Rains forecast for EU may not dissolve wheat rally

 

 

Rain forecast for Europe may not dissolve all the dry weather fears which have driven prices to their highest since last summer, a leading analyst has said.

 

Analysts said that rain expected to douse France in the second half of the week looked likely to prove patchy, and would fail to provide relief to all areas where dry weather has damaged crop prospects.

 

Weak rains could revive Europe's wheat markets, which fell sharply on Wednesday, largely thanks to forecasts of rain.

 

Dry weather had been an issue in particular in northern parts of France, Europe's biggest wheat producer, analysts said, citing in particular the north of the Loire valley heading to the Belgian border.

 

The concerns have also reached the US, where some analysts noted that "some traders believe that northern France's wheat crop has already experienced irreversible damage due to hot and dry conditions."

 

Forecaster Meteorlogix has predicted weather spreading across Europe from Wednesday into the weekend. Thursday would see deposits of up to 1.5 inches. Meteorlogix noted that "dryness over France may be stressing jointing winter wheat," while cold temperatures in Spain "may have hurt flowering wheat recently."

 

The Spanish harvest, which was due to start around now, is said by traders to be unlikely to kick off until next month.

 

However, not all traders were so bullish over the market's prospects, with analysts flagging forecasts for quite heavy rain in Britain, where dry weather has also been an issue.

 

Paris wheat for November, which closed on Monday at the highest level for a second-in contract since June last year, closed down EUR2.25 at EUR144.50 a tonne.

 

In London, July wheat fell GBP0.75 from a nine-month high to GBP108.40 a tonne, with the November contract slipping GBP1.15 to GBP109.25 a tonne.

 

Besides weather, European crops have also been boosted by the declines of the euro, on fears for eurozone sovereign debt, and sterling, on concerns for how the UK's coalition government will cope with poor public finances.