competitor prices on the world market," and notably those of Argentine or US wheat," it continued.

 

Nonetheless, at 9.4 million tonnes, EU stocks would still end 2010-11 at a relatively low level, and down four million tonnes year on year.

 

"The situation on the EU wheat market has slackened a little," Strategie Grains said.

 

"However, there is little room for any growth in potential demand for EU wheat, indicating that prices have no potential for decrease unless prices on the world market decrease significantly, which seems highly improbable," the analysis group said.

 

Paris wheat for March closed 0.4% lower at EUR258.75 (US$349.56) a tonne in Paris, with London's March contract ending down 0.5% at GBP196.50 (US$312.76)  a tonne.