Local demand drives EU wheat consumption despite poor exports

Demand from west European consumers is driving wheat buying and mitigating the worst effects of a season which has seen EU sellers losing market share to Russia, industry data releases have shown.

EU wheat sales got a boost as the USDA added 2.15 million mt to its domestic consumption total in its monthly WASDE report Tuesday.

After a year of poor export figures, EU domestic consumption for 2017/18 is now forecast at 130.9 million mt, 2% higher than last year and 6% above the five-year average.

“If you’re a French trader or exporter you’ve won the lottery, with one of the best quality crops you’ve ever produced,” said Dr. Rory Deverell, Vice President OTC and Advisory EMEA at brokerage INTL FC Stone.

“Two of your neighbours to the north and south need to buy. They’ve had poor production in Germany and poor yields in Spain,” he said.

Increased feed demand coincided with the deregulation of the EU dairy industry and spiking milk prices, with farmers buying in additional feed to take advantage of record butter prices, Deverell explained.

In addition, cold and wet weather in western Europe has also pushed up demand, with farmers forced to keep their herds indoors and make use of compound feeds, rather than leave them out to pasture.

Domestic demand

The USDA’s numbers were reflected in an update from French agriculture agency Franceagrimer Wednesday, which added 405,000 mt of intra-EU trade to its total – taking its 2017/18 export forecast to 8.94 million mt.

French sales to other EU member states are now forecast to be higher than at any point over the last five years, up 24% on the five-year average and 43% on last year’s figure.

Meanwhile, extra-EU exports had a further 200,000 mt taken off, reflecting the poor state of overseas sales for the EU market this year.

Extra-EU exports are now forecast to total 8.3 million mt, up 67% from last year’s weather-afflicted campaign but still 19% below the five-year average.

Total French exports at 17.35 million mt are set to come in 1% below the five-year average.