May 19, 2011

Unfavourable weather affects European wheat futures

European wheat futures reached three-month highs on Wednesday (May 18) as yet another analyst warned of a decrease in output due to impacts of months-long drought in top European producer, France.

Benchmark November Paris milling wheat gained EUR6.50 (US$9.30), or 2.7%, to hit a peak of EUR238/tonne (US$340), its highest point since mid-February. Further away contracts posted similar gains, with May 2012 rising 2.6% to a high of EUR241.25/tonne (US$345.06).

The move comes after Agritel forecast France's 2011-12 wheat crop will fall by 11.5% compared with this season to 31.7 million tonnes due to damage caused by the months-long drought in the country.

In its first estimate for the 2011-2012 harvest, the risk manager said France's average wheat crop yield could fall by 13% to 6.31 tonnes a hectare, cancelling out a 2% rise in acreage to just over five million hectares.

"This drop in expected yields is the direct consequence of a lack of rain during the past three months," Agritel said.

Europe has been suffering from ongoing dryness for months. Conditions are worsening daily in France, Germany, the UK and Poland which account for around 65% of the 27-nation bloc's wheat crop, and forecasters warn that more heat and dryness are expected in May.