Disappointing European corn and wheat crops are adding to the upward pressure on world cereals prices, Strategie Grains said, slicing its production estimates for both grains.

The influential analysis group said that European Union and world corn prices had potential to increase to render the grain "less attractive to users" given supplies continued to be diminished by poor weather.

Strategie Grains slashed its estimate for the EU corn crop by 4.3m tonnes to a five-year low of 53.5m tonnes, noting that "dry, hot conditions persisted in central and southern Europe through August, disrupting grain filling for the maize [corn] plants.

"We now expect significant acreage losses. The true extent of these will become clearer as the maize harvests progress."

Second downgrade in two days

Hopes were cut for a swathe of countries, including Bulgaria, Hungary and Romania in eastern Europe, and Austria, the Czech Republic and Italy further west.

The revised EU-wide harvest figure implies a 19% drop in corn production this year from last year's bumper crop, necessitating a sharp rise in imports, to 8.2m tonnes.

It also takes Strategie Grains' estimate 3.8m tonnes below that of the US Department of Agriculture, which on Wednesday sliced its forecast for the EU harvest, the world's fourth-biggest, citing "excessive heat and moisture stress".

'Very bullish oulook'

Strategie Grains also flagged the potential for further rises in wheat prices, slicing its estimate for the EU crop, the globe's largest, by 1.7m tonnes to 123.6m tonnes, and highlighting the need to ration exports.

"The outlook for all world grain prices remains very bullish and this will accentuate the potential for EU wheat prices to increase," the Paris-based group said.

Some other forecasters, including Macquarie, have said that Paris wheat futures look set to outperform those in Chicago, given the need to ration exports from the EU, the natural alternative for importers seeing Black Sea supplies dry up after poor harvests.

Weather damage

Strategie Grains said that its cut to the EU production forecast reflected "low yields" in eastern Germany, and "disappointing" ones in northern France, with rain cutting further prospects for Irish and UK crops.

The comments follow a downgrade by FranceAgriMer to its forecast for the French crop, although the official farm bureau forecast the crop would be sufficient to support higher exports in 2012-13.

Including durum, the EU wheat crop will come in at 131.6m tonnes, a 3.7% drop year on year, Strategie Grains said.

The USDA on Wednesday, in its monthly Wasde crop report, pegged the bloc's all-wheat output at 132.4m tonnes.

Strategie Grains' upbeat comments on grain prices followed hours after Goldman Sachs said it was positive on prospects corn and wheat futures, despite some apparently "bearish" revisions in the Wasde briefing.