Drought Trims European Wheat Forecasts


By Valerie Parent

PARIS (Reuters) – Estimates for the European Union’s wheat harvest are shrinking by the day, with analysts cutting crop forecasts again on Wednesday as plants wilted in a months-long drought that looks set to continue for a while.

Several months of drier-than-usual weather have parched farmland and cut water reserves in key grain producers France and Germany, stoking worries of a drought similar to that experienced in 1976 and fuelling concern for the final harvests.

“As time goes by the impact on crops grows stronger. We need water, period,” a European trader said.

Parts of central Europe had under 40 percent of their long-term average rainfall from February to April and drought in much of Europe looks set to continue with little relief until June at the earliest, forecasters say. [ID:nLDE74F0J9]

Weather problems in the United States as well as those in Europe have pushed prices higher with benchmark U.S. July wheat rising more than 6 percent to a peak of $8.12 per bushel, its highest level in more than one week. <GRA/>

Benchmark new crop November in Euronext milling wheat futures rose nearly 5 percent to a peak of 243.00 euros, a three-month high.


Wednesday’s biggest revision was from French analyst Agritel which forecast that France’s soft wheat output could fall by 11.5 percent this year from last year to 31.7 million tonnes.

In its first estimate for the European Union’s top producer, Agritel said France’s average soft wheat crop yield could dip

13 percent to 6.31 tonnes per hectare, against 7.25 tonnes last year. This would not be compensated by a 2 percent rise in area planted at just over 5 million hectares.

This average yield would be slightly lower than in 2003 and 2007, the last droughts that damaged crops in France.

“This drop in expected yields is the direct consequence of a lack of rain during the past three months,” Agritel said.

In Germany, the Farm Cooperatives Association cut by 3.2 million tonnes its estimate of the country’s wheat harvest from last month, to 22.31 million tonnes, now down 7.2 percent on the year. [ID:nLDE74H1ND]

Germany is the European Union’s second largest wheat producer after France.

European market players estimate France’s soft wheat harvest this year at 33 million-34 million tonnes, with some forecasts as low as 31.5 million tonnes. In 2007 the crop was at 30.6 million tonnes.

Analyst Strategie Grains was more conservative with an estimate closer to 35 million tonnes but it was revised down from 36 million estimated last week and the analyst said it could cut it further if the drought continued.

“This figure could be revised down due to the high temperatures expected for the weekend and further dry weather,” the analyst told Reuters, stressing that the 2011 spring was atypical and made forecasts more difficult.

REVERSE FROM 2010/2011

The threat to Europe’s wheat crop revives memories of the drought in the Black Sea region in 2010 which ravaged local crops and prompted Russia to block exports and Ukraine to impose export quotas.

The moves sent prices rocketing around the world fuelling protests in the Arab world earlier this year and raising concern about food riots of the kind which hit a number of countries in 2008, including Egypt, Haiti and Cameroon

Although France benefited from the Black Sea countries’ withdrawal from the export market in the 2010/2011 season and accounted for around 10 percent of wheat trade, the situation may be reversed in the coming season, Agritel said.

Agritel pegged France’s export potential at 6 million tonnes in 2011/2012 — half the 2010/11 season — due to the drought.

“This drop in French supplies could nevertheless be compensated by the likely return of Russia and Ukraine on the export market,” it said.

(Writing by Sybille de la Hamaide; additional reporting by Michael Hogan in Hamburg; editing by Keiron Henderson)


Source:  Reuters

Posted by Haylie Shipp


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