July 4, 2012
US to lose to France in wheat exports due to drought
As the worst Midwest drought in more than a decade wilted grain crops and drove prices to 10-month high, US farmers, the biggest wheat shippers, are poised to lose their advantage over French growers in export markets.
Just four months ago, European crops were damaged by winter freezes and France, the world's second-biggest exporter, shipped about 32% less grain outside the EU in the first 11 months of the crop year that ended last week. French output forecasts are now rising after ample rain as the US government cut its ratings for domestic grain crops.
"US wheat is going to be priced out of export bids," said Nick Higgins, a commodities analyst at Rabobank International in London. "The EU is going to have to pick up more of the export burden."
France will reap 35.2 million tonnes wheat this season, 1.1 million tonnes more than estimated in March, Coceral, which lobbies on behalf of producers in the EU, said on June 29. Copa-Cogeca, a farm group based in Brussels, increased its forecast by 2.2 million tonnes to 34.5 million tonnes the same day. The harvest typically starts in July.
September futures rose 19% to US$7.78 a bushel this year on the Chicago Board of Trade, the highest since September, as dry weather also damaged developing corn crops, threatening to cut US feed grain supplies. Prices gained 19% to EUR232 (US$292.11) a tonne on the NYSE Liffe exchange in Paris. Both reflect the most active contracts. The premium is based on the November Paris contract and December Chicago wheat.