Hamburg, Aug 18 - Germany is heading for a larger wheat harvest than previously expected, which could mean lower retail flour prices, the chief executive of German flour mills association VDM said on Tuesday.
Mills expect a wheat harvest of around 26 million tonnes, up from 25.7 million tonnes last year, VDM chief executive Manfred Weizbauer said.
This was in line with the latest forecast from the association of German farming cooperatives, and was roughly 3 million tonnes higher than analysts were forecasting in July.
"Quality is overall looking good and we expect a good supply," he said. German mills need around seven million tonnes of wheat annually.
German high quality milling wheat prices have fallen to about 140 euros ($198) a tonne from a peak of around 300 euros a tonne as commodity markets surged in the previous season, he said.
"There could be a Christmas present for consumers in the form of lower retail flour prices from November," he said, but the extent of the price fall would depend on individual companies.
Flour mills had long term supply contracts with retailers, which generally expire in September, so any lower prices would be available from November.
INDUSTRIAL PRICES FOR BREAD UNLIKELY TO FALL AS FAR
But industrial flour prices for bread are unlikely to fall to the same extent, he said.
Mills had been compelled under the terms of supply contracts to deliver at agreed prices when grain prices surged last year and would be seeking the extra benefits at lower grain prices.
German flour demand remained stable despite the economic slowdown, he said.
German flour mills processed an estimated 7.5 million tonnes of grain in the 2008/09 season ending in June 2009, comprising 6.6 million tonnes wheat and 900,000 tonnes of rye, down from 7.8 million tonnes in 2007/08.
A major reason for the fall was sluggish exports.
"Overall flour demand in Germany is stable, mills are not an industry in a crisis," he said. "Producers of basic foods are less affected by the economic problems than other industries."
A moderate fall in industrial flour demand was noted partly because of the sluggish economy and partly because of tighter calculations by bakers.
"We are seeing that bakers are becoming more cautious with production," he said. "Some had their shelves full until 8.00 p.m. but now stop refilling at 6.00 p.m. so they do not throw so much away."
Mills' profit margins were under pressure from the intense price-war seen in German retailing, with the expansion of giant discount supermarket and bakery chains offering cheaper bread.
"We have an ever smaller number of customers, which buy ever larger volumes," he said.