September 6, 2010

 

Wheat prices soar despite firm German crop

 

 

Wheat prices made further headway on Friday (Sep 3), despite insistence by Germany that its crop had not deteriorated sufficiently to warrant a reliance on imports of milling grain.

 

The EU's second biggest wheat producer acknowledged damage from an early-summer heatwave and sodden harvesting conditions, forecasting a fall of 12% to about 43.8 million tonnes in its grain output this year.

 

However, the German farm ministry's estimate for the key winter wheat crop was, at 23.6 million tonnes, above that of some other observers, if down 5.3% year on year.

 

DBV, the German farmers' association, which last week pegged production of the winter wheat harvest, used in bread-making, at 22.7 million tonnes.

 

Analysts on Friday (Sep 3) cut its estimate for Germany's total wheat crop by 800,000 tonnes to 23.3 million tonnes.

 

Germany's flour millers association warned earlier this week that the country would need to import 1 million tonnes of high grade wheat, following the country's biggest such purchase from the US for nearly a decade.

 

However, the farm ministry said that domestic supplies would prove sufficient, forecasting that wheat for food use "should still be available in satisfactory volumes this year.

 

Besides the drop in harvest volumes, traders have also been concerned about the fall in quality of a crop exposed to less-than-ideal weather.

 

The prospect of a limited rate of German wheat downgrades sent London feed wheat 2.9% higher to close at GBP160.50 a tonne, reducing its discount to Paris milling wheat, which ended 1.0% higher at EUR232.00 a tonne.

 

Meanwhile, in Chicago, wheat for September delivery soared 4.0% to US$7.08 ¼ a bushel, its first close above US$7 a bushel for three weeks.

 

Prices were also helped by continuing excitement at export wins by the EU and US continuing to win trade from traditional former Soviet Union customers, denied supplies by Russia's grain ban and tightness in shipments from Kazakhstan and Ukraine too.

 

Sentiment has also been supported by the prospect of an extended Russian export ban lifting demand for American supplies, even though informed sources appear to believe it will be lifted sooner than the November date many investors have factored in.

 

In addition, the increasing dependence of importers on US and European supplies was reflected in US data late last week showing a fourth successive week of export sales of more than 1 million tonnes, and in the EU by statistics revealing that weekly shipments had reached a 2010-11 high of 856,000 tonnes.