It will be difficult for Romania and Bulgaria to turn large initial grain stocks into significant exports in 23/24 MY

Romania and Bulgaria could struggle to translate high beginning stocks into high exports in the 2023-24 marketing year (July-June) due to low demand from the region’s typical buyers, according to market participants at an industry conference EURO GRAIN HUB Exchange & Forum in Bucharest on 28 April.

Romania and Bulgaria are both expecting wheat production to rise above average in 2023, but are also set to carry over unusually high volumes of old crop into the new 2023-24 season.

Over a million tonnes of Romania’s 2022 crop remains in the country, Alexandru Neagu, trader at Cargill Romania, said at the conference. The country’s monthly exports could rise in June based on recent export deals, Neagu said, but other market participants reported little interest in Romanian old-crop wheat at present. Grain and oilseed storage facilities at Romania’s port of Constanta are full, traders and port operators said, with Romanian farmers also holding back a proportion of their 2022 crop.

Meanwhile, neighbouring Bulgaria is set to carry over two million tonnes of old-crop wheat into the new 2023-24 marketing year, or around 10 times its typical carryover volume, according to Stoyan Valev, head of trading and storage firm Grainstore Bulgaria. Most of these stocks are held on farms, with producers expecting global prices to rebound on uncertainty over Ukraine’s grain corridor.

Valev cited low affordability and a shortage of hard currency among Bulgaria’s key markets in the Middle East and North Africa, and a loss in coaster vessel business. As a result, the majority of Bulgaria’s wheat exports this marketing year have been been sold via international traders via state purchase tenders, Valev said, including to Tunisia’s ODC and Algeria’s OAIC. Bulgaria increased its shipments to Algeria by four times on the year to became one of Algeria’s top three suppliers in 2022-23, GTT data show.

No obvious outlets for strong harvests arriving in 2023

There has so far been little forward selling at Constanta/Varna/Burgas (CVB) ports, traders said. This is in contrast to the relatively liquid French market where wheat has been readily trading for July-September shipments on an fob Rouen and La Pallice basis in recent weeks.

Bulgaria is expecting to harvest a record wheat crop this year thanks to favourable weather and high yields, which should offset higher input costs. But only around 200,000-300,000t of this new-crop wheat has so far sold, compared with around 1.5mn t at the same point in a typical year, Valev said.

Neagu meanwhile expects Romania’s wheat production to reach around 10.5mn t in 2023, in line with Agritel’s April forecast of 10.35mn t and at the mid-low end of general market expectations ranging to as high as 12mn t.

Both speakers cited competition from the Black Sea and the Balkans for the new marketing year. Romanian crop is often first to the market in its region.

Logistics to slow Romania’s response to any rebound in demand

Whether Constanta port is able to handle higher exports of Romanian grain in 2023-24 depends on Ukraine’s access to other Black Sea ports. Constanta’s theoretical capacity at 30mn t of grain and oilseed shipments per year — based on turnover in port storage capacity and the growing use of floating cranes — would realistically amount to 25-27mn t/year given variable weather conditions, pace of barge arrivals and vessel availability, Neagu said. A functioning grain corridor from Ukraine’s Pivdennyi/Odesa/Chornomorsk (POC) ports could keep the volume of grains and oilseeds flowing through Constanta at a manageable 25mn t/year, as opposed to the 28-29mn t expected if Ukraine’s POC export route were to close.

In that case, capacity would increasingly depend on the Danube river ports such as Reni, which has grown to accommodate extra flows of grain since Ukraine temporarily lost access to its deep-sea export routes in February 2022. Logistics at Reni have improved further in recent weeks as barges that were attracted to the port by high freight rates earlier in the year have since stayed in the region, Neagu said.

Tags: Bulgaria, export, grain, Romania, Algeria, wheat, supply and demand balance, Tunisia, crop forecast, Ukraine