Wheat prices in the European Union could fall from spring because the prospect of a large harvest in Russia and an abundant supply of feed grain could offset the expected decline in wheat production in the EU, said strategy Grains.
In the monthly report, the French company lowered its forecast for this year's soft wheat harvest in the EU from 139.8 million tonnes to 138.6 million tonnes, as rain continued to disrupt sowing in parts of Western Europe.
The new forecast for 2020 is a decrease of 5.1% below the previous year's level.
Forward prices for the 2020 harvest are already trading below the level of the old harvest, and the EU market could experience a general fall in prices as the harvest season approaches in the northern hemisphere, strategie Grains said.
"Despite the lower planned harvest and the weak balance sheet position, we assume that wheat prices for Europe 2020 will continue to fall in summer and autumn because they will not be able to withstand the harvest pressure coming from Russia this summer," it said.
The consulting firm expects Russia to harvest 82 million tons in 2020, but warns that weather conditions could change in the coming months.
Other analysts also expect a strong Russian harvest due to the record sowing of winter wheat and the mild winter weather.
Wheat supply pressures could also come from large global barley and corn harvests, which would reduce the demand for wheat as animal feed, strategie Grains said.
The wheat future BL2H0 traded on the Euronext futures market reached a 1½ year high in January due to brisk export demand.
The company raised its forecast for EU common wheat exports in the current 2019/20 season from 30.5 million tons last month to 30.6 million tons.
Exports are expected to decrease to 26.2 million tonnes in 2020/21 due to the lower EU supply.
Strategy Grains announced that it would continue to include Britain in its EU estimates in the transition period that began after Britain's official exit from the bloc on January 31.
Source
HANSA Terminhandel
