October 21, 2011

European wheat crop surpasses expectation

North Europe's wheat output for this year is significantly better than feared and the bigger-than-expected production are lowering prices, according to Germany's biggest grain trading house, Toepfer International, on Thursday (Oct 20).

The double blow of a springtime drought and harvest time rain had led to fears of crop damage in some north European countries including Germany, Poland and parts of Scandinavia.

But European benchmark wheat prices in Paris have fallen from around EUR208 (US$286.52) a tonne in September to around EUR184 (US$253.46) for nearby delivery this week, Toepfer said in a report.

"The north European harvest has turned out to be a larger volume than previously thought and quality is also better than expected," it said. "This has considerably relieved the supply situation in the EU."

EU wheat prices have also fallen, following more optimistic crop forecasts in October by the USDA, Toepfer said.

"Feed wheat prices have fallen less substantially when compared to milling wheat," it said. "North European compound feed producers are still holding off purchases and do not have especially good supply cover."

Yields in the EU corn crop are likely to be substantially larger than expected a few months ago and a bigger EU crop is currently being gathered, it said.

"This is causing price weakness," it added. "Consumers are generally only buying enough to cover their immediate needs."

European corn prices are likely to weaken in coming weeks unless there are weather problems in South American corn producing countries or China buys large volumes, it added.