W37: Wheat Update

Published Sep 21, 2023
W37: Wheat Update

In W37 in the wheat landscape, Strategie Grains expects European Union (EU) soft wheat exports to reach 30.1 million metric tons (mmt) in the 2023/24 season. This is a significant decrease of 700 thousand metric tons (mt) compared to the Aug-23 estimate and lower than the 2022/23 exports of 32.3 mmt. Strategie Grains attributes this downward adjustment to a sluggish 2023/24 start due to EU-origin wheat's lack of competitiveness against Russian wheat. Strategie Grains notes that EU-origin wheat prices need to align more closely with Russian wheat prices for a substantial EU wheat export increase to occur.

Euronext soft wheat futures reached a three-month low in W37, reflecting the competition from Black Sea supplies. EU soft wheat exports so far in the 2023/24 season are 27% lower than in the same period in 2022/23. Despite the export challenges, Strategie Grains estimates EU soft wheat production at 125 mmt in the 2023/24 season, an increase from the 124.7 mm forecast in Aug-23 but slightly below the 125.3 mmt estimated in 2022/23.

FranceAgriMer estimates France’s soft wheat exports at 9.5 mmt in the 2023/24 season, a decrease of 6.4% (100 thousand mt) compared to 2022/23. French soft wheat shipments to other EU countries are expected to reach 7.54 mmt, slightly lower than the Jul-23 prediction of 7.79 mmt but still an increase of 18.1% YoY. 2023/24 French soft wheat ending stocks are predicted to reach 2.91 mmt, higher than the Jul-23 forecast of 2.69 mmt and a surge of 14.5% YoY.

The Russian wheat export market remained unstable in W37 due to a surge in wheat supply from farmers. This was exacerbated by shipping challenges due to low water levels at ports. Exporters attempted to stabilize the market by significantly reducing prices. Export wheat quotations also plummeted, indicating buyers' awareness of the prevailing trends. Experts indicate a rapid wheat sell-off in 2023 due to limited storage capacity and high carry-over stocks from the 2022/23 season. This situation is different from 2022, when farmers often held onto their wheat harvest for later sales. Rising logistic costs and a general transportation shortage further compound the wheat export difficulties, with little expectation for this trend to change before the end of Sep-23.

Russia's consecutive bumper wheat harvests solidified the country’s position as the world's largest wheat exporter, alleviating global upward pressure on wheat prices that had surged due to the Russia-Ukraine war. This situation resulted in wheat prices dropping to their lowest levels in the past three years, currently trading on the Chicago Board of Trade (CBOT) at less than half their peak during the early stages of the conflict. Strategie Grains notes that Russian wheat still faces minimal competition and maintains a significant influence on global wheat prices. Experts indicate that the Russian government's efforts to establish an informal floor on wheat export prices prompted some traders to seek renegotiations or even cancel deals.

Lastly, the Rosario Grain Exchange expects Argentina’s wheat production to reach 15 mmt in 2023/24, a downward adjustment of 0.6 mmt compared to the Aug-23 estimate. This negative revision is due to persistently dry conditions in Argentina’s western and northern growing regions. These conditions have led to approximately 32% of wheat crops, equivalent to 1.7 million hectares (ha), being rated as either satisfactory or poor. Notably, this projected production volume is among the lowest in the last decade. 

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