The worries that a bumper world wheat harvest may disguise a squeeze on quality supplies gained further weight, amid growing ideas of lower protein levels in European, former Soviet Union and US crops.
Rabobank urged investors to be alert for the potential for “wheat protein shortages”, given the damage to crops in many areas from heavy rains, which on ripe grain are viewed as a threat, in encouraging sprouting and quality downgrades.
“Soggy harvests in parts of the European Union, France in particular, and China, along with a slightly lower-than-average protein content of US hard red winter wheat, mean that high-protein wheat may be in shorter supply globally in 2016-17,” the bank said.
The dynamics “may open up an opportunity” for upward pressure on prices of high protein milling wheat “as the [2016-17] season progresses”.
‘Milling premiums have firmed’
The comments underline a concern raised on Thursday by the International Grains Council which, even as it upgraded its forecast for the world harvest to a record high, flagged “escalating concerns about availabilities of milling grades.
“Ample rains boosted average yields of wheat in many places, but caused some quality downgrading,” the council said.
Separately, on Friday, UK grain merchant Gleadell, said that “reports of quality concerns are increasing in Germany and have moved as far east as Russia, where yields and quality have suffered due to rain”.
“Give these various quality problems, milling premiums across much of the EU have firmed,” said David Sheppard, Gleadell’s managing director, adding that “it is the quality end of the spectrum where a potential shortfall lies”.
‘Protein levels are down’
Meanwhile in the US, US Wheat Associates, which is responsible for promoting US wheat exports, flagged that preliminary harvest assessments from itself as well as the likes of Ukrainian analysis group UkrAgroConsult and Paris-based Strategie Grains “indicate winter wheat protein levels are down in the US, Russia, Ukraine and the EU.
“Additionally, wet conditions are affecting the Canadian and some portions of the US spring wheat harvest,” US Wheat Associates said.
The Virginia-based group acknowledged a boost to Russian supplies of quality wheat of some 4m tonnes simply from a larger harvest, even though the proportion making milling grade will drop by 4 points to 69% this year, as estimated by Strategie Grains.
“Still, the expected increase in Russian milling supply will only offset one-quarter of the 16.6m-tonne decrease in European milling supply,” US Wheat Associates said.
The proportion of the, smaller, EU wheat harvest this year making milling grade is expected by Strategie Grains to come in at 66%, down 5 points year on year.
‘Concern about lower protein’
For the US crop, US Wheat Associates estimates the average protein content in this year’s harvest of soft red winter wheat, as traded on the Chicago futures market, at 9.4% – the lowest on records going back to 2005.
US soft red winter wheat protein, test weight, and (overall grade)
Protein in wheat grown in the western soft red winter wheat belt, including states such as Ohio and Missouri, averaged 9.1%, “well below previous values”, the group said, if stating that the crop had, on other measures, such as specific weight, come in ahead of average.
Preliminary results indicate lower protein in hard red winter wheat, the biggest US wheat production class, too, with US Wheat Associates earlier this month flagging “concern about the high-yielding, lower protein” crop this year.
The group added that farmers were responding to the relatively low quality of 2016 harvests by hoarding supplies left over from higher-protein crops last year.
“Many US farmers are storing their highest protein wheat instead of selling it,” US Wheat Associates said, noting that this strategy was being followed elsewhere too.
“UkrAgroConsult recently noted farmer storage of higher protein wheat is also increasing across Russia, Ukraine and Kazakhstan.”
(Source – http://www.agrimoney.com/news/fears-spread-over-potential-squeeze-on-milling-wheat-supplies–9870.html)