In W22 in the wheat landscape, the European Commission (EC) adjusted upwards the EU soft wheat usable production forecast in the 2023/24 season from 130.2 million mt projected in late April 2023 to 131.5 million mt, up 1% and well above the 125.7 million mt harvested in the 2022/23 season. Furthermore, the EC expects EU soft wheat exports in 2023/24 to reach 32 million mt, down 1.5% compared to the April forecast, while expected EU soft wheat exports in 2022/23 were unchanged at 31 million mt. Also, the EC raised the 2022/23 EU soft wheat stocks forecasts from 19.6 million mt projected in April 2023 to 19.9 million mt, up 1.5%, and expects EU soft wheat imports to reach 8.5 million mt. Drought in the Maghreb region - Morocco, Algeria, Tunisia, and Libya - has significantly worsened the prospects for grain production, which is likely to lead to higher food prices, increased dependence on imports, and heightened risks of political and economic instability. In particular, in Morocco, a severe drought accelerated the maturation of wheat and barley crops, which significantly reduced their yields. Therefore, MARS estimates the 2023/24 Moroccan wheat harvest at 3.6 million mt, up 34% YoY due to the 2022 drought, but down 25% compared to the 5-year average of 4.83 million mt, with a yield of 1.48mt/ha, down 10% on average. Meanwhile, Algeria is experiencing the worst drought in 40 years, resulting in significant crop losses. Thus, 2023/24 Algerian wheat production is expected to drop to 1.78 million mt, down 45% compared to the 5-year average, with a yield of 1.28mt/ha, down 24% on average. Also, MARS predicts 2023/24 Tunisian wheat production to reach only 837 thousand mt, down 33% YoY and 28% lower than the 5-year average due to a significant deterioration in grain yields, which is at 1.62mt/ha, down 33% YoY and down 19% on the 5-year average.
The USDA outlines that as of the week ending May 25th, US wheat export inspections reached 382.03 thousand mt, down 58.06 thousand mt WoW, but up 37.71 thousand mt YoY, with shipments mainly destined for Thailand and the Dominican Republic. With just a few reporting days remaining in the 2022/23 season, US wheat inspections are 19.558 million mt, down compared to 19.997 million mt in 2021/22. Additionally, the USDA reports that as of May 28th, 34% of US winter wheat was rated good to excellent, up 4% WoW, with 25% in poor to very poor shape, down 5% WoW, while 72% of the crop had headed, down compared to 73% on average. Meanwhile, US spring wheat planting reached 85% and 57% had emerged, both slightly behind their respective usual paces. SovEcon indicates that up to May 1st, wheat stocks on Russian farms amounted to 12 million mt, twice as high as compared to the 5-year average. The substantial increase in Russian inventories can be attributed to the record wheat harvest and relatively slow exports at the beginning of the export season. Among Russia's wheat-producing areas, the Volga River region saw the biggest increase in grain stocks at approximately 2.7 million mt, up 108% YoY. Stocks in the central region of Russia totaled 3.9 million mt, an increase of 95% YoY. In the South, wheat stocks totaled 2.9 million mt, an increase of 45% YoY. Despite the relatively slow pace of exports in Q3-22, SovEcon expects the 2023/24 season sales to reach 44.5 million mt, a record export for the season. Furthermore, the record wheat inventories are expected to continue to boost Russian wheat exports and exert downward pressure on global prices.
In Brazil, wheat planting in Paraná advanced 8pp in the last two weeks, reaching 66% of the total area forecast. 93% of wheat crops were considered in good condition and 7% in average condition. Also, 17% of wheat crops were in germination, 82% in vegetative development, and 1% in flowering. In the first four months of 2023, Chinese wheat imports totaled 6 million mt, an increase of 80% YoY and 60% of 2022’s total imports. Specifically, in April 2023, Chinese wheat imports amounted to 4.7 million mt, up 141% YoY. The rise is attributed to wheat prices, which fell relative to domestic supplies. Also, Chinese processing companies are replacing domestically grown wheat with overseas products to use as animal feed, resulting in large imports of Australian standard white wheat. Chinese wheat imports were mainly sourced from Australia (60%), Canada (19%), France (13%), and the US (8%). Chinese imports are likely to surpass the tariff quota of 9.6 million mt for the third consecutive year. However, given the higher tariff rates on shipments exceeding the quota, it’s not expected to surpass by much range. Lastly, heavy rain has flooded wheat fields in central China's Henan province just days before the harvest, sending prices soaring and raising concerns about the quality of the 2023 wheat crop in the world's biggest consumer of the grain. The rain, which began mid-last week in the southern half of the province, is causing some of the wheat to sprout or be affected by pests. The price of wheat in the Henan capital Zhengzhou rose 2% in W21 to USD 396.41/mt on May 26th. According to the China Meteorological Administration, more rain is expected on the weekend of W22 in western Henan.
