July 16, 2010
Wheat prices in Europe reach new highs amid weather setback
Wheat prices rose 6% in London and Paris to their highest for nearly two years after Strategie Grains said that poor weather had affected EU producers' hopes of increasing soft wheat production this year.
The influential analysis group slashed by 3.6 million tonnes to 129.5 million tonnes its forecast for the crop, leaving it below last year's 129.8 million-tonne result despite an increase in sowings.
Many analysts had hoped that the EU would at least beat last year's result, thanks to greater plantings. The USDA last week pegged the region's overall wheat harvest coming in more than three million tonnes high than 2009's.
The revision, the latest in a series of downgrades to crops from Canada to Western Australia, came as Ukraine confirmed it was also cutting estimates for its harvest again.
Worries continue to mount over the drought-afflicted Kazakh and Russian crops, which Informa Economics downgraded late on Wednesday (Jul 14).
Chicago wheat for September delivery stood 6.4% higher at US$5.95 a bushel in late deals, the highest for a spot contract for six months.
In London, November wheat finished 7.4% higher at GBP131.15 a tonne, the highest close for a near-term contract since July 2008, making the exchange the top performer this month on either side of the Atlantic.
Paris's November lot, the best-traded contract, ended 6.2% higher at EUR176.75 a tonne, the highest for a nearest-but-one contract since September 2008.
Strategie Grains said that its downgrade reflected the polarised weather which has afflicted Europe's northern grain majors, including top-producer France, with dry weather, even as eastern states suffered widespread floods.
"The end of the growth cycle in Europe coincided with a spell of excessive heat in west Europe and excessive rain in east Europe, causing large reductions to estimated production in both parts of the EU," Strategie Grains said.
France, Germany, the UK and the Benelux countries, which all suffered too little rain, bore the brunt of the downgrade, with hopes cut too for sodden Bulgaria, Hungary and Romania.
