July 10, 2012


France's wheat crop outlook up 1.9 million tonnes on year


France's wheat crop will come in well above previous expectations and up 1.9 million tonnes on year as fears for quality took some of the shine off an estimate by FranceAgrimer.


The French farm bureau, in its first official forecast for the crop, pegged it at 35.9 million tonnes, above a preliminary estimate of 34.4 million tonnes besides projections from other commentators.


Strategie Grains estimates the crop at 35.1 million tonnes, industry group Coceral 35.2 million tonnes and the AGPB growers group at 33.9 million tonnes.


The FranceAgriMer estimate, adding in a durum crop pegged at 2.1 million tonnes, is also one million tonnes above the USDA latest forecast for the total French wheat harvest, the EU's biggest.


The upgrade reflects the impact of rains in refreshing crops threatened by dryness earlier in the year, following an earlier setback to winterkill during a February cold snap. However, in some areas the extent of the rains, so close to harvest, has raised concerns that a crop, while better on quantity than initially feared, may fall short on quality in a country which is a major supplier of softer milling wheat.


"It is nowhere near panic stations, but people are getting concerned," Jaime Nolan Miralles, commodity risk manager at FCStone's European operations, told Agrimoney.com.


"We will have to see how the harvest goes when it reaches the north," and French regions such as Lorraine and Normandy where concerns are particularly high.


With Spain, a major grain importer, set for a small, drought-hit harvest, the fears were beginning to feed through into prices, Nolan Miralles added.


In Germany, milling wheat premiums this week reached EUR13 (US$16) a tonne, up from EUR8 (US$10) a tonne a week before.


Paris milling wheat futures for November delivery have risen by some 16.5% over the last month, compared with 14.2% rise, in euro terms, in London feed wheat for November.


In the cash market in the UK, where rains are also proving heavy and persistent, milling wheat premiums in the north west of England have risen some GBP7-8 (US$11-12) a tonne to about GBP40 (US$62) a tonne since mid-June, Jonathan Lane, trading manager at merchant Gleadell, said.


"Historically, a premium of about GBP40-45 (US$62-70) a tonne I have always seen as a sell. But today would I sell? I'm not so sure," given the quality concerns.


While it was still too early to call damage to wheat quality being compromised on some criteria, such as the hagberg falling number, more rain could mean diseases "starting to be an issue", and the risk of elevated levels of toxic fungal residues.