Wheat quality fears revive, despite quantity hopes

30.07.2013

Concerns over  the availability of quality wheat came back into the spotlight even as the European Union raised its harvest forecast, with merchants in France said to be struggling to find crop to meet protein criteria.

The European Commission lifted by 2.8m tonnes to 131.7m tonnes its forecast for the EU soft wheat harvest, the world's biggest.

While failing to reveal the reasoning behind the upgrades, it is in line with the direction of revisions on the crop, and is above the latest forecast from industry group Coceral of 130.7m tonnes, although below the 133.4m-tonne figure from influential consultancy group Strategie Grains.

However, the EU move did little to assuage growing worries over the availability of higher quality wheat, with industry talk of a low-protein French harvest, the EU's biggest, being followed now by mixed reports from the early stages of the German harvest, the bloc's second largest.

'Exports delayed'

"Wheat crops in south west France are producing much better yields than expected but proteins are low," traders at a major European commodities house said, adding that "much of the crop has come in below 11% which means it's pretty much only good for feed".

Hopes of an improvement in quality as the harvest moved north have been dashed, with reports from the Loire valley suggesting "it's the same story of high yields and low protein".

The quality gap means that "exports of French milling wheat from ports in the Bay of Biscay have been delayed because shippers cannot find enough wheat of the required milling specification", the traders said.

'Low specific weights'

Elsewhere, the commodities house added that "harvesting in southern Germany has also begun and there have been some reports of low specific weights".

And FCStone reported that a "flying start" to the winter grains harvest in Spain had given way to wetter conditions, which are also typically a setback to quality, and spurred a dearth of producer selling which had, unusually, raised internal prices above those at port.

"The last three weeks have seen storms delays winter wheat harvesting up north," FCStone commodity risk manager Jaime Nolan Miralles, adding that "the Spanish wheat market is now a quality and freight game".

"Reports on the ground are suggesting that as little as 20% of the crop has been harvested to date around Huesca, Navarra and Victoria."

'More feed wheat'

The commodities house added that "with similar stories earlier of quality problems in the Black Sea, it seems we may be seeing a trend towards more feed wheat and less breadmaking wheat.

In Russia, "the premium over feed for 12.5% protein milling wheat at ports has increased by about $7 a tonne in the last couple of weeks."

Separately, Moscow-based analysis group Ikar said that Russian wheat export prices had pulled out of a two month decline, remaining stable last week despite the continuing harvest, which in raising supplies, typically depresses values.

Prices for both 12.5% protein wheat and 11.5% protein supplies were stable, at $252 a tonne and $245 a tonne respectively.

'Early days'

The concerns revisit a theme which worried investors last month after rains which hurt the quality of the Chinese winter grains harvest sparked a series of purchases by the country of milling wheat, from Australia, France and the US.

Macquarie warned at the time that "our fear today is that milling grade production could get far worse, creating far more support for milling grade wheat [prices]".

However, at Gleadell, the UK grain merchant part owned by French co-operative giant InVivo, managing director David Sheppard urged against being overgloomy at French prospects.

"You have to remember that 70% of the harvest there is still to go," he told Agrimoney.com.

"And while there may be some local problems, they will get there one or the other," in finding sufficient supplies with 11% protein.



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