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EU again cuts MY 2022-23 wheat yield estimates, may stoke supply concerns

Soft wheat yields in the EU for the 2022-23 marketing year (July-June) have been slashed for a third straight month in June, drawing supply concerns as smaller EU output could further stretch wheat markets in the absence of key supplies from the Black Sea.

Soft wheat yields were cut to 5.76 mt/ha from 5.89 mt/ha, the EU Commission said June 21. The latest projection is also below the five-year average of 5.84 mt/ha for soft wheat yields.
At the beginning of June, the EU Commission pegged soft wheat production for 2022-23 at 130.39 million mt, based off an area of 21.7 million hectares and a yield projection of 5.98 mt/ha.

The commission has reduced the yield estimates primarily due to increased heat waves and continued drier-than-usual weather in some key producing regions.

According to analysts, the EU wheat crop is likely to be smaller in MY 2022-23 (July-June) due to lower output in France, Romania and Bulgaria.

France is the largest supplier of wheat in the EU, followed by Romania.

According to the EU crop observatory, soft wheat output is forecast at 34.2 million mt in MY 2022-23, down from 35.5 million mt in MY 2021-22.

For Romania, output of soft wheat is also forecast to drop to 10.4 million mt in MY 2022-23, down from 11.4 million mt in MY 2021-22, the EU crop observatory said.

Trade impact
Smaller output in the EU is likely to create concerns among major importers across the world as they seek to compensate for the likely decline in supplies from Ukraine.

The EU has been a major supplier of wheat to Egypt, Turkey and other Middle East and Northern African nations.

Even though these regions used to buy wheat from Russia, the Black Sea conflict has forced them to explore alternate options, including the EU, adding stress to the already-critical global wheat supply chain this year.

The EU accounts for around 25%-30% of wheat exports to the Middle East and Northern African nations, while Russia accounts for 40%-45%, according to traders.

Since the war in Ukraine, Algeria and Egypt have become major importers of EU wheat, together accounting for 30% of the EU’s total wheat exports.

What could further add to the supply woes is that buyers from Southeast Asia are also seeking out European wheat. Southeast Asia, which previously depended heavily on Australian wheat, altered its purchasing habits as Australian port capacities are almost full for the next few months.

While Australia is reporting a bumper wheat crop, the stress on global wheat supplies has pushed prices of Australian wheat higher.

Platts assessed FOB prices Australia’s APW wheat at $450/mt on June 21, down $4 on the day, according to S&P Global Commodity Insights data.

Meanwhile, the EU has emerged as a major supplier to the global markets. EU wheat exports are forecast at 36 million mt in MY 2022-23, up from 29.5 million mt in MY 2021-22, according to the US Department of Agriculture.

But these export estimates could change if the unfavorable weather continues to put wheat crop prospects in the EU under pressure.

Platts assessed FOB prices of 11% wheat from France at $404/mt on June 21, down $12 on the day, according to S&P Global data. Similarly, Platts assessed 12.5% wheat FOB prices from Romania at $434.75/mt on June 21, down $6.5/mt on day, according to the data.
Source: Platts

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