Before the summer, despite a slight decrease in yields, there is great optimism. The 2022-2023 marketing campaign for French soft wheat has begun “under good management”, the National Establishment of Agricultural and Seafood Products (FranceAgriMer), which plans “French exports of common wheat outside the European Union are very strong”, to 10.3 million tons, 17% more than last season.
Less than two months ago, the establishment was less confident. Despite an increase in its collection forecasts – from 30.5 to 31.4 million tons – the share of French exports to third countries was revised downwards, from 10.3 to 10 million tons . Many risks, economic, climatic and geopolitical, are indeed weighing on the future.
A large arrival of Russian wheat in 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 most other sources. He is supported by weakness of the euro against the dollar -transaction currency in most agricultural markets-, which favors European exports. The quality of French wheat is also on point this year, while the decrease in world wheat prices observed since May is likely to increase the overall demand from importing countries, despite the high price.
French soft wheat, however, is likely to face tough competition from Russian soft wheat, whose prices are more competitive. despite the high price of the ruble – artificially supported by Moscow -, provides FranceAgriMer. True, according to Reuters estimates – formulated despite Russia’s suspension of all customs data communications since the beginning of the conflict – in July-August, Russian wheat exports fell by 40% compared to the previous year. but “A large arrival of wheat in Russia in the second half of the campaign cannot be ruled out”, predicted Marc Zribi, head of grains and sugar unit of FranceAgriMer.
“We expect a very strong presence of wheat in Russia for export”he expected.
Prizes to recover the money
Russia should have a significant production this year, which is 85.4 million tons, including 41 tons reserved for export. It has already covered 44% of demand from Egypt, which since the beginning of June has bought 3.3 million tons of wheat – including 910,000 tons sent to France. And the low prices made by Moscow probably depend not only on the quality of wheat and the large volumes to be sold, but also on the desire to recover foreign currency to finance the war in Ukraine, analyzes Marc Zribi.
However, the expert emphasized the existence of other factors that tend to balance the competitive game. First, the uncertainties about the quality of wheat in Russia, a large part of which may be consistent only with the use of fodder. But above all, the doubts about the logistics capacities of Russia, and the possible hesitation of potential charterers in the face of insurance risks, says Marc Zribi.
Wheat from the countries of the Southern Hemisphere is 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 continuation or not ofagreement signed with Russia at the end of July to create safe maritime corridorss will weigh heavily on international trade. Discussions between Russia and Turkey are expected to be held on this topic at the Shanghai Cooperation Organization Summit in Samarkand, Uzbekistan which opened its doors yesterday until tonight.
In a global context of maintaining production in 2022-2023 at a very high historical level, despite a slight decrease compared to 2021-2022, the arrival of the wheat market in the southern countries part of the world – very differently affected by climate hazards – is also dangerous. reshuffle the cards. Not to mention changes in the policy of the European Central Bank (ECB) in terms of key prices, as well as freight prices, both of which tend to favor or penalize European exports, especially in countries close to the Middle East and from Africa.
Less demand from China, more from Pakistan
Finally, the demand from both countries comes into play. First of all in China, whose large-scale purchases have boosted the price of wheat in recent years.
“The International Grains Council (ICC) revised China’s import forecasts downward in 2021-2022,” said Marc Zribi, in which Beijing should weigh less on world markets.
Following the catastrophic flood that the country sufferedpurchases from Pakistan on the other hand should be more this year, the expert believes, emphasizing that French exports to this destination have already been noticed.
Overall, “the situation remains very evolving”, he summarized.