EU, Russia expect big wheat crops

The world’s top two wheat exporters will likely have more crop to ship in 2022-23, says an analyst.

The European Commission forecasts that the European Union will export a record 40 million tonnes of wheat next crop year.

Bilal Muftuoglu, analyst with Argus Media, said the previous record was 36 million tonnes, so that would be a massive export program.

“It will be interesting to see if the commission is being too optimistic or not,” he said during his presentation at Alberta Wheat Commission’s spring market update webinar.

The EU put the brakes on 2021-22 exports following the outbreak of war in Ukraine, so that is expected to result in higher-than-usual carryover of the crop.

Domestic consumption is also down due to the EU’s shrinking hog herd in response to disappointing margins in the livestock sector.

The EU’s new crop is off to a good start with FranceAgriMer reporting that 92 percent of France’s soft wheat rated good to excellent while only one percent is rated poor.

German farm group DRV is forecasting 22.7 million tonnes of German wheat production, a 6.2 percent increase over last year. There has been heavy rainfall in April.

Muftuoglu said reports that farmers in Europe are cutting back on nitrogen fertilizer application due to a shortage are misleading.

He said farmers are “well stocked” and use will be on par with last year in most EU countries, although he acknowledged availability could be a problem the following year.

Russia is the other player that could see a surge in exports. It is looking at a bumper crop with Argus forecasting 85 million tonnes of production in 2022-23, up from 75 million tonnes this year.

That number could climb to 90 million tonnes if conditions stay as ideal as they are now.

Russia will enter the year with very high stocks and could export more than 40 million tonnes of wheat next year, up from an estimated 33 million tonnes in 2021-22.

Those numbers are in line with SovEcon’s most recent forecast calling for a record 87.4 million tonnes of production and 41 million tonnes of exports.

“The question is, can they really export it and to which countries?” said Muftuoglu.

International sanctions have created some payment problems but buyers like Turkey are adapting and accepting payments in rubles. Egypt and Iran are also used to using rubles to buy grain from Russia.

Of course, all the export gains in Russia and the EU could be more than offset by the losses in the U.S. and Ukraine.

The U.S. winter wheat crop has the worst ratings in 30 years while Ukraine’s main farm group is forecasting 18.2 million tonnes of Ukrainian wheat production in 2022-23, a 15-million tonne drop from the current crop year.

Luckily, Australia recently harvested a record 36.3 million tonnes of wheat, although it is having some logistical issues getting it to market.

Muftuoglu said Australia’s exports for December through February are only up 27 percent year-over-year compared to a 91 percent increase for Argentina.

Logistical constraints are preventing Australia from shipping more than three million tonnes per month.

Buyers like Japan have agreed to accept much later shipments of Australian wheat because they know they can’t get what they need right now.

The result is that Australia’s export program will stay strong longer than usual.

India and Brazil are two other countries that are providing immediate relief to the wheat market in regions like Southeast Asia and North Africa.

India’s shipping program has been maxed out at one million tonnes per month in the January through March period, although it is mostly feed wheat.

The country is expected to export 10 million tonnes of wheat in 2022-23, which would be the maximum it can ship.

Brazil exported 2.78 million tonnes by the end of March, covering some milling wheat demand from countries like Indonesia, Saudi Arabia, Vietnam and Morocco.

Muftuoglu said wheat demand continues to be robust. Many countries in the Middle East and North Africa can afford higher wheat prices because they are exporters of gas and oil, which have also risen in price.

China’s wheat crop got off to a poor start but prospects have improved. The government rates 86 percent of the crop as fair to good versus 97 percent last year.

The big question is whether China will resume its stock building program in 2022-23 and how much volume will come from Russia, which has a new phytosanitary agreement with China.

Tags: European Commission, exporters, forecast, U.S., Ukraine, export, Brazil, EU, wheat, India