Strategie Grains has slashed its estimate for Europe's wheat stocks by more than 10%, citing a pick-up in the region's exports, but warned over the revision being seen as a harbinger of higher prices.

The Influential analysis group said that the European Union's soft wheat stocks would end the 2009-10 marketing year, which closes in June, at 14.6m tonnes, 1.7m tonnes below its previous forecast.

The market was "less heavy than previously", the Paris-based group said.

However it added that the "the situation… remains bearish in France and Germany, and more so if the euro recovers against the dollar", and edged higher its estimate for this year's harvest.

Prices rise 

Nonetheless, May wheat gained E0.75 to end at E128.75 a tonne in Paris, the highest close for a spot contract in three months.

Traders attributed the grain's buoyancy in part to a weaker euro, which lost more than half a cent against the dollar as worries over Greece's debt resurfaced. A cheaper euro makes assets denominated in the currency cheaper to foreign buyers.

It also reflected continuing difficulties among some Black Sea traders in getting hold of supplies of feed wheat to fill orders.

"That's supporting prices there, which means European values can rise too," a London analyst told Agrimoney.com.

Unusual destinations

Strategie Grains attributed its revision largely to the improvement in Europe's exports encouraged by the decline of some 10% in the euro against the dollar since early December, and by a comparable fall in sterling.

Traders, keen to empty silos before this year's harvest comes onstream, have sold wheat to unusual markets, with French grain sold into Thailand reportedly South America, while UK supplies were last month shipping to the Philippines.

Europe's own consumption of wheat, meanwhile, was seen 500,000 tonnes larger than previous expectations.

The revisions come a day after France, Europe's biggest wheat grower, lifted its export estimate by 474,000 tonnes.

Out of favour

On production, Strategie Grains estimated EU soft wheat output at 134.1m tonnes, reversing last month's small cut to its forecasts.

However, the group made a further cut, of 800,000 tonnes, to its forecast for barley production, putting sowings at 12.6m hectares, lower than it had previously forecast.

Besides the impact of low prices in deterring farmers from growing barley, plantings in some areas have been held back by the late spring.

The forecast EU barley production  of 56.3m tonnes would represent a drop of some 9% year on year.