September 14, 2009

EU wheat prices may fall another five to 10 percent as a combination of this season's crop, growing stock levels and weak export demand impacted the market.

There is little opportunity of a price recovery in French milling wheat futures, based on a second consecutively season of expanding wheat inventory in the EU, according to the latest report from analyst Rabobank.

French futures have fallen by over 20 percent within a few months and are now approaching levels not seen since before the 2006-07 price hike, said Rabobank, who also maintained its bearish outlook for prices over the coming months.

London November wheat futures have also dropped from GBP98 per tonne at the start of the month to GBP91.75 per tonne on Friday (Sept 11).

Rabobank expects EU wheat production to reach 138 million tonnes in 2009-10, down nine percent from last year's all-time record, but still the third largest crop ever produced.

Rabobank also projected a 30-percent decline in EU wheat exports to just 17 million tonnes, even though it is likely to face less competition from the Black Sea region due to legal and quality issues.

But ample supplies from competitors and growing production in some key markets will lead to EU stocks rising another eight percent, on top of last season's 55-percent increase, to reach 20 million tonnes.

Further pressure is also added onto the world grain market by more favourable crop prospects in Australia and the US.