Rising European wheat prices reduce exports from the EU and boost supplies from Russia

Source:  GrainTrade

Sharp rise in prices for European wheat over the past month, caused by forecasts of a decrease in the harvest in Russia in 2024, led to a slowdown in exports from the EU and increased supplies of Russian wheat.

September wheat futures on Euronex in Paris in may rose by 14.3% to 259,25 €/t or 280,7 $/t, and in General, since March 1 rose by 29%.

According to the European Commission (released with a 3-week delay), wheat exports from the EU for April 27-May 3 amounted to only 41 thsd tonnes, and in total in 2023/24 MY reached 26.26 mln tonnes, down 4% from last year’s pace. As a reminder, in the May report, USDA left the forecast of wheat exports from the EU at 35 mln tonnes (which will be the same as in the previous season). However, it is unlikely to be achieved in the two months remaining until the end of the season, so wheat stocks in the EU will increase.

SovEcon experts believe that in May Russia will update the record for wheat exports this month, having shipped 4.1 million tons, which is significantly higher than the 5-year average for this month of 1.5 million tons. According to the Russian Grain Union, wheat exports for May 1-20 amounted to 3.4 mln tonnes, and in total in 2023/24 MY reached 50.5 mln tonnes (including the EAEU countries), while Russian analysts estimate it at 52 mln tonnes, and USDA raised its forecast to 53.5 mln tonnes, compared to 48.1 mln tonnes in 2022/23 MY.

Prices for Russian wheat with 12.5% protein and delivery in May-June are 235-238 USD/t FOB, which is 20-21 USD/t lower than for German and French wheat, which increases the competitiveness of Russian grain. The difference between the prices of Russian and European wheat has reached its highest level since the end of July 2023, when the grain deal was canceled.

Amid weather anomalies in the center and South of Russia, SovEcon lowered its forecast for wheat production by 7.2 to 85.7 million tons in three weeks, which led to higher prices. The increase in prices on the eve of the new season will reduce demand from buyers until there is an understanding of the total global wheat harvest.

Following the prices of European and Russian wheat, the purchase prices in Ukraine for wheat with 11.5-12.5% protein increased to 200-210 USD/t with delivery to the port, which is equivalent to 215-230 USD/t FOB. the Share of milling wheat in the harvest 2023/24 MG decreased due to heavy rains, so its reserves are quite low. In the new season, the wheat production is expected to decrease due to the reduction of sowing areas and the lack of precipitation in April-May, which will contribute to further price growth.

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