Wrangling over terms for sales to Egypt and slow demand from Middle Eastern buyers hit by low oil prices have dampened hopes for a rush of European Union wheat exports to trim large stockpiles, traders and analysts said.
Competition from Russia, Ukraine and Argentina in a world awash with record wheat supplies has also limited the scope for EU exports to accelerate after a tepid start to the July-June marketing season.
EU exports have picked up in the past couple of months as benchmark prices approached five-year lows, but soft wheat export licences show the volume exported so far in 2015-16 is still 15 percent below last season’s pace.
After a record 2015 soft wheat harvest, the slow exports mean the EU is on course for its biggest end of season stocks in seven years while top producer France its facing its biggest stockpile in 17 years, according to official forecasts.
“The driver is now clearly demand whereas until recently it was supply,” one export trader said. “The question for the market has become, who is going to buy and at what price?”
Weeks of tensions between Egypt and its suppliers have put a brake on trade. Egypt, the world’s largest wheat buyer, has sent contradictory messages about whether or not it would accept wheat shipments with any presence of the ergot fungus.
Wrangling over what ergot limits to apply has left a French wheat cargo stranded and disrupted Egypt’s tenders, while payment delays have also put off traders.
Despite a tender purchase on Friday that included one French wheat cargo, France so far this season has sold only a quarter of the 2 million tonnes it shipped to Egypt in the 2014-15 season.
French agricultural agency FranceAgriMer last week cut its forecast for French wheat exports outside the EU by 300,000 tonnes to 11 million, in view of the situation in Egypt and despite a recent run of sales to Morocco.
“Exporting 11 million tonnes is still a fair task and means selling much more to Asia than France has done so far,” Sebastien Poncelet of consultancy Agritel said.
“There could be a helping hand from the euro. If the euro falls back to $1.08 tomorrow we’ll have the cheapest wheat in the world,” he said.
But a drop in the hryvnia currency has made exports from Ukraine cheaper too and curbed immediate prospects for France in feed wheat markets in Asia.
The outlook for EU countries such as Germany, Poland and the Baltic states, which supply higher-quality wheat to Middle Eastern markets, has been clouded by signs oil-dependent states are slowing purchases.
Ongoing tensions over terms of tenders from Jordan have also weighed on EU exports.
Traders are especially waiting for Saudi Arabia to return to the market after falling behind in its usual tender cycle.
“The fall in crude oil prices means governments do not have anywhere near the amount of funds they expected only a few months ago,” one German trader said.
“The weak wheat price trend since November has encouraged delayed purchasing, but importers cannot delay for ever.”
(Source – http://english.ahram.org.eg/NewsContent/3/12/188308/Business/Economy/Time-running-out-for-EU-wheat-exports-after-lost-E.aspx)