Strat Grains bullish on wheat despite 2013 outlook

Strategie Grains said it was "bullish" on wheat prices even as it forecast a jump of more than 11m tonnes in European Union production next year, boosted by sowings expected to hit a record high.

The comments came as Chicago futures recovered from a five-month low set earlier on Thursday, and set course for what would be their first positive close this week.

Strategie Grains said that elevated soft wheat prices - which on the Paris futures market have outperformed US values, reaching what some analysts say is a record premium over Chicago peers will lift EU plantings for the 2013 harvest by 4.8% to an all-time high of 23.9m hectares.

"Given wheat's competitiveness compared with the other crops, wheat acreage is expected to grow sharply compared with 2012-13," the Paris-based analysis group said.

The forecast includes an estimate of a rise in sowings in France, the EU's top producing country, to a record high despite wet weather in northern areas which, as in the UK and parts of Scandinavia, hampered autumn plantings.

'Outlook bullish'

The EU wheat harvest next year will reach 134.2m tonnes, rising by 9.2%, faster than sowings, Strategie Grains said, factoring in a trend yield drawn from analysis of records over the past 20 years.

Strategie Grains forecasts, EU grains harvest 2013, (year on year change)

Wheat: 134.2m tonnes, (+9.2%)

Corn: 63.0m tonnes, (-2.9%)

Barley: 54.1m tonnes, (-0.6%)

Durum: 8.3m tonnes, (+3.8%)

Rye: 7.5m tonnes, (-13.8%)

Total (includes others): 290.2m tonnes, (+6.8%)

This year's crop was hampered by dry weather in many eastern countries and undue wetness in many northern countries, including the UK, which recorded its worst harvest on some measures in a generation.

Nontheless, despite a historically large harvest in the cards for 2013, the group said that it was upbeat on prices for now, following this year's disappointing harvests in many EU countries, besides in the likes of Russia and Argentina too.

"Given the finely-balanced state of the market, the price outlook in the EU remains bullish, especially given the global context, which is also bullish," Strategie Grains said.

'No room for extra demand'

Indeed, the group, lifting its forecast for EU soft wheat exports in 2012-13 by 1.1m tonnes to 18.8m tonnes, said that there was "absolutely no room for EU wheat to attract any additional demand".

Strategie Grains forecasts, EU 2013 grains area (year on year change)

Wheat: 23.9m hectares, (+4.8%)

Corn: 9.1m hectares, (-1.1%)

Barley: 12.1m hectares, (-2.4%)

Durum: 2.7m hectares, (unchanged)

Rye: 2.2m hectares, (-4.3%)

Total (includes others): 56.8m hectares, (+0.9%)

The raised export forecast reflected expectations of strong demand from Iran, and reduced hopes for supplies from Argentina, where heavy rains have hurt the crop, prompting the Buenos Aires grains exchange on Thursday to cut its forecast for the ongoing harvest.Strategie Grains' comments came as Chicago wheat futures for March delivery recovered from an early low of $8.07 a bushel, the weakest since early July, to stand at $8.15 a bushel, a gain of 0.4% on the day.

The futures nonetheless have lost more than 5% so far this week, hurt by a downgrade by US farm officials to forecasts for domestic wheat exports in 2012-13.

Paris wheat for March stood unchanged at E260.00 a tonne, leaving at 3.2% its decline this week.

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