Posted on September, 26, 2022 at 08:55 am
EU wheat exports have started strong with July-August exports over 6 million tons cumulatively. Supported by ample beginning stocks, exports are expected to rise to the highest in 3 years, despite a smaller crop. The robust monthly shipment pace is expected to wane as competition increases, both domestically and internationally.
The primary use for wheat in the EU is for food, which has been rising as COVID-related restrictions subside and tourism rebounds. In addition, an influx of refugees from Ukraine has boosted consumption demand higher. After food, the next largest volume for wheat is for animal feed use, which remains robust.
Over the past decade, corn has overtaken wheat as the predominant feed grain, sourced from domestic production and imports. This year, the EU corn crop has been affected by adverse weather conditions and the crop size is expected to be down 17 percent from the prior year. With less corn production, the EU is expected to import more.
However, imports are forecast only marginally higher given tight global corn supplies, resulting in less corn feed use. Likewise, the EU barley crop is also expected to be lower, leading to less barley feeding. Currently, EU wheat prices are at a discount to corn and barley, making it an attractive feed option.
Despite the strong early-season pace, monthly shipments of EU wheats are expected to subside as more Black Sea wheat becomes available as the harvest is completed. Ukraine and Russia are the largest direct competitors to the EU, particularly in Africa and the Middle East. Ukraine wheat has begun to move through the grain corridor, with over 500,000 tons shipped in the past month.
Meanwhile, Russia is completing its harvest of its record grain crop and still has ample carryin stocks. Russia is forecast to be the largest global exporter and even with record exports will still have abundant ending stocks. As a result, Russia has the most competitive export quotes globally (see page 4) and is likely to see the pace of sales and shipments rise in the months to come.
While the EU is set to be the second largest exporter, demand from the domestic market will take precedence over exports as the year progresses.
Russia is set to have record supplies in 2022/23, enabling the country to soar to record exports. Production is up more than 20 percent from last year on much improved weather conditions and the country has large carryin stocks.
The restrictive trade policies in place during the second half of the 2021/22 marketing year prompted larger on- and off-farm stockholding, leading to large carryin stocks from which to ship. Russia implemented an export quota of 8 million tons between February 15 and June 30, the end of the marketing year.
So far in 2022/23, exports have begun to increase. However, continued challenges in booking sales and export logistics, and the continued government-imposed export tax have resulted in a more modest start of the export campaign.
Over the course of the year, Russia is expected to increase monthly shipments to offset lower exportable supplies from its two main competitors. The EU has a smaller wheat crop and will also use more wheat domestically for feed due to lower corn production.
Ukraine also has a smaller crop and faces continued logistical constraints on its exports. While the grain corridor is currently open, there are upcoming discussions regarding its renewal. As the largest exporter and with a bumper crop, Russia seeks to expand its markets overseas, by boosting exports and continuing to open new markets such as Algeria.
Source: AgFax