July 17, 2012


France, UK rains aid wheat prices to new highs



As a caution over rain damaged added to upward pressure on futures from a floating Chicago market, wheat prices returned within 4% of GBP200 (US$313) a tonne in London and set a contract high in Paris.


London wheat for November delivery jumped 2.7% to GBP193 (US$302) a tonne, a high for the contract, which has now soared by one-quarter over the past month.  The contract closed at GBP191.25 (US$299) a tonne, a gain of 1.7%.


In Paris, the November lot rose in line to a contract high of EUR267.50 (US$329) a tonne before easing to finish at EUR264.75 (US$326) a tonne, a gain of 2.3%.


The gains reflected in part a strong performance by wheat on US markets, as forecasts for more hot and dry weather for the US Midwest sent prices of corn, a rival for uses such as feed, soaring 4% in Chicago. Chicago wheat for September closed 4.3% higher at US$8.84 1/2 a bushel, the highest finish for a spot contract since August 2008.


However, in the EU, fears rose further for crops in western countries, including France, the bloc's top producer, thanks to heavy and persistent rains which have slowed the harvest. Just 3% of French soft wheat was harvested as of July 9, compared with 47% a year ago, according to official data released last week.


"Europe is not just a follower," FCStone said, noting a report of northern French wheat as "heavy, late and dirty", although the southern crop is viewed as "very good".


"The entire north western block of northern France, the UK and Ireland is suffering massive disease pressure," with rejections of some crops on grounds of toxic fungal residues "now all but inevitability, let alone the yield losses". "The British Isles [crop] will be a quality disaster."


Separately, UK grain traders at a major European commodities house reported that "fungal infections of wheat crops, especially with fusarium, are now being reported as commonplace almost everywhere.


"This raises the prospect that this will be the first season ever when every parcel of wheat destined for human consumption for delivery after August 1 will need to have had a Don [fungal toxin] analysis carried out on it."


Some traders "are already beginning to write off the UK quality wheat crop from their calculations", the commodities house said, adding that in northern France "there is escalating concern about the quality of the wheat crop due to the incessant rain, as there is in Germany".


Separately, the UK's HGCA crop bureau on Monday (July 16) flagged "doubts over final yields" for harvests of wheat and other crops, following rains which have broken a series of records.


"Weather for developing crops has been poor over recent weeks, with low sunshine levels and high rainfall during the critical grain-filling period," said Jack Watts, HGCA senior analyst. "As a result, uncertainty remains around yields."


The HGCA comments came as it pegged British wheat sowings at two million hectares, a rise of 2.2% on year, with winter barley plantings seen recovering 4.5% to 368,000 hectares. Spring barley sowings were estimated at 618,000 hectares, a rise of 4.6%, nearly half in Scotland, where plantings jumped 16% to a record 301,000 hectares.


The "main driver" of the Scottish increase "is likely to have been the wet Scottish autumn in 2011, diverting land from winter to spring cropping", the HGCA said. "Continuing optimism in distilling demand may also have been a contributory factor."


However, the bureau cautioned over the prospects for the UK rapeseed harvest, despite estimating sowings at a record 736,000 hectares, up 4.5%.


"The record area of 2012 may not translate into record production as crops have been subjected to poor weather conditions in recent weeks," the HGCA said.


In Paris, rapeseed for August rose 1.2% to a record closing high of EUR523.25 (US$644) a tonne. The UK has, over the last couple of seasons, been a major exporter to continental Europe, helping fill a void left by disappointing German rapeseed output.