Grain consolidation likely despite signs of wheat output stabilising

The European Union’s wheat harvest will probably fall from last year’s record as yields return to more normal levels in the bloc’s biggest producing countries.

Total output of wheat, including durum, will drop 3.4% to 154.9 million metric tons this year, according to the average estimate of the views which were expressed by 11 leading industry analysts who were surveyed by Bloomberg.

Respondents to the survey expect smaller crops in France, Germany, and the UK, after favourable weather last year boosted plant yields.

“There will probably be slightly less good yields everywhere,” said Alexandre Boy, an analyst at Paris-based farm adviser Agritel. 

“Still, if we look at the main producers in Europe, there are no problems anywhere, so if things continue to be perfect, production could be higher.”

A smaller crop may bring some relief to prices that are trading near the lowest since 2010 in Paris following bumper harvests.

The United Nations’ Foodand Agriculture Organisation earlier this month reduced its outlook for global production by 10 million tons because of declining potential for crops in Russia and Ukraine. 

The FAO sees world output at 712.7 million tons, about 3% smaller than the prior year’s harvest.

The EU’s production of soft wheat may fall to 145.8 million tons, according to the Bloomberg survey.

That would be down from European Commission’s estimate for last year’s harvest at a record of more than 151 million tons. 

Analysts in the survey expect the EU’s durum crop to total 8.7 million tons for 2016.

Farmers in France may harvest 41.1 million tons of wheat, down 3.9% from last year, the survey found. 

Milling wheat futures tumbled 18% in the past year on Euronext in Paris as last year’s record French harvest added to a worldwide grain glut.

The survey also offered the following estimates:

n France’s soft-wheat harvest seen falling 3.9% to 39.4 million tons, while the country’s durum production will increase 5.2% to 1.9 million tons.

n German wheat output expected to slip 1.8% to 26 million tons.

n UK wheat harvest predicted to decline 5.8% to 15.3 million tons.

Meanwhile, European agriculture markets are poised to see further consolidation as grain prices that have fallen in the past three years continue to decline, according to German commodities trader BayWa.

Farms in central Europe are still too small to be profitable and smaller grain traders might find it hard to survive, said BayWa chief executive, Klaus Lutz.

He said: “We’re not really out of the woods with price development for farmers and traders. Hedge funds are really still bearish and also future prices don’t show us interesting potential for the next few months.”

BayWa expects grain sales volumes to rise to 40 million metric tons this fiscal year from 35 million to 36 million a year earlier, Mr Lutz said.

— Bloomberg


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