March 16, 2012
EU wheat exports to barely rise by 2017
With EU shipments to be curbed by growing use of cereals in bio fuels, limited production gains and competition from Black Sea exporters, EU wheat exports will benefit little from rising world demand over the next five years, an analyst said.
Soft wheat output in the 27-country EU could rise by five million tonnes by 2017, Strategie Grains said in a presentation on Thursday (Mar 15), arguing growth would be capped by demand for arable land for oilseeds and declining yield gains for wheat in western countries like France.
An extra five million tonnes would represent a rise of nearly 4% in EU soft wheat output compared with Strategie Grains' estimate of 2011/12 production of 129.4 million tonnes and 131.1 million forecast this year.
This increase may be absorbed by bio fuel demand for wheat that could more than double over the next five years, it said.
The EU has set a target for a 10% share of renewable energy in road transport by 2020, and Strategie Grains forecast current bio fuels that use crops would continue expanding as the role of second-generation bio fuels remained marginal.
"Bio fuel blending will be a major variable affecting European grain exports," Andree Defois, head of Strategie Grains, told a conference held by France's grain export lobby.
Under one scenario, Strategie Grains estimated wheat use in ethanol would reach 11 million tonnes in 2016/17, against 4.7 million tonnes in 2011/12, leaving total exports of soft and durum wheat unchanged over the period at 15.7 million tonnes.
Under a mid-way scenario, ethanol use of wheat would rise moderately, assuming the EU adjusts its renewable energy directive, giving scope for a slight rise in EU wheat exports to 17.3 million tonnes in 2016/17.
Another scenario would see wheat use in bio fuel stagnate, allowing a sharper rise in exports, but this was unlikely given the EU's renewable energy targets, Strategie Grains said.
Ethanol uses cereals like wheat and corn, as well as sugar beet or cane, as feed stocks. Biodiesel, meanwhile, processes vegetable oils such as palm and rapeseed oil.
The EU would still face a challenge in raising shipments in the face of the growing presence of exporters from the Black Sea region, the analyst said. France, which is not expected to use much wheat in ethanol, would export about 10 million tonnes of soft wheat in 2016/17, close to current levels, but may be forced to develop new export markets if Black Sea origins were to penetrate traditional French destinations in North and West Africa, it said.
Strategie Grains projects soft wheat exports from Black Sea producers Russia, Ukraine and Kazakhstan reaching a combined 37 million tonnes in 2016/17, up more than half from an average 22 million per year over 2005-10.
French wheat exports outside the EU are concentrated heavily in North and West Africa, and any changes to tender terms by major importers could expose France to more competition, French grain exporters union Synacomex said.
"If tomorrow Algeria's (state grain agency) OAIC changes its terms and accepts higher insect levels we could lose a vital outlet for our wheat," Synacomex's head Jean-Michel Aspar said.
"If Egypt changes again its minimum protein requirement or maximum moisture level, we'll lose that market as well," he added, referring to Egyptian state buyer GASC.
To withstand competition from Black Sea producers and win new markets, French wheat needed to raise its quality, he said.
"French wheat doesn't have a strong image. German wheat is like a BMW car while French wheat is a Renault. We need to gain a percentage point in protein in the next five years and raise gluten content," he said, referring to key quality criteria applied by importers of milling wheat.