A rally in the euro has dented prospects for EU wheat exports for the end the 2016/17 season, potentially taking the shine off unexpectedly brisk shipments earlier to destinations from Vietnam to Turkey. Despite a reduced harvest surplus, EU shipments kept up a healthy clip into the second half of the season thanks to competitive prices and difficulties for rivals, such as a trade dispute between Russia and Turkey that handed several hundred thousand tonnes of unexpected sales to EU members.
But a rise in the euro against the dollar, buoyed by relief that French centrist Emmanuel Macron looks set to beat anti-EU Marine Le Pen in Sunday's presidential election runoff, has made grain from countries such as France and Germany dearer. The euro hit its highest in nearly six months against the dollar on Friday at almost $1.10.
"The euro's strength will be a big burden for EU exports, the question now is whether the euro will weaken after the French presidential election," one German trader said. "US, Russian and other Black Sea wheat is looking cheaper than the west EU in FOB terms, which is an important factor in price sensitive markets." Traders reported slow export demand in Germany and France this week, with activity more focused on domestic outlets such as livestock feed manufacturing.
Some traders and analysts say the EU may struggle to meet the European Commission's official forecast of 24 million tonnes of soft wheat exports, or 25.6 million including durum wheat. Russian exports could accelerate at the end of the July-June season, helped by an agreement announced this week to resume wheat shipments to Turkey. But some analysts are more upbeat about EU wheat exports.
The US Department of Agriculture (USDA) is among forecasters to have raised its EU 2016/17 export outlook last month and analyst Strategie Grains also upped its forecast on the back of EU sales to Turkey. ODA Groupe, another private analysis firm, raised its EU soft wheat export forecast by 2 million tonnes last month to 24.8 million due to factors such as steady French sales to Algeria. In April, France recorded 760,000 tonnes in soft wheat shipments to non-EU destinations, the highest for the season, port data compiled by Reuters showed.
Romania could export a record 5.5 million tonnes this season, according to a USDA attache report, spurred by shipments to Vietnam. However, an expected run of French wheat shipments to Asia in the past month has so far led to just one loading, suggesting the attractiveness of EU wheat may be ebbing. "The world is awash with wheat supplies," another German trader said. "This is encouraging importers to delay purchasing in the hope of cheaper supplies."