A late surge in wheat yields in France and Germany, the EU's two biggest producers, should leave western Europe with a large crop that could keep stocks high and prices subdued this season, analysts said. Farmers were only part-way through harvesting in more northerly regions, and total European Union wheat output remained set to fall on last year's massive crop, reflecting a sharp drop in the south and east of the 27-member bloc.
But higher-than-expected yield results have led forecasters to raise estimates for French and German production since last month to above 2008 levels, fuelling a slide on wheat markets. The front-month wheat reference price in Chicago has been languishing near an eight-month low while benchmark November prices for milling wheat in Paris and feed wheat in London have both set contract lows this month.
"The balance sheet is very heavy for 2009/10, more so than last month, and the outlook for EU prices is bearish," Strategie Grains said in its monthly crop report. In France, where harvesting is nearly over, observers reported near-record yields and mostly good quality that belied earlier fears about the impact of wet weather last month.
Most forecasts call for production to exceed the 36.9 million tonnes notched up last season as the jump in average yield is seen outweighing a decline in the area sown. Farm office FranceAgriMer last week pegged the national yield at 7.7 tonnes a hectare, close to a 2004 record and with results in the northern half of the country as high as 12.
Apart from localised rain-affected results, analysts cited satisfactory quality and Strategie Grains forecast a similar share of milling wheat to last year, at 90 percent versus 91.
SMALLER SOUTHERN CROPS: In Germany, where harvesting may be wrapped up this week, analysts also pointed to bigger-than-anticipated volumes and satisfactory quality despite wet conditions. "We have suffered constant interruptions from rain this summer but this was largely short showers, which does not appear to have caused significant quality damage," one analyst said.
Germany's association of farming co-operatives forecast the crop at 26.26 million tonnes, up from 25.7 million tonnes in 2008 and only 24.6 million tonnes seen in July. An outlet for French and German wheat this season could be the southern EU countries faced with smaller domestic crops. Traders in Italy, which covers about half of its grain needs with imports, said it may have to buy more grain abroad after domestic wheat crops fell sharply.
After harvesting that ended in June, soft wheat output will fall 25 percent to 2.95 million tonnes, according to initial estimates from the farm ministry. In Spain producers said the wheat and barley harvest may have fallen by up to 37 percent from last year. However, large carryover stocks and poor demand may prevent sizeable import requirements from rising.
"The harvest is in principle offset by surpluses of old crop, and really, we are not that worried about cereals and the market isn't responding either," said Jorge de Saja, director of the Spanish Animal Feed Compounders' Association (CESFAC). Farmers say winter grains output will be short by up to 7 million tonnes, but carryover stocks were at a record 3.5-4 million and demand weak from the livestock sector.
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