“It has suddenly got quite interesting in the grain markets. We saw a price rally in the past 10 days but the fundamentals of supply and demand as yet are unable to set a new trend in current prices.
While the recent hot and dry conditions in parts of Europe are raising concerns over crop yields, particularly maize, this spell of weather may have come too late to massively impact wheat. In fact, the heat has most likely assisted in the maturation of winter crops.
So, in a year-on-year analysis, we envisage a reduced amount of feed quality wheat compared to 2014 when rain damage in the summer drove a large quantity of EU wheat onto the feed market,” Jack Watts, lead analyst, cereals and oilseeds, at AHDB Market Intelligence, told FeedNavigator today.
The impact on the later developing maize crop remains to be seen, he said, and is likely to keep up the interest in the EU feed grain market for a while.
But, on the maize side, the carry-over from the large EU crop of 2014 will offer some cushioning, said Watts.
He also noted Russian wheat exports for 2015-16 might not be as free flowing as the new export tariff mechanism there is adding an “extra layer of complexity” - officials and exporters are differing in their interpretation of the levies that should be imposed.
“That factor, coupled with the weaker euro, could support European wheat exports going forward,” he said.
French wheat
Indeed, according to the first estimates by the French government for 2015, French soft wheat production is estimated to exceed last year’s crop by 1%. A larger planted area is behind the predicted increase.
Though at 37.9Mt the French authorities’ estimate is below the June forecasts from Coceral and Strategie Grains, said Helen Plant, senior analyst, AHDB Market Intelligence.
Barley crop
Meanwhile, forecast data from Coceral, released in June, projected a combined spring barley crop from the UK, Denmark, Germany and France – the key northern EU producers - in 2015 of just over 12Mt – slightly above 2014 levels.
However, this was based on the assumption that 2015 spring barley yields in France would be above those of 2014, said the AHDB team in a note on the EU grains market. “But it is very likely that spring barley yields in France will have to be revised lower in light of recent hot, dry conditions,” they added.
Global outlook
In terms of the global picture, Watts noted a certain amount of market unease over dry conditions in Canada and fears wheat production there could reach 2002 levels - a year when it fell by around 25%.
The threat of El Nino is said to be still looming over Australian production and wet conditions in parts of the US are also raising concerns over the quality and exportability of winter wheat.
However, the markets will have to wait, said the grain market specialist, until the reality of harvest bites before getting a firm handle on crop levels.