EU Rumor: China Eyes Large Volume of French Wheat
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EU Wheat area in MY 2022/23 has been slightly adjusted upwards compared to previous estimates due to higher than anticipated plantings, notably in Poland, Spain, and Italy. EU Wheat crop is projected to reach 134.8 MMT, but still down from MY 2021/22 levels. Production exceeded July forecasts in most western European countries such as France, Belgium, Germany as well as Poland, and Bulgaria. However, the drought and heat waves that hit most of Europe in the summer of 2022 took a toll on Wheat yields, which were generally below average, and the harvest started several weeks early. Yield variation was also significant between regions with superficial soils, where the Wheat yields were much lower, and areas with deeper soils, where moisture prevented yield losses.
The Wheat crop quality is reportedly generally good in most European Wheat-producing countries. The high temperatures last July and August did not significantly impact the specific weight, while protein levels are on par or slightly below the average. EU Wheat feed uses expected to decline in MY 2022/23, given the overall feed production decline, along with the increased competitiveness of corn and barley in the feed formula. In most of the EU, farmers are lowering feed purchases to reduce their operating costs. Additionally, many are decapitalizing their cattle and pork herd as consumption of meat and dairy product is sluggish due to high inflation.
In the Netherlands and Belgium, stringent environmental regulations are also responsible for lower animal production. Even poultry production is down in most EU Member States because of Highly Pathogenic Avian Influenza (HPAI) outbreaks. The smaller EU corn crop should increase Wheat imports in MY 2022/23. Ukraine will be a major supplier of Wheat to the EU along with the United Kingdom, which has a sizeable crop. Imports from Ukraine will be by road or train to neighboring countries such as Poland, Romania, and Hungary and vessels to Spain.
Ukraine Wheat exports to Spain, mainly intended for the feed market, are dependent on the continuation of the UN’s Black Sea Grain Initiative agreement in place. Italy is projected to purchase more durum Wheat from Canada as the Canadian durum crop in MY 2022/23 returned to average volumes. According to AgFlow data, Spain imported tons of Wheat (0.6 million tons) in the EU in Jan-Feb 2023, followed by Italy (0.2 million tons) and the Netherlands (0.14 million tons).
Despite a lower crop, EU Wheat exports are anticipated to increase, benefiting from lower competition from Black Sea Origin Wheat (Ukraine and Russia) and potentially lower competition due to more minor crops in Argentina and Australia. EU Wheat prices have recently decreased, making it more competitive in North Africa and Asia, a trend enhanced by the weakness of the Euro. There are persistent rumors that China is considering purchasing a significant amount of French Wheat (well above the 2.2 MMT already purchased in MY 2021/22). Some market analysts even fear that France may lack physical Wheat stocks available for exports in the second half of MY 2022/23 if the pace of export contracts continues at the level of the first half of the marketing year.
EU Wheat Export
France exported a record volume of Wheat in the Q1 of MY 2022/23 (July-September). Poland is also expected to sharply increase its MY 2022/23 exports, supported by the weakness of the Polish Zloty. Wheat exports from the Baltic States are also likely to grow. EU FSI Wheat uses are expected to decline slightly in MY 2022/23, both in the milling sector, the starch sector, and the biofuel sector. High energy prices are negatively impacting the industries’ margins, and consumption is driven down by inflation. Wheat ending stocks are expected to increase over Post previous estimates but are projected to remain below MY 2021/22 levels.
Other sources: USDA
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