May 26, 2011

 

EU wheat prices increase as lesser rains are forecast

 

 

European wheat futures rose on Wednesday (May 25) as forecasts for rain in France and Germany this week were scaled back, focusing attention on the risk to crops from drought in the EU's top-two grain producers.

 

Paris futures also drew support from firm US futures which rebounded from a sharp fall on Tuesday (May 24).

 

European Benchmark wheat, Paris's November contract was up EUR1.75 (US$2.48) or 0.7% at EUR242.75 per tonne. Paris had fallen over 1% on Tuesday (May 24) following drops in US prices and earlier forecasts of widespread rain in France on Thursday (May 26).

 

Weather forecasters are now expecting only light showers and localised thunderstorms for France on Thursday (May 26) and Friday (May 27) which would bring little relief to grain crops stressed by a prolonged dry and warm spell. Substantial rain had earlier been forecast.

 

"The rainfall will continue to be erratic and not enough to ease the drought," private forecaster Meteo Consult said, adding that May was the third straight month showing a major rain shortfall in most of France.

 

Nearly half of France's local government regions have imposed some restrictions on water use as of Tuesday, with a growing number of areas subject to irrigation curbs, France's environment ministry said on Wednesday (May 25).

 

French weather worries were also exacerbated by sub-zero overnight temperatures in parts of the country, which raised the risk of possible late season frost damage, traders added.

 

Weather remains dry in drought-hit Germany and some weather forecasters are scaling-back their previous expectations of heavy rain on Friday.

 

Standard new crop bread-quality wheat for September and later delivery in Hamburg was offered for sale up one EUR248 (US$351) per tonne with buyers at EUR246 (US$348).

 

"The weather looks like it will remain dry in France and Germany," one German trader said. "People have been hoping for heavy rain at the end of this week but the forecasts are not so encouraging today."

 

Germany is forecast to remain almost completely dry on Wednesday (May 25). Light showers in west-Germany are expected on Thursday (May 26).

 

But several forecasters now say they expect showers and thunderstorms on Friday (May 27) instead of the constant rain previously forecasedt. Saturday and Sunday are forecast to be mainly dry and hot again.

 

Germany's giant farming cooperatives association forecasts the country's 2011 wheat harvest will fall 7.2% on-year to 22.31 million tonnes, up from 24.0 million tonnes last year after very dry weather in recent weeks.

 

Crops in key north German wheat export regions have been especially hit by drought.