May 26, 2011

EU wheat futures are revised

EU wheat futures will most likely average at EUR260/tonne (US$367.67) in the third quarter of this year, an increment from the previous forecast of EUR250/tonne (US$353.54), according to Commerzbank on Wednesday (May 25).

Forecasters and traders said wheat prices could hit the three-year highs touched in February if the drought in Europe and the US continues to stress next year's wheat crop.

New-crop wheat prices gained sharply last week, hitting three-month peaks of EUR251.50/tonne (US$355.66) on the November Paris milling wheat contract, driven by concerns that the harvest could be irreparably damaged.

In its May report, French analyst Strategie Grains said there has been very little rainfall in most European countries and yield potentials for wheat and barley have already been affected.

"The situation remains particularly tight in France, UK, Central Europe (Hungary and Poland) and southeast Europe (Romania and Bulgaria). Germany's balance has tightened since last month," the analyst said.

Strategie Grains revised down EU 2011-12 wheat production by 3.6 million tonnes to 131.5 million tonnes this month.

"West EU countries are the worst affected by the deterioration in yield potentials, while the central European countries have fared better."

France's rainfalls in January, February, March and April were respectively 56%, 58%, 74% and 65% of the normal level, according to the weather agency.