July 28, 2011

 

EU wheat harvest rains raise quality concerns

 

 

Europe's wheat harvest may be set to surpass pessimistic quantity estimates made during the spring drought, but quality concerns have been raised over the effects of wet weather during harvest time.

 

Wheat production in the EU is forecast to be 137 million tonnes this year, the EU's Monitoring Agricultural Resources unit (MARS) said in a report on its website.

 

June rains relieved a spring drought in northwest Europe that had threatened to slash average yields in the region. Rains in Europe from June 21 to July 20 were above average, with wet periods in eastern France, Germany, and Poland causing a sizable rainfall surplus, according to MARS.

 

The rain has slowed harvest in central Europe, risking quality as well. Harvest-time rains encourage the sprouting process, which comes at the expense of protein and starch levels.

 

Fears over the quality of Europe's crop have contributed to a reinflation of premiums of harder wheat contracts over Chicago's soft wheat equivalents in the US, according to Erin FitzPatrick at Rabobank.

 

"You have seen Kansas wheat come back a little bit over the last week or two, while the premium of Minneapolis wheat has stabilised at about US$1.50 a bushel," FitzPatrick told agribusiness site Agrimoney.com. "Right now, as far as quality concerns go, we are looking at Europe at the moment."

 

Both Poland, EU's third-ranked grains producer, and the Czech Republic, a small farming nation, have cut harvest quality hopes, with some concerns in surrounding countries as well.

 

"We are hearing good reports in Hungary around Budapest, but the quality is dreadful up north," Jaime Nolan at FCStone's Dublin office said.

 

To the west, Spain's harvest is in its latter stages, but test weights were coming in "slightly low", with some concerns over other metrics, which may affect market prices given the country's status as a significant wheat importer.

 

The harvest results from the big-three wheat producers of France, Germany, and the UK are likely to be the deciding factor. Harvesting in France and Germany is still underway, and still in its early stages in the UK.

 

Rainy days in the last part of July interfered with harvesting in France and southern Germany, although Nolan described it as a "waiting game".

 

"Weather is looking a bit drier in France and Germany, which should allow harvest to get on a bit," he said.

 

In the UK, David Eudall, analyst at the Home Grown Cereals Authority, also said it was a "wait and see" market.

 

"Farmers do not want to sell because they do not know what they have got. Buyers do not want to buy until they have a clearer view of the situation too," Eudall said. "If rains stick around for another two or three weeks, that would certainly start to affect the quality."

 

According to MARS, rain is expected mainly around the Baltic Sea for the period to August 4, with precipitation lower than usual in the UK and most of Germany.

 

"The weather will be favorable for harvesting activities in France, Germany, Benelux, and the British Islands," MARS said. "Rainfall will hamper these activities in Poland."