Prospects for Europe's wheat stocks look "extremely tight again" thanks to the boost to demand caused by plunging prices, Strategie Grains said, as it downgraded its estimate for the region's grains harvest for a third successive month.

The report came as one European Union state, Serbia, revealed it had banned wheat exports for three months to protect domestic supplies and keep food price inflation in check.

Strategie Grains raised by 600,000 tonnes to 19m tonnes its forecast for European Union soft wheat exports, to reflect the impact of the fall in prices which, on the Paris futures market, has seen the near-term contract tumble by one-quarter from a two-year high.

"The latest prices of EU wheat completely wipe out the impact of demand rationing seen in recent months," the influential analysis group said.

The improved prospects for shipments, coupled with a lower estimate for imports, prompted Strategie Grains to cut by 1.1m tonnes to 8.7m tonnes its forecast for the region's soft wheat stocks at the close of 2010-11.

"The EU outlook looks extremely tight again," it said.

Serbia's export curbs, over which the EU has been consulted, were imposed after reports revealed that it had exported 650,000 tonnes of wheat from last year's harvest, above a ceiling of 500,000 tonnes it had introduced.

'Potential stress' 

And Strategie Grains also reduced its forecast for the extent that this year's harvest will replenish supplies, trimming by 100,000 tonnes to 289.7m tonnes its forecast for grains output, amid growing concerns over weather.

The estimate for the soft wheat crop was cut by 300,000 tonnes to 135.2m tonnes, in part on lower hopes for the UK, where farmers have opted to raise rapeseed sowings in favour of grains, but also reflecting weakened prospects for central Europe, where crops have suffered freeze and dryness setbacks.

Toepfer International, the German-based grain merchant, warned this week of losses to Germany's rapeseed crop, the EU's biggest, from low winter temperatures.

While winter grains are generally more resilient to frost, Jaime Nolan at FCStone's Dublin office highlighted that "dryness across north Germany, Poland, the Czech Republic and Hungary coupled with low temperatures and lacking snow coverage when temperatures fell these last several weeks, is a concern.

"For new crop, the weather patterns across Europe continue to suggest caution. We need to see moisture coming into affected areas soon to prevent potential stress on Europe's winter wheat crop."

France too?

Some concerns surround France, the EU's top wheat producer, too, where south western parts have "had moisture deficit these last eight weeks", Mr Nolan said.

Agritel, the Paris-based consultancy warned that stress from lack of water "is persistent… in the northern regions of France, and in the north of the EU".

Paris wheat for May stood 1.3% higher at E209.00 a tonne in morning deals in Paris, adding to gains on Wednesday, which saw the grain close higher, in spot contract terms, for the first time this month.