European wheat prices soared to new three-year highs on Wednesday, fuelled by worries that smaller than expected crops in drought-hit Europe and quality problems in the Black Sea could significantly dent global supplies this season. Benchmark December milling wheat on Paris-based Euronext, ended 2.8 percent higher at 202.50 euros a tonne after hitting 203.00 euros, the highest level on the second contract since July 7, 2015.
This marked the fourth day in a row that a new contract high had been scored. Consultancy Strategie Grains has again cut its estimate for this year's EU soft wheat crop, which is now expected to be below 130 million tonnes. This would be the lowest soft wheat harvest in the 28-member bloc since 2012, analyst Laurine Simon told Reuters.
"The downward revision is maybe not over for late harvesting regions. With a harvest below 130 million tonnes, EU supply and demand is getting really tighter and exportable surplus is melting a little further," a European trader said.
Wheat crops have been severely damaged by dry and hot weather in major exporter Germany and other northern European countries such as Sweden and Denmark. "Harvesting is moving towards the areas in the north and north east of Germany with the main crop damage and I think the market is expecting poor harvest results in these areas," one German trader said.
"These regions supply German export ports, so the outlook for German wheat exports in the new season is not looking good." New crop standard bread wheat with 12 percent protein for September delivery in Hamburg was offered for sale at 6.5 euros over Paris December. The moderate reduction in premiums meant the market followed Paris prices up.
In Poland, prices rose in the last week due to strong international markets and fears about the quantity and quality of the new Polish crop. "There are plenty of buyers every day and they are willing to increase price offers," one Polish trader said. "But farmers are not willing to sell because of uncertainty about both quality and quantity of Poland's crop this year."
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