The European Union underlined the potential for its soft wheat exports to hit a record high in 2022-23, despite waning production hopes, even as trade talk suggested the season had indeed made a strong start.
The European Commission said that a “comfortable level” of stocks carried into the new season from 2021-22, which ended last month, “and expected sustained demand from the neighbouring countries should allow for a significant increase of EU wheat exports”.
Indeed, shipments “could reach 38m tonnes”, the commission said, which would be a record high, and up from the 30.0m tonnes estimated for last season.
With overall grain exports forecast rising by 6.8m tonnes to 54.3m tonnes in 2022-23, while imports ease below 21m tonnes, net shipments will reach an eight-year high of 33.5m tonnes, helping fill the void in world supplies created by factors such as the Ukraine war.
The EU’s improved export performance “will, if realised, help mitigating the significant concerns in relation to availability of cereals on global markets, by partially compensating for the difficulties in access to Ukrainian cereals and export restrictions put in place by some exporters”.
‘Concerns for global availability’
Indeed, the commission underlined the challenges confronting Ukraine, where the 2022 harvest is beginning without clarity on how the country, facing a marked downturn in exports, will be able to find space to store crops – with implications for 2023.
“With the start of the new cereal harvest in Ukraine and the rest of Europe, uncertainty remains about the capacity of Ukrainian farmers to properly store and to export their 2022 harvest,” the commission said.
“This already creates concerns for global availability, and could in turn also threaten the capacity of Ukrainian farmers to ensure their 2023 harvest even on a reduced area.”
While the EU was “actively facilitating new logistical routes to connect Ukraine to global trading partners,” the commission warned that “the situation remains nevertheless challenging, with for instance, long waiting time at some borders and overall a still-insufficient capacity”.
Meanwhile, demand for supplies from Russia – the top wheat exporter, which typically sets the pace in world shipments in particular at the beginning of the season – has been tested by a strong rouble, which undermines the competitiveness of shipments, and export taxes, although these were lowered last week.
The dynamics have been viewed by traders as fuelling strong 2022-23 demand for EU supplies, with talk of interest from Asian buyers, including China, besides unusually buoyant early-season demand for French origin from Gasc, grain authority for top wheat importer Egypt.
Gasc reportedly last week made a rare purchase of German wheat, 63,000 tonnes, on top of other purchases largely from the EU made from a 444,000-tonne direct deal last week, and an 815,000-tonne purchase on June 30.
Of these 1.3m tonnes in part-reported, and part-confirmed, more than 930,000 tonnes has been sourced from the EU – 520,000 tonnes from France – and less than 390,000 tonnes from Russia.
‘Could fall further’
The EU’s strong export hopes contrast with reduced expectations for grains production in the newly-started harvest, with the commission noting that “weather conditions are creating further challenges for the new harvest, with a fall in earlier forecasts for yields now foreseen.
Production hopes “could fall further if current overall adverse weather conditions, notably drought, continue.
“The continuing hot and dry weather in many parts of Europe presents the biggest risk to a good harvest.”
EU wheat output was forecast at 125.0m tonnes, down by 5.1m tonnes year on year, with total grains production at 286.4m tonnes, a drop of 7.4m tonnes from last year.