European wheat market: French wheat prices accelerated as export competition intensified

The decline in French wheat spot prices accelerated in the 9th week of 2023, mainly as competition in export markets remained intense. Markets continued to focus on the prospect of a Black Sea export deal.

As of Thursday, the price of first-class French wheat for delivery at the port of Rouen was $301 a tonne, down $8 from a week ago. The price range over the past 52 weeks has been $299 to $472 a tonne. The price of second-class wheat in Argentina's Rio Grande on Thursday was $358 a ton, unchanged from a week earlier; U.S. No.2 hard red winter wheat at $376 / ton, down $18; Us No. 2 soft red winter wheat was at $307 a ton, down $13.

On the Euronext exchange in Paris, wheat futures for May delivery, the most actively traded contract on Friday, closed at 275.25 euros a tonne, down 1.7 percent from a week ago. Chicago wheat futures fell 1.8 per cent over the same period.

Russian wheat is likely to take the lion's share of a 790,000 tonne wheat tender in Turkey on Tuesday, squeezing EU export prospects. Although the exact source of Turkish purchases is unclear, Russia, Ukraine and other Black Sea wheat are believed to dominate sales. German traders say Russian wheat has repeatedly been sold in Turkish tenders at prices below $310 a tonne, which is very cheap. In addition, some Ukrainian wheat was sold to Turkey for around $308 a ton.

The European Commission has slashed its forecast for EU wheat exports because of strong competition from the Black Sea. In its supply and demand data Bureau released on February 23rd, the European Commission forecast EU27 wheat exports (to third countries) of 32 million tonnes in 2022/23, down 2 million tonnes from its January forecast of 34 million tonnes, but still up from 29.255 million tonnes last year. It also cut EU wheat production to 125.96m tonnes this month, down from 126.38m in January and 129.008m a year earlier. Eu wheat feed was unchanged at 43 million tonnes, up from 39.8 million tonnes a year earlier; Imports from third countries were revised up by 500,000 tonnes to 6.5 million tonnes, up from 2.82 million tonnes a year earlier. Ending inventories are expected to reach 17.107 million tons, up from the 15.374 million tons forecast in January and 11 percent higher than the 15.411 million tons in the previous year.

On February 15, the French Agricultural agency (FranceAgriMer) lowered its 2020/23 export outlook for French soft wheat, with stocks revised up accordingly. French soft wheat exports to third countries (outside the EU) in 2020/23 are forecast at 10.45 million tonnes, 150,000 tonnes lower than the 10.6 million tonnes forecast on 9 January. Two months ago, FranceAgriMer raised French wheat exports to third countries because of strong sales to North Africa. But traders report that demand for French wheat exports has slowed since January. FranceAgriMer also cut France's soft wheat exports to the rest of the European Union to 6.59 million tonnes in 2020/23, down 50,000 tonnes from an earlier estimate of 6.64 million tonnes. 2020/23 French soft wheat ending stocks increased to 2.46 million tonnes, higher than last month's forecast of 2.33 million tonnes, but 11 per cent lower year-on-year.

On Feb. 9, Strategic Grains forecast soft wheat production for the EU27 in 2023/24 at 129.7 million tons, up from its January forecast of 129.3 million tons and more than 3 percent higher than 2022/23's 125.6 million tons. Strategic Grains cut its 202/23 EU soft wheat export forecast by 1.7 million tonnes to 30.1 million tonnes; It also raised its forecast for wheat exports in 2023/24 by 400,000 tonnes to 30.6 million tonnes.

On February 8, the US Department of Agriculture left EU 2020/23 wheat production unchanged at 134.7 million tonnes, down from 138.22 million tonnes the previous year; Exports further revised up to 37 mt (last month forecast 36.5 mt vs. 31.92 mt last year); Imports were revised up to 9 million tons (8 million tons last month vs. 4.61 million tons last year); Ending inventories revised lower to 11.06 million tons (11.31 million tons last month vs. 13.36 million tons last year).

This week the European Commission resumed publishing grain trade data. As of February 26, EU27 wheat exports in 2020/23 (July-June) were about 20.5 million tonnes, compared with 19.1 million tonnes in the same period last year. The top buyer was Morocco (3.07 million tons, or 15.0 percent). Eu wheat imports so far this year were 5.82 million tonnes, compared with 1.91 million tonnes in the same period last year. Ukraine was the top supplier (3.86 million tonnes, or 66.2 per cent). Wheat exports from the 27 EU countries in 2021/22 were 27.47 million tons, up 6.8% year on year; Imports of 2.46 million tons increased by 21.5% year on year.

At the port of Rouen, France's top wheat export port, 74,614 tonnes of wheat were exported in the week ending March 1, up 122% from the previous week, mostly to West Africa, port operator Haropa said.

Investment funds and financial institutions held 43,423 lots of net short orders in the Euronext wheat futures and options market as of Feb. 24, up from 9,344 lots the previous week.

On Friday, the euro closed at $1.0645, compared with $1.0565 a week ago.

Note: 1 euro is equal to $1.0645