Reuters
Top News
EU, US wheat export outlooks brighten as Black Sea runs dry
Wed, Nov 28 10:02 AM EST

* Black Sea area wheat export supplies almost sold out

* West EU, U.S. wheat competitive against Russia

* EU and U.S. will still face other tough competition

By Michael Hogan

HAMBURG, Nov 28 (Reuters) - U.S. and western European global wheat export prospects are expected to pick up as rival supplies from Russia and the Black Sea region run out quickly, with exportable surpluses slashed by drought-damaged harvests, traders say.

But fresh business will still be fiercely contested by Australian and Canadian wheat in the key Middle East market, while niche producers Romania and Bulgaria are also likely to sell their remaining supplies soon.

"We are likely to see the last gasp of sales from Russia and Ukraine in the next few weeks and then more demand will be switched to the west EU, especially France, and the United States," a European trader said.

Wheat export powerhouses Russia and Ukraine both suffered enormous crop damage this summer. Russia may import grains, while Ukraine has voluntary export limits. Argentina, meanwhile, has harvest problems related to flooding.

"If Egypt issues a purchase tender for second half January shipment I would tip U.S. soft red winter to win a big part of it," a trader said.

"This week started with November Russian wheat at $360 a tonne fob, above French at $357 and U.S. Gulf soft red winter at $344 a tonne," another trader said. "I would put my money on more French and U.S. sales in coming tenders.

"But there are still cheap offers from the Black Sea at around $350 a tonne fob, German wheat has become more expensive at $373 a tonne."

Russian wheat was still offered heavily and won part of Iraq's tender on Nov. 21.

"I think the Iraq buy was some of the final supplies being sucked out of Russia and does not change the picture that Russia is now spent as an export force," a trader said.

"But there are cheap offers from smaller producers Romania and Bulgaria which may have to be sold before the west EU and U.S. move in."

Traders noted aggressive offers of Canadian and Australian wheat in recent purchase tenders.

"Both countries will give Europe and the U.S. a tough run in the next round of grain tenders," a trader said.

The west EU's main export hopes rest on France and Germany. The pace of French exports will depend on maize (corn) imports covering animal feed demand and freeing up limited wheat supply for export, traders and analysts said.

Traders see scope for France to export between 10 million and 11 million tonnes of soft wheat outside the EU in 2012/13, substantially higher than 8.4 million tonnes last season.

U.S. soft red winter wheat has become cheaper than French wheat but the higher-quality hard red winter variety preferred by some importers remained relatively expensive, even after the euro's recent rise against the dollar, traders said.

Benchmark wheat prices in Paris are trading close to their highest levels since 2008 and recent euro strength made euro zone wheat more expensive in export markets.

"The rise in the euro is a penalising factor in itself but this depends on the destinations and the quality," an export trader said.

"If you're talking about Algeria or Morocco, you have to compare yourself with U.S. hard red winter wheat, which remains expensive and against which French wheat is still competitive."

U.S. Gulf hard red wheat is around $363 a tonne fob.

A tender this week by Algeria has offered prospects of a fresh French export sale, particularly as heavy rain is troubling Argentina's harvest.

Another pull on French wheat supply could be rare demand from Iran, which is rumoured to be looking at France after already buying from Germany and the Baltic region.

Traders cited regular talk that at least one French wheat cargo could be loaded for Iran by the end of December.

France is also expected to export more to Egypt, the world's top wheat importer, this season after profiting from a tailing off in offers of Black Sea wheat, although increasingly competitive U.S. wheat is tipped to take a growing share. (Additional reporting by Valerie Parent and Gus Trompiz; editing by Veronica Brown and Keiron Henderson)


Email Article
Next Article in Top News