Strategie Grains issued some rare bullish revisions to European Union wheat estimates, lifting its forecast for the bloc’s exports this season, and forecasting 2016 will bring the first output decline in four years.
However, prices eased nonetheless, with the group flagging unusually large EU inventories nonetheless.
The influential analysis group, in its first forecast for soft wheat output in the world’s biggest producer next year, pegged it at 143.6m tonnes.
That would represent a decline of 6.4m tonnes year on year, and the first drop since 2012.
Strategie Grains saw prospects undermined both by a small drop in sowings – seen falling for a second successive year, down some 100,000 hectares at 24.0m hectares – and yield prospects.
Winners and losers
The Paris-based group pencilled in an average EU soft wheat yield of 6.0 tonnes per hectare, down from the bumper 6.2 tonnes per hectare achieved this year.
Indeed, output was seen falling most sharply in some of the countries which performed notably well this year, including France, the EU’s top-ranked grower, which recorded its first harvest above 40m tonnes, and the third-ranked UK, which for the first time achieved two successive crop above 16m tonnes.
Second-ranked Germany, Romania, a key wheat exporter, Ireland, the Baltic States and the Czech Republic were also forecast to see production declines, although Finland, Poland and Spain would perform better, to the combined tune of 1.2m tonnes.
Strategie Grains also raised its forecast for EU soft wheat exports this season, despite a drop in the pace of shipments so far this season of 22% year on year.
The revised estimate of 27.6m tonnes, an upgrade of 800,000 tonnes, would represent a decline of a more modest 16% year on year.
However, the group highlighted the boost from wheat price declines relative weakness in the euro to shipments from eurozone countries, notably France, the EU’s top exporter, which has won some high profile orders from unusual buyers.
“In addition to higher volumes to North Africa, current prices have enabled shipments to more exotic destinations,” Strategie Grains said, citing in particular Mexico, on the doorstep of the US, and Indonesia.
The ability of wheat exporters to find buyers in distant destinations has also been helped by the weakness of shipping charges, which reduces the advantage of geographic proximity, with the Baltic Dry index this week hitting 471 points, the lowest on exchange data starting in January 1985.
‘Just about competitive’
Meanwhile, weakness in sterling has boosted prospects for exports from the UK too, with its supplies now cheaper than those of Ukraine, opening up the potential for business from Asia.
The UK has already gained market share from Ukraine in some southern EU importers, Strategie Grains said.
The comments follow customs data earlier this week showing some improvement in the country’s export performance, with shipments hitting a seven-month high of 195,324 tonnes – and exceeding import for the first time this season – helped by decent sales to Portugal and Spain.
The data were deemed “more encouraging” by traders at a major European commodities house, which estimated at 900,000-1m tonnes UK exports for 2015-16 to the end of this month, implying combined shipments of at least 400,000 tonnes during November and December.
“A number of cargoes of low grade milling wheat have been sold out of the deep water ports to Algeria and Tunisia for December and January,” the traders said.
“Meanwhile, UK feed wheat remains just about competitive for sales in coasters out of the smaller ports to European destinations.”
With Strategie Grains also cutting its forecast for EU wheat imports, reflecting weakened expectations for purchases from Ukraine, the group cut by 1.4m tonnes its forecast for EU stock wheat stocks at the close of the season, in June next year.
Nonetheless, carryout stocks, at 18.4m tonnes, would prove “very substantial”, the group added.
Paris wheat for March stood 0.3% lower at E174.50 a tonne in lunchtime deals, undermined by a decline in Chicago futures, which for March were down 0.8% at $4.83 Ѕ a bushel.
London wheat for May was 0.4% lower at £116.00 a tonne.
(Source – http://www.agrimoney.com/news/strat-grains-ups-eu-wheat-export-hopes-sees-2016-output-drop–9124.html)