July 23, 2010

EU wheat prices hit new highs amid German yield fears

Wheat prices hit their highest for nigh on two years in Europe, and rose above US$6 a bushel in Chicago, after farmers reported fears of yield losses of up to 20% in Germany due to dry weather.

Farming association Deutschen Bauernverbandes, or DBV, said that wheat yields in the EU's second-ranked producer of the grain would be 10-20% down on the year.

Initial harvest results had shown signs of crop damage and lower yields, notably in areas with lighter soils, where the impact of this year's prolonged dry weather had been particularly severe.

Analysts earlier this month estimated the German wheat crop at 24.86 million tonnes, only 300,000 tonnes lower than last year's. The data helped wheat prices overcome early weakness to close up 2.3% at EUR178.75 a tonne in Paris, for November delivery, the highest for a nearest-but-one contract since the start of September 2008.

London's November contract finished up 2.9% to GBP132.75 a tonne, the highest since late July 2008.

In Chicago, September wheat reached US$6.10 a bushel, the first time a spot contract had topped US$6-a-bushel since June last year.

Price rises are also being stoked by concerns that Russia, which has grown into a major force in wheat exports over the last decade, will curb shipments, supporting domestic supplies but forcing importers to seek grain elsewhere.

The DBV also signalled a worse performance in rapeseed, of which Germany is the EU's top producer. Separately, the Ukrainian Agrarian Confederation, a producers and merchants group, said that the rapeseed harvest in Ukraine, which has suffered both overly dry and wet weather, would fall to 1.5 million tonnes from last year's 1.8 million tonnes.

Analysts at UkrAgroConsult last month pegged the crop, of which most is usually exported to the EU, at 1.6 million tonnes.

Paris rapeseed for August delivery closed 0.7% higher at EUR363.50 a tonne.