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Strategie Grains cuts hopes for EU wheat export revival in 2019-20

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Strategie Grains slashed its forecast for the revival in European Union soft wheat exports next season, citing increased competition from Ukraine – although the Black Sea country’s harvest prospects have become a matter of market debate.

 

The influential analysis group cut by 1.1m tonnes to 22.1m tonnes its forecast for EU soft wheat exports in 2019-20, as starts next month, halving the recovery expected from the 21.0m tonnes in shipments expected this season.

 

The downgrade to the 2019-20 export figure, which took it further below the European Commission’s 25.49m-tonne forecast, came as Strategie Grains trimmed its forecast for the EU’s soft wheat harvest this year also by 1.1m tonnes, to 142.8m tonnes.

 

The Paris-based group, in the weakened production outlook, cited dry conditions in central and eastern Europe, adding that “dry conditions in the Baltic countries are currently causing concern”.

 

‘Outlook has worsened’

However, a harvest at this level would remain 15.7m tonnes above the 2018 level, and Strategie Grains stressed instead in its export revision enhanced prospects for competition on export markets.

 

The export outlook “has actually worsened since last month thanks to the new increase for Ukraine’s exportable surplus”, the analysis group said, highlighting that “Ukrainian wheat is a main competitor of EU wheat.

 

"At current prices, France would export less wheat than in 2018-19,” it said, although foreseeing that the northern EU countries of Germany, Lithuania, Latvia “would perform solidly”, assuming current harvest expectations are met.

 

‘Favourable weather’

The sanguine expectations for Ukraine wheat come two days after the US Department of Agriculture, in its much-watched Wasde briefing, raised by 1.0m tonnes to 30.0m tonnes its forecast for Ukraine’s wheat harvest this year.

 

The USDA, which also raised its 2019-20 Ukraine wheat export forecast by 500,000 tonnes to 19.5m tonnes, said it had lifted yield expectations on “favourable weather in the Steppe Zone, which accounts for about half of Ukraine’s production”.

 

Satellite imagery “shows favourable conditions compared to last year”, and an “above-average crop”.

 

Crop downgrades

However, not all commentators are so upbeat, with Proagro on Thursday downgrading its forecast for the Ukraine wheat harvest by some 200,000 tonnes to 28.06m tonnes, factoring in a weaker area estimate.

 

And Refinitiv last week cut its forecast for the harvest by 620,000 tonnes to 26.58m tonnes, citing “recent and expected warm weather”.

 

Maxar forecasts that “hot and dry weather is expected to continue across nearly all of the” Black Sea region over the next 10 days.

 

“This will lead to further soil moisture declines, especially in eastern Ukraine and southern Russia,” although Maxar sees this “stressing corn and sunflower growth”, with winter wheat crops largely through “the most moisture-critical stages of development across most of Ukraine”.

 

Gasc tenders

Strategie Grains’ comments also follow the first tender by Egypt’s Gasc, earlier this week, for wheat for delivery in 2019-20, which highlighted the competitiveness of Black Sea wheat prices.

 

Gasc paid $197.49 a tonne for a cargo of Romanian wheat, and $196.90 a tonne for a cargo of Russian wheat, with both prices excluding freight.

 

At the previous tender, two months ago, Gasc paid an average of $221 a tonne, for Romanian and Ukrainian wheat.

 

Only Romanian and Russian wheat was offered to this week’s tender.

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