Return of Black Sea grain not enough to dent bullish outlook

Improved Ukrainian and Russian cereal production this harvest is unlikely to be enough to offset falls in European and American supplies, according to one analyst.

French price risk management specialist Offre & Demande Agricole forecasts Europe will have only 12m tonnes of wheat to export this year, compared with 19m tonnes last year, largely due to the spring drought reducing expected yields in France, UK and Germany in particular.

It estimated French wheat yields would be around 15% below the five-year average at 6.16t/ha, while yields in the UK and Germany were likely to be nearer 9% down on average.

In the US, the winter wheat situation was also worrying, as key production areas of Texas, Oklahoma and Kansas had experienced very dry conditions. ODA estimated American production would reach 53m tonnes, down from 60m tonnes in 2010-11.

In contrast, it predicted Ukrainian and Russian wheat production could be up on last season, with both countries potentially returning to the export market. But, with several weeks still to go until harvest, relatively low stocks in these countries and political uncertainty, the impact of increased yields could be limited, ODA’s Cedric Weber said.

“At least for the next six months, we’re still bullish about the 2011-12 market and could see it going higher than the peak of the 2010-11 campaign. But there are a lot of uncertainties over yields and weather over the next few weeks will be critical.

“Also, we don’t know what will happen in the southern hemisphere, which is looking better and acreages should be up by 9% in Argentina and 5% in Australia.”

ODA estimated world wheat production would reach 644m tonnes this year, which would lead to a 20m tonne fall in stocks.