Before the summer, despite a slight drop in yields, there was great optimism. The 2022-2023 marketing campaign for French soft wheat had started “under good auspices”, rejoiced in July the National Establishment of Agricultural and Seafood Products (FranceAgriMer), which planned “French exports of soft wheat outside the European Union up sharply”, to 10.3 million tonnes, 17% more than in the previous season.
Less than two months later, the establishment is less confident. Despite an improvement in its collection forecasts – which went from 30.5 to 31.4 million tonnes – those concerning French exports to third countries have been revised downwards, from 10.3 to 10 million tonnes. . A multitude of hazards, economic, climatic and geopolitical, indeed weigh on the future.
A massive arrival of Russian wheat on the markets
Among the factors likely to favor them is first of all the export price of French milling wheat, which remains very competitive compared to the majority of other sources. He is supported by the weakness of the euro against the dollar -transaction currency on most agricultural markets-, which favors European exports. The quality of French wheat is also on point this year, while the decline in world wheat prices observed since May is likely to boost overall demand from importing countries, despite still rather high prices.
French soft wheat, however, is likely to face tough competition from Russian soft wheat, whose prices are even more competitive. despite the high prices of the ruble – artificially supported by Moscow -, provides FranceAgriMer. Admittedly, according to Reuters estimates – formulated despite Russia’s halting of all communication on its customs data since the start of the conflict – in July-August Russian wheat exports fell by 40% compared to the year former. But “a massive arrival of Russian wheat in the second half of the campaign cannot be ruled out”, predicts Marc Zribi, head of the grains and sugar unit of FranceAgriMer.
“We expect a very strong presence of Russian wheat for export”he anticipates.
Prizes to recover currencies
Russia should indeed have a significant production this year, of 85.4 million tonnes, including 41 tonnes reserved for export. It has already managed to cover 44% of demand from Egypt, which since the beginning of June has bought 3.3 million tonnes of wheat – including 910,000 tonnes shipped by France. And the low prices practiced by Moscow probably depend not only on the quality of the wheat and the large volumes to be sold, but also on a desire to recover foreign currency to finance the war with Ukraine, analyzes Marc Zribi.
However, the expert underlines the existence of other factors likely to rebalance the competitive game. First, the uncertainties about the quality of Russian wheat, a large part of which could be compatible only with fodder use. But above all, doubts about Russia’s logistical capacities, and the possible reluctance of potential charterers in the face of insurance risks, notes Marc Zribi.
Wheat from Southern Hemisphere countries eagerly awaited
French exports also face other risks. If the forecasts for Ukrainian production and exports remain very low compared to the averages of previous years, the maintenance or not of theagreement signed with Russia at the end of July on the creation of secure maritime corridorss will weigh heavily on international trade. Discussions between Russia and Turkey are expected to be held on this subject at the Shanghai Cooperation Organization Summit in Samarkand, Uzbekistan which opened its doors yesterday until tonight.
In a global context of maintenance of 2022-2023 production at historically very high levels, despite a slight decline compared to 2021-2022, the arrival on the wheat market of countries in the southern hemisphere – very differently affected by the climatic hazards – also risks reshuffling the cards. Not to mention the changes in the policy of the European Central Bank (ECB) in terms of key rates, as well as those in freight prices, both of which are likely to favor or penalize European exports, in particular to countries close to the Middle East and from Africa.
Less demand from China, more from Pakistan
Finally, demand from both countries will come into play. First of all that of China, whose massive purchases have boosted wheat prices in recent years.
“The International Grains Council (ICC) has revised China’s import forecasts downwards in 2021-2022,” observes Marc Zribi, for whom Beijing should thus weigh less on world markets.
Following the catastrophic floods suffered by the countrypurchases from Pakistan should on the other hand be more present this year, believes the expert, stressing that French exports to this destination have already been noticed.
Overall, “the situation remains very evolving”, he summarizes.