EU Grain Close

01/07/11 -- EU grains finished mostly higher in a rebound from yesterday's steep losses. July London wheat ended up GBP3.45 to GBP174.45/tonne and with new crop Nov also rising GBP3.45/tonne to GBP160.50/tonne. Nov Paris wheat closed EUR3.25/tonne higher at EUR187.75/tonne whilst May12 also rose EUR1.75/tonne to EUR2194.50/tonne.

At the end of a choppy week Nov London wheat finished GBP3.00/tonne lower overall, with Nov Paris wheat falling EUR8.00/tonne.

The UK barley harvest has just about begun in a few places, and the pace should accelerate over the weekend with the weather set to remain fine. More unsettled conditions are forecast for the middle of next week though.

Coceral cut their forecast for EU-27 soft wheat production to to 126.53 MMT from their previous March estimate of 131.44 MMT. With a durum output of 7.89 MMT that gives us a total EU-27 wheat crop of 134.42 MMT, only a million tonnes below last season and a fall of less than 1% on 2010.

That's a surprisingly small drop and almost 4 MMT above the USDA's most recent estimate.

UK output is seen at 13.95 MMT, down 3% on last season's 14.4 MMT crop. French production for soft wheat is forecast at 32.7 MMT (down 8.2%) and German output at 23.7 MMT (down 1%). All pretty modest reductions compared to all the "up to 25% of the crop may have been lost" stories that were doing the rounds a month or two ago.

Significant soft wheat production gains in 2011 come from the UK's top export home of Spain, up 15% to 5.1 MMT; Denmark up 8% to 5.45 MMT; Romania up 10% to 7.22 MMT; Bulgaria up 13% to 4.3 MMT.

EU-27 barley production is now seen at 51.76 MMT, 1.5% down on last year. The UK crop is pegged at 4.54 MMT, a reduction of 9.5% on last year.

Coceral also unsurprisingly dropped their estimate for the EU-27 rapeseed crop from a figure of 20.2 MMT in March to 18.46 MMT, that's a fall of 2 MMT or 10% on last season. Even so the UK crop is still estimated at a record 2.275 MMT.

All in all these numbers hardly paint the crisis picture that many had feared. The question now is how accurate will the ultimately prove to be?

The market still has plenty of weather premium built in, even allowing for recent losses, if we are ultimately going to have an all wheat crop less than 1% down on last year. Meanwhile the USDA have EU exports falling by almost a third in 2011/12.