EU expects top wheat exports in demand market

The French market consultancy firm Stratégie Grains expects an export of 28,6 million tons of soft wheat from the EU. A month earlier this was still 27 million tons. Wheat production amounts to 131,1 million tons. Last year the total harvest volume was 119,4 million tons, or 10% less. The export level in the current season is 26,9 million tons. For 2021/22, therefore, 6,3% more exports are assumed.

The European harvest will start later than usual this year. Despite a warm period, the cool and rainy weather ensures this. Due to the heat, the backlog has partly been made up to 7 to 10 days. In the past 3 years, threshing took place extremely early. The first ones arrived in 2018 combine harvesters already in the field on June 19.

Stratégie Grains has also increased production of barley and corn in the EU. These amount to 53,9 million tons and 65,3 million tons. Despite the cold weather in May, most grain maize in Europe is now in good condition due to the combination of moisture and higher temperatures. Only in Romania there are fears about the quality due to excessive rainfall. However, due to the high demand market, traders are convinced that there is also a market for lower quality wheat.

Position Russia
The agency is very positive about the export opportunities for the EU, analyst Laurent Crastre told Reuters. Countries such as France, Germany, Romania, Poland and Bulgaria can benefit from healthy demand on the global market. Especially in the first phase of the 21/22 export season, Russia's smaller power position is taken into account. After all, exporters in this country have to deal with a variable export tax on every ton of wheat, barley and corn. Nevertheless, Russia expects to be able to export a lot of grain.

What helps wheat from the EU is a relatively favorable price level. Especially when you factor in the Russian tax on top of their wheat. That comparison is not entirely fair, because wheat from the Black Sea region is baking wheat. Those from the EU are more often feed wheat. That does not dampen expectations, because there is a lot of demand for feed grains worldwide. France expects to become a major supplier of wheat to China for the third season in a row. This spring, the Chinese already bought a million tons of new French harvest. Last month, another 300.000 tons were added.

Grab a piece of cake
China's hunger for raw materials is so great that it is feared that not all other export destinations can be supplied. Other European countries may benefit from this. For example, Germany and Poland can export more to Algeria - a typical French export destination - but Iran, Turkey and Pakistan are also regarded as export countries.

German grain traders are therefore very positive about the upcoming season. Meanwhile, Russia also supplies wheat to Algeria. That's the first time in 4 years. Due to a lack of available wheat, France has not always been able to supply these destinations sufficiently.

The expectations look good, but there are challenges. A fluctuating exchange rate of the euro-dollar is troubling the EU. In addition, freight costs have increased dramatically. Not only for containers, but also bulk transport. Prices have tripled compared to last year. According to analysts at ING bank, it will take at least 2 years before transport capacity is increased sufficiently to cope with the increased demand.

Falling prices
A good grain harvest is also expected in the Black Sea region this season. In Russia, Ukraine and Kazakhstan, 5% more wheat is expected for the 21/22 season, which will start in the next 2 weeks. Prices continue to fall due to these figures. Last week it stood at $248 per tonne (FOB). Down $7 from the week before. Nevertheless, the variable export tax has increased since the beginning of June. A ton of wheat is now taxed at $38 per ton. This level is lower than in May.

In Europe, prices for the new harvest are also under pressure. On Friday, June 18, the Matif recovered considerably to €208,25 after a low of €204,50 per tonne. The lowest price for the September contract this season. However, on Monday June 21, the Paris stock exchange opened lower again, at €206,50.

In the meantime, the last remains of the old harvest are being traded. In week 23, the Rotterdam quotation for feed wheat reached its highest level this season at €261 per tonne. However, last week the price dropped by €8. The Northern Dutch listing again had prices below €250 on the board.