The European Union wheat glut, which drove Paris futures to near-six year lows, is an approaching an end, Strategie Grains said, seeing enhanced demand outweighing improved harvest prospects for this year.
The analysis group cut again its forecast for EU soft wheat stocks at the close of 2015-16, in June, this time by 1.0m tonnes to 15.6m tonnes.
Strategie Grains – which had six months ago forecast soft wheat inventories ending this season at nearly 20m tonnes – cited the “export competitiveness of EU wheat”, in particular supplies from France, the bloc’s top producer and shipper of the grain, which had boosted trade prospects.
While rating stocks of 15.6m tonnes “still very heavy”, the downgrade, plus an increase in expectations for feed use of wheat ahead, fed through into a cut of 1.2m tonnes to 13.2m tonnes in the forecast for inventories at the close of 2016-17.
That would signal a “return to near-balance” in EU wheat supply and demand next season, the Paris-based group said.
Prices to rise?
The dynamics would appear to imply more bullish conditions for wheat prices, which on the Paris futures exchange last month touched E140.25 a tonne, the lowest on a front contract basis since July 2010.
Strategie Grains indeed held out the prospect for some revival in international wheat prices early next year as ample inventories are eroded, although adding that the scope for this recovery will depend on actual harvest results.
Paris wheat futures for May stood down 0.5% at E154.50 a tonne in afternoon deals on Thursday.
Strategie Grains vs European Commission
The group’s stocks forecasts are less generous than those issued by European Commission officials, which peg inventories at the close of this season at 17.7m tonnes – and forecast a rise next season, to 17.9m tonnes.
The commission data use a lower forecast too for the EU soft wheat harvest this year, seeing it at 142.4m tonnes compared with an estimate of 144.7m tonnes from Strategie Grains, representing an upgrade of 1.1m tonnes.
Winter cereals crops were, as of last week, “in very good condition… with very promising yield outlooks in France, the UK, Germany, central Europe and south east Europe,” Strategie Grains said.
However, the analysis group was upbeat on expectations for wheat use in livestock feed, upping its estimate for 2016-17 consumption by 1.4m tonnes thanks to the relative cheapness in prices, compared with corn.
And on exports, its forecast for volumes of 29.5m tonnes this season was, while down on last season’s record high of 33.3m tonnes, was above the 29.0m-tonne figure that the commission has factored in.
Strategie Grains highlighted the “export competitiveness of EU wheat”, especially of milling supplies from France, the bloc’s top producer and shipper, and of feed wheat offers from the UK.
FranceAgriMer, the official French crop bureau, on Wednesday raised by 460,000 tonnes to 18.7m tonnes its forecast for the country’s wheat exports this season, reducing the shortfall compared with the 19.1m tonnes achieved in 2014-15.
French wheat shipments outside the EU, upgraded by 500,000 tonnes to 11.5m tonnes, were now seen narrowly exceeding those last season.
The upgrade followed upbeat data for shipments in February, helped by strong sales to Morocco.
(Source – http://www.agrimoney.com/news/eu-wheat-glut-to-end-in-2016-17-despite-improved-crop-prospects–9494.html)