Strategie Grains forecast wheat prices staying firm even as the influential analysis group put a rise in European Union output back on the agenda, hiking its production estimate by the equivalent of a Spanish harvest.
Rains had proved "very beneficial" for grain filling in France, Germany and the UK, the region’s top wheat producers, where spring drought had looked set to send output tumbling.
"In these countries, harvest outcomes are now set to be much better than had seemed possible a month ago," Strategie Grains said.
In Bulgaria and Romania, yields were "set to be particularly high", boosted by warher conditions which had been "extremely favourable for crop development throughout this year’s entire growth season".
The Paris-based group hiked its forecast for the EU soft wheat harvest by 4.6m tonnes, more than Spain produced last season. The revision took the production forecast to 130.2m tonnes, putting it ahead of crops both last season and in 2009-10.
It was also higher than a 126.5m-tonne forecast two weeks ago from Brussels based grains industry group Coceral.
And, factoring in durum, the hard wheat used in making pasta, Strategie Grains’ estimate for the total wheat crop was, at 138.4m tonnes, considerably higher than the 132.1m tonnes that the US Department of Agriculture forecast in a benchmark crop report on Tuesday.
Nonetheless, Strategie Grains remained upbeat about prospects for wheat prices, saying that "except for the possibility of sharp financial downturn, few factors exist that could have a downward impact".
Even though EU prices may be subject to downward pressure from the Black Sea countries through the summer and even autumn, they retain an increase potential because US and world stocks are forecast so low," the analysis group said.
However, the comments came as a rally in wheat prices – stoked by weaker hopes for Canadian and Ukrainian crops outlined in Tuesday’s USDA report, besides hot weather threatening fellow grain corn in America – showed signs of stalling.
Chicago wheat for September stood 0.8% lower at $7.08 ½ a bushel at 09:00 GMT, with Paris wheat for November easing 0.4% to E200.25 a tonne and London’s November contract down 0.1% at £167.00 a tonne.
In the US, Brian Henry at Benson Quinn Commodities said that EU and US wheat was "setting up for someone to really get clobbered in this trade", given their premium of some $50 a tonne to Russian prices on export markets.