April 13, 2012

 

Strategie Grains' Analyst cuts EU winter grain outlook on weather impact

Due to the impact of both frost and drought, Strategie Grains' analyst on Thursday (Apr 12) cut its forecasts again for winter grain crops in the EU this year, raising the prospect of tight wheat supply in Europe next season.

 

The analyst lowered by 4.3 million tonnes its forecast of the EU's main soft wheat crop to 126.8 million tonnes, now putting production below last year's 129.1 million tonnes. It also cut its outlook for the barley crop by 1.1 million tonnes to 52.4 million, still up 1% on last year, and lowered its durum forecast by 600,000 tonnes to 7.8 million, leaving the forecast down 6% on 2011 output.

 

"We now estimate that 6% of the area originally sown with winter crops will need to be replanted as a result of the severe frosts in February," Strategie Grains said in a report.

 

"Soft wheat and winter barley account for more than half of the 2.5 million hectares that will need replanting."

 

Drought in southern parts of the EU, meanwhile, intensified in March, with Spain and Portugal worst hit, the analyst said.

 

"We have therefore revised down our yield forecasts in all the countries impacted by the frost and drought, but our estimates retain a high variation potential," it said, stressing weather in the coming weeks would be very influential on yields.

 

The analyst had already lowered its forecasts of EU winter grain production in its March crop report, citing frost damage and developing drought. It had left average yields for soft wheat and barley unchanged but warned they could be reduced if dryness continued. The reduced harvest outlook this month would leave EU wheat supply relatively tight next season, with prices thus having the potential to rise to curb demand, Strategie Grains said.

 

"In the EU, at current prices, the outlook is now tight due to the reduced harvest forecasts and the existence of incompressible demand (industrial and exports to North Africa)," it said.

 

The decreased crop forecast also led the analyst to cut by three million tonnes its forecast of EU soft wheat exports next season to 13.5 million tonnes. Coupled with damaged harvest prospects in North Africa, the Middle East and the Black Sea region, the EU situation would also cut into world wheat supply.

 

"In conclusion, the outlook for wheat in 2012-13 is no longer heavy, either at the EU or global levels," it said, referring to supply levels.

 

In soft wheat, the biggest forecast cuts were in France and Germany, with Strategie Grains revising down output by about 1.3 million tonnes in each country. This left its French forecast at 34.79 million tonnes, similar to the drought-affected 2011 crop of 34.02 million.

 

In Germany, the analyst now expected a wheat crop of 23.5 million tonnes, versus 22.71 million in 2011. The analyst also reduced its soft wheat crop outlook for southern EU countries by 900,000 tonnes, for Romania and Bulgaria by 500,000 tonnes and for central EU countries by 400,000 tonnes.

 

In durum, the reduced crop outlook partly reflected the possibility of some fields in Spain and Portugal being abandoned due to the severe drought there. Like last month, Strategie Grains raised its forecast for this year's EU corn harvest as it expected the spring-sown crop to gain further area from re-sowing of winter grain fields.

 

Strategie Grains raised its corn crop forecast by 900,000 tonnes to 65.4 million tonnes, now down just 1% on a bumper 2011 crop. Spring barley would also gain around 200,000 hectares transferred from damaged winter barley fields, helping keep the overall estimated barley area unchanged from last month.