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EU wheat exports set to hit records as competition wanes

Sybille de La Hamaide
Wednesday, 11 Dec 2013 | 8:01 AM ET

* Analysts, traders up 2013/14 export estimates to 23-25 MT

* Former EU wheat export record was 22 mln T in 2008/09

* Black Sea wheat supplies wane, world demand brisk

* French wheat sales to Egypt key in 2nd part of season

PARIS, Dec 11 (Reuters) - Brisk world demand and shrinking supplies, notably in competing Black Sea countries, are likely to drive soft wheat exports from the European Union to record highs this season, beating earlier expectations.

Romania's massive and rare sales to Egypt and significant volumes of French wheat shipped to unusual markets such as Mexico and Syria have led forecasters to lift their EU soft wheat export forecasts to 23-25 million tonnes, far above the record 22 million shipped in the 2008/2009 season.

"We have dynamic exports, Black Sea availabilities waning faster than expected and lower South American supplies, which could shift some demand to the EU," Pierre-Antoine Allard, an analyst with French consultancy Agritel, said.

Agritel lifted its wheat export forecast for the 28-member bloc to 23 million tonnes, up 2 million from its October estimate and compared with 19.5 million in 2012/13.

The U.S. Department of Agriculture (USDA) also raised EU wheat exports estimates to an equivalent 23 million tonnes of soft wheat, up 1 million from its figure last month.

"We are heading for a record year for sure," Allard said.

European traders are even more optimistic, putting forecasts at around 25 million tonnes.

"Availability of wheat in the Black Sea is almost wiped out, the pace of U.S. wheat sales is already hefty, Australian wheat should go to Asia and Canada's record crop is facing logistical problems getting out," one European trader said.

"On paper the EU can export 25 to 26 million tonnes."

Russia and Ukraine, one of the EU's toughest competitors, have harvested lower amounts of quality wheat this year.

This has led to a hefty pace of European wheat exports, notably Romanian wheat. EU operators have booked export licences for 11.8 million tonnes up to last week, or nearly 50 percent more than at the same time last year.

FRANCE TO EGYPT KEY

Paris-based wheat futures hit seven-month highs, supported also by fears that Argentina's crop would be worse than expected, which could open markets to U.S. and EU wheat.

U.S. and European wheat prices fell on Tuesday after the USDA report estimated global supplies above expectations, but analysts remained bullish for EU wheat prices in the long term, expecting diminishing supplies to start forcing European sellers out of the market.

"A lot will now depend on the euro not gaining painful strength and on shipping costs," a German trader said.

Hefty EU wheat exports were buoyed by demand from unusual clients early in the July 2013/June 2014 season.

Line-ups in French ports since the start of July showed new or rare destinations such as China, Saudi Arabia, Mexico and Syria, while Germany booked sales to Morocco, traders said.

Sales in the second part of the season will depend on whether top EU wheat exporter France wins Egyptian deals and on demand from Iran and Syria, which are hard to predict, analysts said.

"The variable that will most influence European exports is France, because Romania and Bulgaria are pretty much done. They exported nearly everything they could," Strategie Grains analyst Veronique Fradin said.

Cairo was tendering to buy wheat for January shipment on Wednesday.

Farm office FranceAgriMer raised its forecast for French soft wheat exports outside the bloc by 600,000 tonnes to 11.8 million for the year, up 19 percent on 2012/13.

Analysts and traders generally estimate that Egypt will buy around 1.5 million tonnes of EU wheat altogether, although some stress that forecasting Egyptian purchases has become increasingly difficult.

"There are so many countries this year where demand is very uncertain that it doesn't take much to lift EU exports to 25 million tonnes," Fradin said, citing Egypt, Iran and Syria.

(Additional reporting by Valerie Parent in Paris and Michael Hogan in Hamburg; editing by Jane Baird)