February 27, 2012

 

Positive export outlook for EU wheat

 

 

EU wheat sees strong export prospects this season given growing demand from North Africa and the Middle East, along with reduced shipments from Black Sea producers.

 

While a smaller surplus will prevent the EU from approaching last season's export haul, which featured a record for France, European wheat could keep grabbing sales from importers until the 2011-12 season closes on June 30, traders and analysts said.

 

Strategie Grains' analyst this month raised its forecast for EU wheat exports this season to 14.5 million tonnes, up 140,000 tonnes from January, notably to take account of increases in expected French shipments to Morocco and German exports to Iran.

 

Iran, an unpredictable wheat market participant, bought a large amount of wheat this month, on course for a smaller domestic harvest and covering feed grain requirements in the absence of Ukrainian corn, hampered by western sanctions.

 

Strategie Grains put French exports outside the EU at 9.2 million tonnes, putting it in line with many traders who see shipments exceeding the 8.7 million currently projected by farm body FranceAgriMer.

 

France is expected to claim a chunk of recent demand from regular customer Algeria, which bought 700,000 tonnes earlier this month for shipment in April and May and is back in the market this week to buy more for May.

 

"March is going to be a big month for French grain loadings," another trader said, stressing ports would be handling recent sales to Algeria, Egypt and West Africa.

 

French prospects in Algeria have also been boosted by the country's rejection of some South American cargoes on quality grounds, leading to some volumes to be switched to France.

 

South American competition is moreover expected to fade as export giants Argentina and Brazil turn their attention to shifting their main corn and soy crops.

 

US wheat has emerged as a competitor for the second half of the season, with US offering ample supply and lower prices, and the origin has clinched a series of sales to Egypt, the world's top wheat importer, since last month.

 

But French wheat could live with this US competition, traders said.

 

Russia, which dominated exports to Middle East importers in the first half of 2011-12, has seen its activity curbed by a combination of rising prices, winter logistics snags and dwindling supply close to ports.

 

Flows from Ukraine, meanwhile, have been affected by uncertainty over possible export curbs as the government reacts to severe weather damage to the next crop.

 

"The Russian and Ukrainian export sales have tapered off much more quickly than people had expected only at the beginning of this year," a German trader said. "With Russian wheat not even offered in the last GASC tender from Egypt, a lot of new prospects are open."

 

"EU prices have certainly worked their way to competitiveness because of the unwillingness to sell in the Black Sea region," German trading house Toepfer said.

 

Outside the euro zone, the UK has enjoyed healthy exports as the EU's No. 3 wheat producer has captured some feed demand in the US due to high corn prices.

 

The US is not a regular buyer of UK wheat, mostly exported within the EU, particularly to Spain and the Netherlands. But activity has slowed since November and with stocks relatively tight this trend could continue, traders said.

 

"Certainly the year end in the UK is going to be extremely tight," a UK-based trader said, adding he forecasts exports to total around 2.5 million tonnes for 2011-12.

 

The UK exported 2.65 million tonnes of wheat in 2010-11, according to customs data.