Summer rains hampering the tail-end of Europe's wheat harvest have dented output and raised doubts over quality, accentuating a squeeze in global supplies that has propelled prices to record highs.
The wheat harvest for most Western members of the EU bloc is virtually over, but more rain is preventing German and British farmers from gathering the last of their crops.
Freak summer weather, which has included dramatic swings from hot to cold in countries like Italy, has taken its toll on quality, with questions raised over how much of this season's wheat can qualify for human, rather than animal, consumption.
This, coupled with sharp downward revisions in particular for Eastern Europe's likely wheat production, will remain supportive for wheat prices which have, in Paris, rallied over 80 percent since early April.
"We will end up probably with a greater supply of feed wheat than milling wheat," said James Dunsterville, an analyst with Agrinews in Geneva. Still, tight wheat supplies in Europe did not represent a great problem given that the bloc could turn to other countries to import better quality grain, he said. "I think it's a problem of price," he said. "You've got the situation where the domestic consumer has to pay up."
Everyone from food manufacturers to livestock firms and consumers are feeling the pinch as prices soar, raising concerns that this will feed through into higher inflation in Europe. On Thursday, Paris-traded new crop futures hit a new record at 241.50 euros a tonne.
The difficult weather has led to estimates for France's wheat output being cut to 32.5 million tonnes, according to domestic grains agency ONIGC, but some players expect the number to dip below 32 million tonnes. Last year, France produced 33.3 million tonnes of wheat.
In Germany, relentless rains during the critical harvest period of July and August meant that the nation's wheat crop would probably fall to between 20 and 20.3 million tonnes this year, down from 22.4 million tonnes in 2006.
Quality generally fared well in south Germany, but rain damaged wheat in two of the largest wheat-growing areas of Lower Saxony and Schleswig-Holstein where harvesting is nearly over. A larger than usual proportion of Germany's wheat crop would probably only qualify for animal feed, analysts said.
"The damage varies hugely between regions and we still do not have an accurate picture," one analyst said. "But I do not think we are facing a disaster. I think about 80 percent of the crop will reach milling wheat quality."
Rains have also slowed Britain's wheat harvest, which was around 55 percent complete as of Wednesday, and the weather looked set to depress yields. "This year yields are likely to be down for many farmers after the extremes in dry, then wet conditions since the spring," Britain's National Farmers Union said.
The outlook for quality across the channel was mixed. "Quality is still variable, with milling proteins seen generally decent and meeting most specifications but average specific weights seen down," said Michael Archer, an economist at the Home-Grown Cereals Authority. In Italy, where the harvest ended in late July, soft wheat output was almost unchanged at 3.2 million tonnes this year, according to farmers body Coldiretti and research centre ISMEA.
But traders said it was not clear how much of it would make the grade for bread and Italy may need to make more imports. One bright spot, in terms of weather and its impact on harvests, has been Spain, where a mild summer and plentiful spring rain have set the scene for a bigger than usual crop. The government has put the soft wheat crop up 24 percent and barley production up 36 percent.