European Union wheat prices face ahead pressure despite declining prospects for this year’s harvest, Strategie Grains said – citing the prospect of a further recovery in Russian output.
The influential analysis group trimmed again its forecast for this year’s European Union soft wheat crop, the world’s biggest, this time by 1.2m tonnes to 138.6m tonnes.
The downgrade - which follows a cut by France to its winter wheat sowings estimate, after persistent wetness which has undermined UK plantings too – left the harvest estimate further adrift of last year’s total of 146.0m tonnes, besides the 2015 record of nearly 152m tonnes.
Nonetheless, Strategie Grains was cautious on prospects for EU prices for 2020-21, flagging the threat of greater Russian competition in export markets.
‘Harvest clearance pressure’
"Despite the smaller projected [EU] harvest and the weak balance sheet position, we envisage that European 2020 crop wheat prices will continue to fall through the summer and autumn,” the Paris-based group said.
Prices “will be unable to withstand harvest clearance pressure emanating from Russia this summer”.
Forecasters are predicting a strong Russian wheat harvest this year after a benign winter, which has presented little in the way of winterkill threat to autumn-seeded crops.
Ikar has pegged this year’s harvest at 79.5m tonnes, and SovEcon at 83m-87m tonnes, up from last year’s result of some 74m tonnes, and the 72m tonnes produced in 2018, and potentially challenging the record 86.0m tonnes recorded for 2017.
Strategie Grains on Thursday pegged this year’s Russian harvest at 82m tonnes.
The competition from Russia will see EU soft exports drop to 26.2m tonnes in 2020-21, as starts in July, from the 30.6m tonnes expected for this season, Strategie Grains said.
The 2019-20 EU export forecast was upgraded by 100,000 tonnes from last month, after a strong performance soft far this season, in which shipments are running 73% above year-ago levels, at 17.54m tonnes, according to latest European Commission data.
Strategie Grains said that EU wheat prices could also face pressure from large world production of barley and of corn, boosting competition in feed markets.
However, there was the potential for a rebound next winter, once the initial rush of Russian shipments is passed, and with inventories in major exporters seen remaining relatively thin.