April 13, 2007

 

Strategie Grains: EU wheat balance grows more precarious
 

 

The European Union's current wheat balance is "even more precarious" than it was a month ago, according to analytical report Strategie Grains Thursday.

 

While the EU's main wheat exporting nations are not showing any major deficits, Strategie Grains said there is no room for maneuver either.

 

Paris-based milling wheat futures posted a five-month high in the front month contract Wednesday, which traders said was due to short-covering and the nearby tightness.

 

Freshly harvested supplies are expected to enter the pipeline at the start of the summer, and due to favourable crop conditions, Strategie Grains looks for EU farmers to reap 9 percent more wheat this season.

 

Strategie Grains estimates the EU will have 11.5 million tonnes of wheat available for export in 2007/08, which is about steady on the year but still lower than the 2005/06 campaign.

 

However, despite the increased supplies, Strategie Gains holds there still will not be a significant surplus to offer to the government intervention programme.

 

And due to tight world wheat stock levels, the report warned any crop problems this year would have a "strong bullish impact on EU prices."

 

Still, it added EU wheat faces potential downward price pressure going into the 2007/08 season as they are already higher than US values, and will likely be hit with stiff Black Sea competition.

 

"Unless weather events lead to a deterioration in harvest outlooks, prices will have little potential for increase," said the report.

 

Meanwhile, a total of 119,556 tonnes of grain was granted at Thursday's European Union intervention resale tender, EU figures showed.

 

This comprised 76,549 tonnes of soft wheat, 935 tonnes of barley, 40,772 tonnes of corn and 1,300 tonnes of rye.

 

This season, the EU grain management committee opened tenders to sell intervention grain back on the internal market due to tight domestic supplies.

 

The grain is not allowed to be granted below domestic or intervention prices.