European Union wheat will compete strongly on global export markets in coming weeks despite the record strength of the euro against the dollar, European traders said on Friday.
A series of export restrictions by major rivals including Russia, Ukraine, Argentina and Kazakhstan will leave the EU as the leading supplier to the key Middle Eastern markets with the United States and possibly Canada as main rivals, traders said. “I think the US and Canada are too expensive for the Middle East so the EU will have excellent export prospects in the coming four weeks,” one trader said. The rise this week of the euro to fresh record highs against the dollar does not blunt export prospects. Grain deals are largely denominated in dollars and the euro’s strength makes EU wheat more expensive in dollar terms.
Traders said the main issue was the large volume available for immediate sale. “The outlook depends on the destination but in the Mediterranean and Middle Eastern regions there is hardly anything else available following all the export bans,” the trader said. Another trader added: “I think for nearby shipments up to end May/early June, EU wheat is the most competitive despite the strong euro. As from late May, US new crop will start arriving and so it will probably become the cheapest. We have seen in bidding in Egyptian tenders for shipment after May that the US is offering the lowest prices." But from now until end May the EU is competitive for countries requiring immediate shipment.”
A critical factor is the timing of the start of the export ban announced by EU competitor Kazakhstan on April 15. “Some reports said it had immediate effect 10 days after April 15, others 10 days from publication, apparently today, in the country’s official journal,” a trader said. “But the Kazakh government is apparently not allocating railway wagons for wheat transport so it is hard to get it out anyway. Until the Kazakh ban comes into force, it will probably remain the most competitive origin in the Middle East.” It was also possible that stocks of Kazakh wheat previously sent to Black Sea ports will be put up for sale in coming weeks by east European traders.
Traders said they regarded US wheat as currently too expensive in the Middle East, but some supplies could be offered from Canada and Australia. “The EU does have large supplies available for immediate sale,” a trader said. “France, Germany, Scandinavia, the Baltic States and some EU members in the east have stocks for export.” Traders noted that Turkey’s purchase in its wheat tender on April 11 included the option of German, Swedish, Bulgarian, Lithuanian and Hungarian wheat if the first choice of Kazakh wheat was not available. “Depending on tender specifications, we will increasingly ask if we can also deliver EU wheat if we make a sale,” one trader said. However, good global harvest prospects this year mean any EU export supremacy could be short-lived, traders said, adding that Russia and other countries will lift their export curbs soon. (Reuters)