May 26, 2011

EU drought continues to boost grains and oilseeds

EU grain and rapeseed prices have jumped again this week, amid ongoing fears of the effect dry weather across Europe is having on yields.

Old crop wheat prices rose by EUR7 (US$9.92) per tonne, to an average of EUR188 (US$266) per tonne ex-farm, with November futures up by almost EUR11 (US$15.58) per tonne on the week.

France's crops are already in crisis, with Agritel's first estimate of the 2011 wheat harvest pegged at 31.7 million tonnes - a drop of 11% on year. Germany's crops are also suffering, with the Co-operative Association estimating a 7% drop in production, to 22.3 million tonnes.

"Slow US corn plantings and declining crop ratings for US winter wheat are also seen adding support to the wheat complex, with London new crop wheat futures up almost EUR30 (US$42.52) per tonne since the beginning of the month," says David Sheppard, managing director at Gleadell Agriculture.

However, crop prospects in Eastern Europe and the Black Sea regions remain favourable, meaning any rain could spark profit-taking in the market, he adds.

Rapeseed values have increased by EUR14 (US$19.83) per tonne over the past week, to about EUR400 (US$567) per tonne ex-farm for both spot and harvest movement. "The German co-op association put production down 23% and similar losses are expected from France and the UK," says Gleadell trading manager Jonathan Lane.