July 20, 2018 / 3:24 PM / 5 months ago

As wheat harvest heads to parched north, Europe braces for more losses

PARIS (Reuters) - Europe’s grain market is bracing for more downgrades to the size of this year’s wheat crop as harvesting reaches the northern regions that have been worst hit by exceptional drought and heat since spring.

FILE PHOTO: A French farmer harvests wheat in Sancourt, northern France, July 17, 2018. REUTERS/Pascal Rossignol/File Photo

Germany, the European Union’s second-largest wheat grower, has been a focus of concern, and comments this week by the country’s farming association saying it could not forecast the crop because of uncertainty about weather damage have added to market jitters.

Harvesting is under way in south and central Germany and is spreading north to the regions most badly damaged by dryness.

“I think it pretty likely that the association will cut its forecast of the wheat crop in coming weeks as the harvest results arrive,” one German analyst said.

“The association cut its forecast of the winter barley sharply after the final northern and eastern areas were gathered where the damage was severest.”

The DBV farming association already forecast on July 5 that Germany’s winter wheat harvest will fall 15 percent from 2017 to 20.5 million tonnes. It declined to update the number this week but sharply lowered its winter barley crop estimate.

Neighboring Poland is also expected to see a significant drought impact, while harvest rain was now slowing field work.

Poland’s wheat output may fall 10 percent from 2017 to about 10 million tonnes, Sparks Polska forecasts.

“The winter wheat harvest started 2-3 weeks earlier than normal, but now it has been hampered by wet weather,” Wojtek Sabaranski of the analyst firm said.

As well as slowing field work, rain around harvest time can damage wheat quality, and downpours in southeastern Europe have raised concern that exporting EU members Romania and Bulgaria may have less milling-grade wheat than usual.

In Britain, the wheat harvest has just got underway earlier than normal, with a smaller crop widely anticipated.

Crop analysts expect production to fall below 14 million tonnes, well down on last year’s 14.8 million and the lowest since 2013.

“The continued decline in the UK wheat area, lack of rainfall and higher than usual temperatures in June could lead to a prospective tightening of the UK wheat supply,” the Agriculture and Horticulture Development Board said in a report.

FRENCH CROP SEEN SMALLER BUT BETTER QUALITY

France, the EU’s top wheat grower, is expected to play its part in the reduced European supply after torrential rain hurt crops earlier in the year, although recent hot, dry weather may have boosted grain quality.

Slideshow (3 Images)

Consultancy Agritel on Friday forecast the French soft wheat crop, excluding durum, at 34.2 million tonnes, more than 6 percent below last year’s crop.

Agritel’s estimate was toward the low end of current market expectations as market participants struggle to extrapolate varying local yields. But with a rapid harvest already two-thirds complete, results may become clearer in the week ahead.

Traders and analysts have widely reported good quality readings, notably for test weights and protein content, which could help French export prospects this season.

Reporting by Gus Trompiz and Valerie Parent in Paris, Michael Hogan in Hamburg and Nigel Hunt in London; Editing by Kirsten Donovan

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