Poor quality drives French wheat onto feed market

The poor quality of the French wheat crop is driving "substantial" volumes onto the export market as feed, with results from other European countries exacerbating ideas of strong rivalry in this sector.

"There are definitely some problems with the French wheat crop," traders at a major European commodities house said.

"After news of some lodging and sprouting in the field, we are now seeing substantial tonnages of French feed wheat being offered on the export market," an observation confirmed to by an analyst at a leading global broker.

"That is definitely happening. The French are keen to sell," the analysts said, with a sharp decline in Paris futures on Monday attributed in part to "selling by co-operatives", which are a big feature of the French cereals sector.

'Might as well sell the worst stuff'

Indeed, the French feed wheat is being sold at E4 a tonne below that of the neighbouring UK, whose wet climate makes it a more natural supplier of the grain for livestock rations and is, indeed, where feed wheat futures are traded, in London.

France is more typically a provider of soft milling wheat, but harvest time rains, in encouraging sprouting and cutting protein levels, are leaving much fit only for feed.

The enthusiasm of its producers to sell grain for feed supplies is being seen as a symptom of the compromised quality of a European crop which looks like coming in large on quantity, but with a much-reduced proportion fit for milling.

"As harvest moves north through Europe, a picture is developing of good yields but concerns over quality," the European commodities house said.

A UK grain trader told "There looks like being no shortage of feed wheat in Europe, and that is before you get to the corn crop, and to the huge US corn crop on the way as well.

"You have to think you might as well sell the worst stuff now, as it could be a long time before you see any kind of shortage to lift prices again."

Not so bad

In fact, wheat quality in Central Europe appears to be coming in relatively strong, the brokerage analyst said, boding well for hard wheat supplies for which Germany is noted, with some decent results from the Czech Republic, of 15% protein or more.

However, the problems further east, in Bulgaria, Romania and Hungary, have been well documented, by commentators from INTL FCStone to the US Department of Agriculture, prompting talk of a scramble for quality supplies by merchants seeking to fulfil export orders.

Romania earlier this month won two high-profile victories at wheat tenders by Gasc, the grain authority for Egypt, the world's top wheat importer.

Meanwhile, in western Europe, in north east France, the there are reports of 30% germination rates in wheat in a band stretching from Paris to the German border.

Wheat vs corn

"The question now is what all this means for prices," the analyst said, forecasting support for quality premiums from the squeeze on supplies, but for feed wheat too from the extent it has already fallen.

"It is already below production cost," the analyst said.

In fact, corn futures in Europe are performing particularly poorly, not just because of increased competition from feed wheat, but from raised harvest prospects, with the rain undermining wheat quality a boost for autumn-harvested crops, still in their growing period.

Corn futures for November, standing down 0.8% at E158.50 a tonne in Paris on Tuesday, were down 10.1% in the past month, compared with a 6.0% drop to E177.00 a tonne in November milling wheat futures.

That took above 50%, to E18.50 a tonne, the rise in the premium of milling wheat to corn over the period.

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