French analyst hikes EU wheat forecast after rain

French analyst Strategie Grains on Thursday raised sharply its outlook for soft wheat output in the European Union after rain last month revived crops parched by a spring drought in the west of the bloc. The analyst increased its estimate of 2011 soft wheat production in the EU by 4.6 million tonnes to 130.2 million tonnes, now up 2 percent on last year's harvest.
The revision partly reversed a cut of almost 10 million tonnes in its soft wheat crop forecast over the two previous months when it factored in the drought in western Europe. France, Germany and the UK, the EU's top three producers, accounted for 3.3 million tonnes of the increase in Strategie Grains' wheat forecast this month.
"In these countries, harvest outcomes are now set to be much better than had seemed possible a month ago," the analyst said in a report. Other analysts have also raised their wheat crop outlook after June's rainfall, although some are now concerned about excessive moisture affecting crops in France and Germany, as well as persisting dryness in parts of the UK.
The improved outlook in western countries was coupled with continued favourable crop growth in the south east EU, for which Strategie Grains raised its wheat estimate by 800,000 tonnes. "In the south east (Romania and Bulgaria), weather conditions have been extremely favourable for crop development throughout this year's entire growth season; these good conditions continued through June and yields are set to be particularly high," the analyst said.
The revised crop estimate led Strategie Grains to raise by 3.2 million tonnes its forecast for EU soft wheat exports this season to 16.1 million tonnes, although this was still down on a revised estimate of 19.1 million tonnes for 2010/11 exports.
The analyst continued to see EU wheat prices supported by a relatively tight world grain market, despite some short-term pressure as Black Sea countries step up exports after lifting restrictions imposed in the wake of a drought in 2010. "Even though EU prices may be subject to downward pressure from the Black Sea countries through the summer and even autumn, they retain an increase potential because US and world stocks are forecast so low," it said.
"Except for the possibility of sharp financial downturn, few factors exist that could have a downward impact on wheat prices." The analyst also raised its forecast for EU barley output this year, adding 700,000 tonnes to 52.9 million tonnes, putting it virtually in line with last year's crop of 53.2 million.