Romania and Bulgaria's wheat crops are expected to be relatively unscathed by recent rain, although some wheat could be downgraded to feed quality, traders said on Friday. Flooding in Bulgaria and heavy rains in Romania in June raised concerns that crop yields and quality could be damaged, but the first week of harvest has abated concerns.
"We see a similar crop to last year, a reasonable quality crop," said an industry source, forecasting that around 60 percent of region's wheat would be milling quality with the remainder feed. "Indications are that the ratio will be similar to last year which was a good ratio by historical standards." One trader estimated Bulgaria could harvest about 70 percent feed wheat this year against average of around 50 percent.
The International Grains Council (IGC) forecasts Romania to harvest 7.1 million tonnes of wheat compared with 7.2 million last year, while Bulgaria's wheat harvest is pegged at 4.8 million tonnes versus 5 million last year. "At this stage we don't expect to make any significant downgrades to the crop projections," said Darren Cooper, senior economist at the IGC. "The adverse weather could be more keenly felt in terms of reduced quality and a portion of the crop being downgraded to feed quality."
First cuts from the harvest showed poor results but already the outlook is improving, traders said. "First fields are traditionally lower quality anyway, you don't want to put too much weight on the very early quality," said one industry source. "In Bulgaria, Romania, Ukraine and Russia it's (results are) starting to improve quite rapidly."
Traders were sceptical about comments from the Association of Grain Producers of Bulgaria saying it expected a drop of about 15 percent to below 4.5 million tonnes of wheat due to the bad weather. "I don't hear yields are going to be impacted too much, I think it's more about protein levels, that's their bigger concern," said a European trader.
High volumes plus decent crop quality in 2013/14, notably in eastern Europe, enabled the European Union to set a wheat export record. In the past couple of years Romania has emerged as a major exporter to Egypt - the world's biggest wheat importer. Earlier this week, the latest wheat purchase by Egypt's state grain buyer, the General Authority for Supply Commodities (GASC), included 180,000 tonnes of Romanian wheat.
"I think the higher prices in the GASC tender in Egypt on Tuesday showed protection being taken for rain in Romania, Ukraine and other parts of the Black Sea region," said a European trader. The trader noted GASC paid a higher average price this week then it did in its previous tender on June 21, despite the world wheat price falling over the period. "This shows price protection being taken out in the event that rain in the Black Sea area pushes prices up," he added.
