Europe Awash with Feed Wheat after Rains Hit Quality

Europe Awash with Feed Wheat after Rains Hit Quality
Source: Reuters
(dated 01/08/2008)

London, July 31 - Europe faces a glut of feed wheat with production rising sharply this year and heavy rains ensuring many crops, particularly in the Black Sea region, will not be suitable for milling into bread flour.



New crop British feed wheat prices on Euronext.liffe fell to an 8-month low this week and premiums for milling-grade supplies rose sharply, with a large amount of Black Sea grain appearing destined for the animal feed sector.

"Rumours about bad quality of Ukrainian grain and abundant supply of feed grains add to the decrease in prices," the Moscow-based Institute of Agricultural Market Studies said.

The International Grains Council on Thursday projected the European Union's wheat crop this year would rise 19 percent to 141.6 million tonnes while Ukraine and Russia should harvest a combined 73.5 million, up 16 percent.

IKAR said Russia also expects a relatively high share of feed wheat in the new crop.

"Rains benefitted crops in key areas but delayed harvesting and put quality at risk in parts of the EU, Ukraine...," the IGC said on Thursday.

Jozsef Vancsura, Chairman of the Association of Hungarian Grain Growers, said this year's wheat crop is expected to come in at 5.5 million tonnes, up from 4 million last year.

However, producers expect about 2.0-2.5 million tonnes of this year's crop to be feed quality due to unseasonal amounts of rain in July. Last year almost all of the wheat harvested was milling grade.

HIGHER QUALITY IN WEST

Reports from crops in western European countries such as France and Britain were more promising.

"At the moment the quality looks excellent, very high bushel weights, very high specific weights, good hagbergs," said wheat trader Simon Ingle of U.K. farmers co-operative Grainfarmers.

"That is encouraging as the UK is going to need some quality to hold itself above the dire feed wheat levels. Black Sea feed wheat prices look very cheap," he said.

In France, the European Union's largest grains producer and exporter, the wheat's quality was expected to be good, although variable from one region to the other.

"It seems that we are in a year when there are wide differences in yields and we will probably see the same in terms of quality," Jacques Mathieu, deputy director of France's grain institute Arvalis said.

"But it is likely that we will have no problem answering all types of needs, for the milling industry, for exports and for feed makers," he added, stressing that the harvest was not over.

He said the quality was expected to be exceptional in the north but less so in the south part of the country.

Germany's wheat harvest quality is looking generally satisfactory but there are concerns that low protein levels after repeated rain this summer will lead to larger volumes of feed wheat than previously expected.

"Wheat quality varies greatly between regions following repeated rainfall in recent weeks," a spokesman for Germany's association of farming cooperatives, said.

LOWER PROTEIN

"Indications are that in much of the country protein levels are about half a percentage point lower than normal, which could push noticeable volumes of marginal-quality wheat into feed categories as they will not be accepted by flour mills."

"But this is not a disaster and generally quality levels are good." The association estimates that about 30 to 35 percent of Germany's wheat harvest has now been brought in.

Spain's soft wheat harvest is forecast to exceed last year's by about 10 percent due to farmers sowing more land, but growers say that weather conditions were too uneven during the campaign to ensure quality.

"It will be interesting to see how much domestic milling wheat will be switched to feed this campaign given the unexpectedly low quality of what has been harvested so far," said Jorge de Saja, president of feed makers' group CESFAC.

Italy has wrapped up wheat harvesting with a strong increase in output, but the new crop quality was patchy as some regions suffered from unfavourable weather, grain traders said.

"Soft wheat quality is very good in Bologna, medium in Veneto and low in the north west where specific weights are too low to make it for bread quality," said one trader.