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US officials cautious on prospects for EU wheat export revival

European Union wheat exports will not recover as strongly in 2017-18 as some commentators imagine, despite better harvest prospects – although shipments this season will beat expectations, US officials said.

A report from US Department of Agriculture bureaux - offering the first glimpse of what the world's most important agricultural commodity forecaster is thinking on next season's EU grains balance sheet from – pegged the bloc's overall wheat exports at 29.0m tonnes.

That would remain well below the levels, as high as 35.4m tonnes in 2014-15, which drove the EU to top rank among world wheat exporters – before last year's disastrous French harvest, hurt by summer rains, dented supplies in the bloc's top producing country.

The forecast is also below the 30.4m-tonne figure that the European Commission sees the EU achieving in wheat exports next season, which starts in July.

The International Grains Council forecasts EU wheat exports recovering in 2017-18 to 30.0m tonnes.

'Lower carry-in stocks'

The USDA bureaux's estimate for EU wheat output in the forthcoming harvest, at 151.7m tonnes including durum, was in fact a touch higher than the IGC and European Commission forecasts, although below a 153.2m-tonne estimate from industry group Coceral.

Forecasts for EU all-wheat exports in 2017-18, and (2016-17)

European Commission: 30.41m tonnes, (25.476m tonnes)

IGC: 30.0m tonnes, (25.2m tonnes)

USDA bureaux: 29.0m tonnes, (27.0m tonnes)

However, the bureaux was more downbeat on supplies carried over from this season – a reflection in part of ideas that EU exports will not fall as far as other commentators believe.

The bureau in their report flagged a "considerable tightening" in EU stocks this season, a fact which would be felt "heavily on the 2017-18 balance, even with production forecast at 151.7m tonnes".

France vs rest of EU

While acknowledging that the EU will in 2016-17 wheat exports "lose some share" of trade to the key North African and Middle Eastern markets, the bureaux said that French volumes would remain strong enough for it to remain the bloc's top shipper.

And "exports are forecast up in Germany, Romania and Bulgaria and, to a lesser extent, Poland and Italy," the bureaux's report said.

"Germany reports a notable increase in exports to Algeria, Saudi Arabia and Turkey."

Romanian exports, meanwhile, had been buoyed by "an excellent wheat crop" last year, while demand for Bulgarian and Polish wheat has been helped by a harvest last year high in quality and quantity.

Lower-than-expected fall

The bureaux forecast EU wheats exports in 2016-17 at 27.0m tonnes – a drop of 7.7m tonnes year on year, but well above the USDA's official estimate of 25.5m tonnes.

Forecasts for EU all-wheat production, 2017-18

Coceral: 153.232m tonnes

Strategie Grains: 152.8m tonnes

USDA bureaux: 151.7m tonnes

European Commission: 151.129m tonnes

IGC: 150.3m tonnes

"Overall, EU wheat exports are currently forecast to… decline nearly 8m tonnes on a year earlier, but not as much of a reduction as previously forecast."

The estimate is also well above figures from other commentators, including Strategie Grains, which foresees a sub-25m-tonne result.

'Sentiment generally good'

On their estimate for EU wheat production of 151.7m tonnes, the bureaux said that the figure reflected ideas of a harvested area of 26.3m hectares.

That would be down 700,000 hectares year on year, and below the 26.8m hectares recorded in 2015, when the EU produced a record wheat harvest of 160.5m tonnes.

Conditions had been largely benign, although low winter temperatures had caused some crop damage in the Czech Republic and Hungary, and likely in the Baltic states too.

"In summary, the sentiment is generally good but with the EU entering a critical yield and quality determining weather period, producers are cautious to assume a positive outlook given the French experience in 2016-17."

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