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EU woes dent further hopes for world wheat rebound

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Strategie Grains put another dent in hopes for a sharp revival in world wheat output this year by cutting its estimate for the European Union harvest, citing setbacks to sowings for winter crops.

The much-watched analysis group cut by 1.7m tonnes to 133.3m tonnes its forecast for the EU soft wheat harvest, the world's biggest, with wet weather during sowing cutting hopes for crops in Denmark, France, Sweden and, especially, the UK.

A harvest at that level would still represent an improvement on the 123.9m tonnes achieved last year, when wet weather set back harvests in some north western countries, while eastern states were unduly dry.

But it further cuts hopes for a revival in wheat output in the forthcoming season after a decline in output below consumption in 2012-13.

While still leaving adequate supplies worldwide, this shortfall has sapped stocks in exporting countries to historically low levels.

'Just did not sprout'

On Wednesday, Russia's Grain Union warned that of the 15m hectares sown in the country to winter grains, "about 1.2m hectares cane be written because of dry conditions.

"They just did not sprout," Arkady Zlochevsky, the union's head, said.

Furthermore, some crops may have been damage by low temperatures, with Mr Zlochevsky saying that "more than 1m hectares were without snow cover, and in low lying areas the temperature was minus 12 or 13 degrees [Celsius], even minus 15".

Separately Agritel warned that "frost damage will be observed" in southern Russia, a main source of wheat supplies for export, and "where the snow cover is melting once again which could be a problem" if bitter temperatures return.

While lost winter crops can be reseeded, spring equivalents tend to yield less.

US downgrade

Meanwhile, in the US, Lanworth cut by some 500,000 tonnes, to 53.8m tonnes, its forecast for US wheat output this year, a harvest which would be the smallest in seven years.

At broker Benson Quinn Commodities, Brian Henry said that while he "questioned the validity" of Lanworth's research, "you don't have to look very hard to find people willing to reduce the size of the wheat crop".

US winter wheat, which accounts for the majority of the crop, went into winter dormancy in its worst condition on record, and dry forecasts have cut hopes, for now, of a recovery after it re-emerges in the spring.

Separately, the International Grains Council, forecasting a 4% rise in this year's world wheat harvest in 2013-14, urged caution over extensive gloom on US prospects, saying that "analysis shows little correlation between reported end-November crop conditions and final yields.

"But as the rating for the current crop is at an historical low, it is uncharted territory," the council added.

A 4% rise in world wheat output would take it to some 682m tonnes, strong by historical standards, but short of the 2011-12 record.

Cold risk

In Europe, Strategie Grains cautioned over a further risk to winter crops from any sudden drop in temperatures, as happened last February, after a relatively warm December.

"The milder conditions could limit the plants' hardening process and reduce their resistance to the cold," the Paris-based group said.

"Weather conditions in the coming weeks will therefore need to be watched closely."


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