Fears for German wheat keep prop under EU prices

Wheat prices eased in Europe on Wednesday – but not by as much as on US markets, as fears for the quality of Germany’s harvest reduced appetite for selling.

FirstFarms, the Copenhagen-listed farm operator, highlighted that many eastern European countries had avoided the rains which have dogged, in particular, parts of Germany and Poland.

The group said its harvest in Romania and Slovakia "has been better than expected, and the crops not yet harvested are also estimated to give a higher yield than expected".

At broker FCStone, Jaime Nolan said that much of central and eastern Europe, besides France and the UK are "seeing better-than-expected levels of output than was envisaged two months ago", after an excessively dry spring.

Quality vs quantity

However, traders were continuing to fret over the plight of Germany’s crop, the European Union’s second largest, whose quality prospects have been impaired by harvest rainfall.

"Quantity will not be the problem this year for wheat, with Europe’s output adding to strong former Soviet Union output. The problem is that much of this will be feed," Mr Nolan said.

"Quality is the outstanding concern, and rain-delayed harvesting of the German crop in particular is offering firm support to the current market price."

Paris-based Agritel said that Germany’s rains "should last until the end of the week. Quality will therefore be damaged".

Mr Nolan said that rain had been a "characterising factor" for Poland’s crop too, adding that "there is no question that sprouting and ultimate quality have been a real issue".

Paris milling wheat for November closed at E206.75 a tonne, down 0.5%. London wheat for November ended flat at £169.00 a tonne.

Nonetheless, both lots were ahead of US wheat, which for September delivery tumbled 2.6% to $9.26 a bushel in Minneapolis, and closed down 1.1% at $7.94 ¼ a bushel in Chicago.

Rapeseed impact?

Germany’s harvest  delays – which have left an estimated 20-30% is yet to be reaped, far more than usual at this time of year – have also propped up rapeseed prices, for fear of farmers, for a second season, being unable to sow winter crop in the optimal window.

"Northern Germany is a concern. Farmers are already wondering what the consequences of delay will be on early rapeseed sowings for the 2012 harvest," Agritel said.

Germany is typically the European Union’s top rapeseed producer although, thanks to higher winterkill rates, blamed on late seeding last year leaving crops more vulnerable to cold temperatures, it is set to slip behind France this year.

Dairy setback

FirstFarms’ crop announcement came as the group revealed that it had moved DKK2.90m into the black in the April-to-June quarter, compared with a DKK221,000 loss a year before.

However, the company, while saying its performance had been better than expected, declined to lift its target of a pre-tax profit of DKK1.6m this year, warning that milk production would fall short of forecasts, thanks to a decision to trim herd size thanks to a lack of modern accommodation.

Shares in FirstFarms, which has not reported a full-year profit since 2007, stood 3.1% lower at DKK 47.00 in lunchtime deals.

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