January 18, 2008

EU wheat exports need to accelerate near-term, Strat Grain

EU soft wheat exports need to accelerate starting on February to offset the loss of Russian supplies on the world market, analytical report Strategie Grains said Thursday.

The halt of Russian exports and the export baton passing to the EU will have a bullish impact on EU prices, Strategie Grains said. This would be accentuated if exports from Ukraine also do not resume.

Russia's wheat exports will be effectively blocked from February to May by a 40-percent duty. However, Ukraine has decided to allow grain exports of 1.2 million tonnes in the first three months of 2008 after only trivial amounts were allowed in the second half 2007.

EU wheat is still uncompetitive against Argentine wheat, but the spread has narrowed over the last month as gains in EU wheat have trailed those in Argentina, the report said.

Strategie Grains maintains an EU wheat export forecast 2007-08 of 7.6 million tonnes, unchanged from last month, but down from 10.4 million tonnes in the previous season.

However, analysts at Strategie Grains warn the estimate has a decrease potential of 500,000 tonnes, as some importers may attempt to postpone last season purchases until cheaper new crop supplies are available. Still, demand from importing nations is already forecast at a low level, making this unlikely, they said.

For 2008-09 Strategie Grains is forecasting an exportable surplus of 12 million tonnes, based on a current production projection of 128.9 million tonnes, up 17 million from 2007-08.

Analysts also warned downward pressure from greater supplies would not take effect until the 2008 harvest is secure.