European wheat prices topped 3-1/2 year highs on Wednesday on new signs that global milling wheat supplies could be lower than expected in northern Europe, notably in Germany where drought appears to have severely damaged the crop. Benchmark December milling wheat on Paris-based Euronext closed at 208.50 euros a tonne, its highest level since December 2014. Analysts and traders were mostly bullish for European wheat with little sign of relief ahead.
"Every days brings a new cut. People have mixed feelings on how high it can go. I believe it can keep rising as there is no sign of relief ahead," a trader said. Traders were also keeping an eye on Australia where dry weather is also likely to slash output. The German farming association sharply cut its harvest forecast, the latest sign German crops have suffered badly from this summer's drought and heatwave.
Germany will harvest about 18 million tonnes of winter wheat in 2018, down around 25 percent on the year, the DBV said in a harvest report. The latest harvest estimate is based on actual harvest results rather than forecasts, and "confirm the pessimistic estimates of past days," said DBV president Joachim Rukwied.
New crop standard bread wheat with 12 percent protein for September delivery in Hamburg was offered for sale at 5 euros over Paris December, down 1 euro, but with outright prices effectively rising along with Paris. "The farming association forecast is very pessimistic but with such terrible weather this year it is certainly credible," one German trader said. "It looks like Germany will not be much of a major exporter in coming months and could be an importer, especially of feed wheat."
Germany's government is considering special aid for livestock farmers to help them overcome a sharp rise in animal feed prices after the summer drought, Agriculture Minister Julia Kloeckner said on Wednesday. "Feed wheat prices in north Germany are very high, well above milling wheat, with feed grain supplies looking very tight after the sharp reduction in the harvest," the trader said.