European Wheat Exporters Pessimistic for New Season Amidst Russian Supply Influx

Europe: Wheat exporters in the European Union are expected to encounter a more challenging beginning to the new season. This is due to the substantial supply of cheaper Russian grain dominating international demand, which has left the EU dependent on Morocco and China to handle its export surplus. In contrast, the situation was entirely different from a year ago when buyers quickly made bookings for EU Wheat amid the disruption caused by Russia's invasion of Ukraine, which affected Black Sea trade.

As the 2023/24 season kicks off in July, Russia is poised to dominate the Wheat export market with their large stockpile from a record-breaking harvest last year. Predict that with another sizeable crop expected this year, Russia could reach unprecedented levels of exports and solidify their position as the world's top Wheat supplier. This surge in exports poses a significant threat to EU sales in the upcoming weeks and months, particularly after Algeria's recent purchase, which traders suspect was mostly sourced from Russia. This development highlights the challenges faced by the EU in the highly competitive Wheat market.

The current export price floor for Russian Wheat stands at around $230 a tonne FOB, which is still $25-$30 cheaper than western European supplies. Morocco, which overtook Algeria as the EU's primary destination in 2022/23, is expected to play a critical role in EU Wheat once again. The country has recently launched a scheme offering up to 2.5 million tonnes of subsidized Wheat imports from July to September. Moroccan importers tend to prefer EU Wheat due to its shorter shipping distances and milling quality preferences. However, even in this market, Russian Wheat may pose a threat, as traders claim that Moroccan authorities are seeking to address importers' concerns about Western financial sanctions against Moscow.

Amid competition from EU origins like Romanian and German Wheat for Moroccan sales, French supplies are comparatively expensive, making the return of Chinese demand crucial for French prospects. While there were talks this week about potential interest from Chinese buyers, like previous French barley sales, it remains uncertain whether any Wheat deals have been finalized for the upcoming season.

Although EU exports in 2023/24 may increase due to higher flows from eastern countries such as Romania, which have significant stockpiles after the influx of Ukrainian grain during wartime, experts predict that exports will gradually gain momentum due to a mixed global supply picture and ongoing war risks. The recent mutiny in Russia over the weekend is an example of this. However, presently there is still a considerable amount of Wheat waiting to be sold in the markets.