EU Wheat Gains On Crop Loss Talk

17/05/12 -- EU grains finished higher with May 12 London wheat closing up GBP1.00/tonne to GBP174.00/tonne, and Nov 12 rising GBP1.80/onne to GBP153.80/tonne. Aug 12 Paris wheat was up EUR3.75/tonne at EUR205.00/tonne and new crop Nov 12 was also up EUR3.75/tonne to EUR1207.00/tonne.

A leaked report last night suggesting that Strategie Grain would cut it's EU-27 soft wheat production estimate by 4.2 MMT to 122.7 MMT proved to be correct. The losses are mainly accounted for by much worse winter kill damage in February than had earlier been anticipated, they said.

The reduction means that the French analysts have lopped 8.5 MMT off their forecasts for EU-27 soft wheat output in the last two months alone, and this latest figure now represents an cut of 10.3 MMT on their original assessment of thia year's potential and a 5% drop on last season's production.

Germany (down 1.6MMT), Poland (down 1.4 MMT) and France (down 0.6 MMT) were the main countries responsible for the downgrade.

It wasn't all bullish news from them however. They cut their 2011/12 and 2012/13 soft wheat export forecasts too, reflecting a lack of competitiveness against other origins like the US, the Black Sea and South America. For the 2012/13 season soft wheat export of only 11.4 MMT are amongst the lowest in the last thirty years.

Concerns over Russian and Ukraine wheat production potential this year are also grabbing the headlines, although analysts on the ground paint a less disastrous picture. There's some talk also of US wheat prospects declining due to dryness.

The Eurozone crisis still weighs on the market however, and that is potentially what could still bring the grain market to it's knees no matter what the fundamentals say.

Many are now talking of a Greek exit as being almost inevitable. Greece’s benchmark ASE Stock Index fell to it's lowest level since 1990 today. Greek nationals are reported to be syphoning off large sums of money from their own banks to be deposited abroad. If and when they do depart the immediate concern will be who is next, and that could mean a possible run on Portuguese, Spanish and Italian banks too.