Wheat Prices Advanced due Low Stocking Levels in EU and Deteriorating US Crop Conditions

Wheat prices look set to soar to record levels this year due to anticipated low stocking levels in the European Union, the world?s largest wheat producer.

Industry experts predict the price will remain high for the remainder of 2011. Milling wheat traded on the NYSE Liffe exchange in Paris, the European benchmark, averaged ?252.20 a ton in the first quarter, the second highest price since 1999. It fell by around 1% to ?238 yesterday, but looks sure to trade at ?220 to ?250 over the next year.

French agri-analysis firm Offre et Demande Agricole is advising its 5,000 French farm members to sell crops, according to Bloomberg. Prices may reach ?300 should crops fail in one of the bigger producers, it advises.

France?s crops office, FranceAgriMer, has increased its estimate for soft-wheat exports outside the EU in the 12 months to June to 12.75m tons from 12.6m tons.

Meanwhile, the US Department of Agriculture predicts global wheat stockpiles will drop 7.6% to 182.8m tons at the end of the 2010-11 trading year.

Rain last autumn slowed the planting of winter wheat, which accounts for 95% of the EU?s wheat crop, leaving acreage little changed from a year earlier.

While better yields will boost output by 5% to 141.4m metric tons, that may not be enough to rebuild the EU?s stockpiles, which its experts estimate will slump by 19% before the end of June.

The European farmer representative group Copa-Cogeca, of which the Irish Farmers Association is a member, said that this wheat shortfall serves to remind food producers of the importance of independence of food security for the EU?s 27 member states.

Meanwhile, Copa-Cogeca also noted that a newly published EU report on nitrogen emissions similarly highlighted the need to keep food security to the forefront in the continent?s future environmental strategy.

The EU report highlights the vital contribution of nitrogen to agricultural productivity and to maintaining EU food security. The farm group said that this issue is more important than ever given that world food demand is expected to more than double by 2050.

Copa-Cogeca secretary-general, Pekka Pesonen, said: "This study confirms that food security is crucial for Europe and that the only way to achieve this is to support an efficient, productive agriculture sector.

"The report also shows that the agriculture sector is much further ahead than other sectors in reducing its green house gas emissions, with a 20% fall in emissions seen in the EU agriculture sector over the period 1990 to 2007.

"Some 70% of nitrogen emissions, which have been identified as the most costly to society, come from transport and heating," he added.

"Furthermore, Copa-Cogeca EU farmers have reduced fertiliser consumption by 18% from 2002 to 2010. But in order for this to continue, European farmers need access to all technologies which improve their production efficiency. At the same time, EU farmers are being squeezed by high input prices and extreme market volatility.

"This will limit the amount of investment European farmers put into improving their business. The Common Agricultural Policy must provide a good economic framework for a modern, efficient agriculture to tackle also the nitrogen challenge."

Wheat rose for a third day in Chicago as worsening winter-crop conditions in the U.S., the largest exporter, and delayed spring-crop plantings fueled supply concerns amid strengthening demand.

About 38 percent of the winter-wheat crop was in poor or very poor condition as of April 17, up from 36 percent a week earlier and 6 percent a year earlier, the U.S. Department of Agriculture said yesterday. Dry weather in the past week from central Kansas to Texas hurt crops. About 5 percent of the spring-wheat crop was sown, against 18 percent a year earlier and the prior five-year average of 12 percent, the USDA said.

?Wheat prices rose sharply on the news of the slow spring- wheat planting and on the further news that the condition of the current winter-wheat crop is really quite bad,? economist Dennis Gartman said in his daily Gartman Letter.

Wheat for July delivery gained 12.75 cents, or 1.6 percent, to $8.235 a bushel by 10:54 a.m. London time on the Chicago Board of Trade. Prices reached a one-week high of $8.2475 after jumping 3.9 percent yesterday. Milling wheat for May delivery traded on NYSE Liffe in Paris climbed 6.25 euros, or 2.5 percent, to 252.25 euros ($360.01) a metric ton.

Wheat output in Texas, the fifth-largest U.S. grower, may plunge 61 percent to 50 million bushels as the dry spell damages plants and farmers abandon fields, said Mark Welch, a grain- marketing economist at Texas A&M University. About 68 percent of the Texas winter-wheat crop was in poor to very poor condition, the USDA said yesterday.

Yields in the U.S. may drop to 38 or 39 bushels an acre, the lowest since 2006, without improved weather conditions, said Dennis Delaughter, owner of Progressive Farm Marketing Inc. in Edna, Texas. The national yield has been below 40 bushels only twice in the past 13 years, USDA data show.

Wheat inspected for export at U.S. ports rose 24 percent from a week earlier to 35.7 million bushels in the week to April 14, the USDA said yesterday.

Corn for July delivery rose for a second day in Chicago, advancing 1.75 cents, or 0.2 percent, to $7.6125 a bushel. Sowing of the grain in the U.S., the largest grower and exporter, fell behind last year?s pace.

About 7 percent of the corn crop was planted as of April 17, down from 16 percent a year earlier, the USDA said yesterday. At least a third of the crop should be sown by May 1 or yield potential may be diminished, said Greg Grow, director of agribusiness for Archer Financial Services Inc. in Chicago.

Soybeans for July delivery fell 2.5 cents, or 0.2 percent, to $13.5325 a bushel after two advances in a row. China?s soybean crushers canceled more than 10 cargoes of the oilseed this month to cut growing losses for processing, state- affiliated researcher Grain.gov.cn said in a report today.

Crushers have also delayed shipments of more than 20 cargoes, it said. The cancellations and delays will likely lower China?s imports in the year through Sept. 30 to about 53 million tons, compared with 57 million tons estimated by the USDA, the researcher said. The Asian country is the world?s biggest soybean importer.