The prospect of large cereal harvests worldwide this year will limit scope for a price rebound in Europe, despite signs of demand being stirred by a recent slide in the wheat market, analyst Strategie Grains said on Thursday. Wheat futures tumbled to a one-year low in Chicago and a nine-month low in Paris at the start of the week, as concerns about ample supplies and lagging export sales fuelled selling by investment funds.
Futures have since regained some ground, with Paris futures supported by signs of an acceleration in French exports, but Strategie Grains said an upside to prices could be modest. "New crop prices will keep any increase to old crop prices largely in check," it said in a monthly cereal report.
"For 2019/20, price outlooks are now bearish for all three cereals given the larger harvests on the horizon (weather permitting)," it said of wheat, barley and maize (corn). Like other analysts, Strategie Grains expects mostly favourable growing conditions so far and a shift in area away from rapeseed to help European Union cereal output to rebound this year from a drought-hit 2018 harvest.
French-based Strategie Grains trimmed its forecast for 2019/20 soft wheat production in the EU to 146.1 million tonnes but this would still be 15 percent above last year's level. The EU barley crop was projected to rise 11 percent to 61.8 million tonnes, while the grain maize crop, which is yet to be sown, was put at 63 million tonnes, up 3 percent.
Winter cereal crops were in good shape in the EU, with the exception of Spain and southeast Europe, Strategie Grains added. For the current 2018/19 season, the analyst said an upswing in exports and a shift in livestock feed demand away from maize could help EU wheat and barley prices recover in the short term.
The barley market, which has seen a steep price fall despite relatively low global supplies, would be supported if major buyer Saudi Arabia resumes its import programme, it said. The market would also be influenced by China's decision on imposing tariffs on Australian barley imports, following an anti-dumping probe that had contributed to the recent price slide, it added.