An unexpected surge in west European wheat exports in recent weeks has supported prices during bumper harvests in many countries, analysts and traders said on Friday. But they said export demand for EU wheat could soon end as Russia's huge crop this year is offered on world markets.
The EU's wheat harvest this summer is likely to jump 20 percent on the year to 133.9 million tonnes, French analyst Strategie Grains forecasts, and observers had expected prices to fall more sharply as farmers sold the big new crop. But prices in many regions have not fallen as strongly as many had anticipated and are even unchanged in some areas.
A sudden fall of the euro to six-month lows against the dollar, coupled with harvest problems in the EU's arch wheat export rivals Russia and Ukraine, have generated new export demand. "Prices have stabilised in the EU internal market in past weeks because of good export demand for better qualities," said Germany's largest grain export house, Toepfer International, in a report.
Oliver Balkhausen, grains analyst with German commodity analysts F.O. Licht, said: "It seems that strong export demand is playing a role in supporting EU wheat prices and that this effect is greater than previously thought." "It would have been expected that prices would fall more substantially in the face of large harvests this summer."
A French grain trader added: "Structurally the market should have fallen but healthy exports helped maintain prices." In Germany, standard bread wheat prices in the key Hamburg market have remained around 200 euros a tonne in August although a wheat harvest 24 percent larger than last year is pouring on to the market.
"Strong export demand has provided welcome new demand which has soaked up much of the harvest pressure," one German trader said. "Prices in south and central Germany, more dependent on domestic demand that exports, are around 20 euros lower than in seaports." "Past business which people thought would automatically go to the Black Sea region has been transferred to France and Germany."
Both Ukraine and Russia are exporting large volumes of feed wheat and this is coking up railways and ports. Two months into the current export season, EU wheat exports totalled 2.8 million tonnes, more than double the 1.3 million tonnes seen a year earlier, the EU Commission said.
"We are seeing a strong trend, which is needed given high availability for export," one French trader said. The UK is expected to have much more wheat to export this year after a large crop and should compete with France, the United States and Black Sea producers in North Africa.
Source: Reuters
