Bumper crop

Investors will keep European wheat prices buoyant this year despite the prospect of a large crop that has been boosted by a mild winter across much of the region, analysts say.

"As we stand today Europe is set for an excellent wheat crop in 2008," says one German analyst. "Farmers have increased plantings to cash in on high wheat prices and so far we have not had serious winter weather damage.

"In normal times you would expect this to push down new crop prices," the analyst adds. "But with so much investment fund money being put into US wheat and expectations of continuing tight global supplies, new prices are very firm and could stay so."

Global wheat prices soared after poor harvests in several countries last year, pushing food prices up in their wake.

Farmers expanded wheat sowings in autumn 2007 to cash in, while mild winter weather is increasing the prospects of a good harvest this year, although there is still the risk of frost damage in most countries for around six more weeks.

New crop wheat for November delivery in the key Paris wheat futures market was quoted at 240 euros a ton last Tuesday, up from 200 euros in early December.

The outlook in France, the EU's largest wheat producer, is positive with plantings developing well due to good weather but experts warned there could still be damage ahead.

"We are at the end of the winter and there were no weather problems so we can expect a normal harvest," says Jean-Paul Bordes from grain institute Arvalis. "But we're not there yet because the months of April to June are very delicate stages that determine the final output."

In the EU's second largest producer Germany, plantings were developing well in mild weather, analysts say.

"Overall crops are developing very well with a little background concern about too much moisture," one says.

The third largest producer Britain should increase its crop this year with planted area raised and yields also set to climb.

"It (the wheat crop) is looking fine. Yields above 8.0 tons per hectare are possible," analyst Susan Twining of crop consultants ADAS says, noting the current five-year average is 7.8 tons and last year was a below-normal 7.2 tons.

Twining estimated wheat area had risen by 12 to 13 percent.

More rain in Spain needed

In Italy, farm experts and traders said winter weather had been so far favorable, but crop quantity and quality would depend on whether there was enough rain in March and April.

Spanish winter grain plantings increased by 6.1 percent this year but one of the driest winters in memory is causing concern for crop development.

Although Spanish farmers say rain is needed soon and the crop can still be saved, forecasts are fraught by the cereal harvest's tendency to swing between 9 million tons in a bad year like 2005 to a bumper 19.6 million in 2007.

The picture also looks positive in Russia, a major rival to EU producers in global export markets.

Russia is officially expected to raise its grain output this year to no less than 85 million tons against 81.8 million tons last year mainly due to an increase in sown area and a rise in inputs. Analysts expect this year's crop to be above the official forecast.

Russian analyst SovEcon on Tuesday estimated that about 60 percent of Russia's total grain crop would be wheat.

And yet the impending increase in supply is failing to dent investor enthusiasm, analysts says.

"The flow of fund money invested in US wheat futures may well be the measure of supply and demand which sets EU wheat prices this summer, not the size of the crop," one says.

Agencies

(China Daily 03/17/2008 page11)