February 17, 2012

French wheat threatens Argentina, Russia with US looming

French wheat has gained an edge over Argentine and Russian wheat in the past month, but with US joining the race, EU wheat exports are unlikely to exceed 14.5 million tonnes in 2011-12.

Strategie Grains said Thursday (Feb 6) that it expects French exports to Morocco and Cuba to increase, after seeing off supply from the southern hemisphere and Black Sea region that recently arrived on the international market and pressured prices.

However, it also reflected analyst concerns that EU wheat futures are themselves likely to be pressured after Egypt's state-owned wheat buyer - the General Authority for Supply Commodities - turned to the US to buy 55,000 tonnes over the weekend.

Nevertheless, Strategie Grains expects EU wheat exports to third countries to increase on the year in 2012-13, but not use up the entire bloc's supply, as the Black Sea region will likely maintain a high level of total demand, while the US will increase its share of demand.

The analyst said there has been little change to the competitive price hierarchy on the world corn market, as US produce remains the most expensive origin, followed by Argentine, Brazilian, Romanian, Bulgarian and then Ukrainian corn.

Strategie Grains also said that French corn is dearer than US produce for a free-on-board basis, but benefits from an advantage in shipping costs to Mediterranean destinations, which makes it competitive in cost-and-freight terms.