EU wheat exporters rely on Morocco, China as Russia expands trade

European Union wheat exporters face a slow end to the season, crowded out by record Russian exports that have left European wheat dependent on sales to Morocco and China, traders and analysts said.

After brisk winter shipments marked by some 2 million metric tons of French exports to China and a steady flow of EU wheat to drought-hit Morocco, there were few signs of demand for the rest of the 2023/24 campaign that ends in June.

The European Commission forecasts that EU common wheat exports in 2023/24 will fall 5% year on year to 31 million tons, despite higher supply this season.

“I am not optimistic about export prospects for the rest of this season and for the new season,” one European trader said.

“Russia’s wheat crop is so big this season that its wheat exports still need to run at around a million tons a week up to the summer to clear out enough storage space for the new crop.”

Russia has eroded the EU’s presence in major markets like Algeria and Saudi Arabia as it continues to expand wheat trade, despite Western financial sanctions over its invasion of Ukraine and an unofficial floor price applied to a varying extent.

Russia has also captured market share from Ukraine as the war has shifted more Ukrainian grain towards Europe.

European prices BL2K4 may have to fall again to win fresh demand, after a rebound from three-year lows. But slow selling by farmers unhappy about their income could curb export flows, traders said.

Morocco is on course to be the top buyer of EU wheat again in 2023/24 and should remain a key outlet next season as it is threatened with a dire harvest.

France and other EU suppliers like Germany retain an edge in Morocco because of short shipping distances and their wheat’s suitability for local millers.

China has also become a regular buyer of French wheat as part of growing grain imports that have so far not included Russian wheat. However, recent cancellations of U.S. and Australian wheat sales suggest Chinese buying may be complete for this season.

A smaller EU harvest expected this year, after rain-hit planting, may lessen the need to generate exports. But burgeoning Black Sea supply will remain a curb on EU shipments.

“For the years when both Europe and Russia have a lot of wheat to sell, we’re going to have to find an export solution,” said Maxence Devillers, analyst with Argus Media.
Source: Reuters (Reporting by Gus Trompiz in Paris and Michael Hogan in Hamburg; editing by Jason Neely)