LONDON – Wheat farmers in the European Union, which produces about 20 percent of the world’s supply, will begin harvesting the largest crop in six years in the next few weeks, compounding a global surplus as prices slump.
The 28-nation EU may produce 145.9 million metric tons in the season that starts July 1, according to the average estimate of five analysts surveyed by Bloomberg News. That’s bigger than the European Commission’s forecast of 144.98 million tons and the largest since the 2008, when the world’s farmers expanded output to take advantage of record prices.
More wheat from Romania to Britain is adding to global inventories that rose for the first time in three years after record crops in 2013.
Demand is slowing, and output is rising from importers including China and Brazil. By year-end, wheat futures in Paris may drop 15 percent to $220 a ton, the survey showed. Prices fell 9.1 percent from a four-month high in April, when violent conflicts between Russia and Ukraine sparked concern Black Sea exports would be disrupted.
I struggle to be anything but bearish, Chris Gadd, an analyst at Macquarie Group in London, said in a telephone interview. In Europe, the crops look absolutely fantastic, and in Eastern Europe as well as the Black Sea region, there are no real issues as yet.
Milling wheat for November delivery traded at $261 a ton in Paris on Wednesday after falling to $258 on June 2, the lowest for a most-active contract since Feb. 28. A drop to $221 would be the lowest since July 2010. Prices already declined 6.5 percent this year, while wheat on the Chicago Board of Trade increased 1.4 percent as drought in the Great Plains threatened U.S. output.
EU production of wheat, excluding durum, a hard variety used to make pasta, may be 139.16 million tons, 2.3 percent more than in 2013, according to estimates released May 27 by Alfred C. Toepfer International, a trading unit of grain handler Archer-Daniels-Midland.
While top producers France and Germany will see little change in output, the harvest will jump 26 percent in Britain to 15.07 million tons, the Hamburg trader said, as farms rebounded from a rain-damaged crop last season that was the smallest in 12 years.
Output also will be higher in countries including Romania, Bulgaria, Denmark and Sweden, as Spain falls 24 percent to 5.1 million tons, Toepfer said.
Combined production in Russia and Ukraine, which compete with the EU and U.S. in export markets, may total 72 million tons, down 3.2 percent from a year earlier, the U.S. Department of Agriculture said. Russia may collect as much as 55 million tons, more than the 52 million forecast by the USDA, Agriculture Minister Nikolai Fedorov said May 28.
Black Sea wheat for delivery after the harvest fell to $255 a ton June 3 from $275 in mid-May, as French grain in Rouen slid to $252 from $283 earlier in the month, data from the International Grains Council show.