European Union cereal exports lower after a poor harvest… | Grain Brokers Australia

Posted by | August 27, 2020 | Weekly Commentary | No Comments

The winter crop harvest is winding down across much of Europe, and it appears that wheat production has been the worst hit by the extremely dry growing season weather and severe spring frosts across central and southern parts of the continent.

In their August update, the United States Department of Agriculture pegged the wheat crop in the European Union, including Britain (EU-28), at 139.5 million metric tonne (MMT). This is a year-on-year fall of 10 per cent or 15.5MMT.

On the whole, EU-28 barley crop appears to have fared much better in the testing seasonal conditions with the USDA calling production 62.5MMT, only slightly less than last season’s 63MMT crop. The rapeseed crops have also held up exceptionally well with production estimated at 16.8MMT, on par with last season’s EU-28 output.

France is the biggest grain producer and exporter in the European Union. Earlier this month the country’s farm ministry cut its soft wheat production estimate to 29.7MMT, down from 31.3MMT a month earlier. This represents a 25 per cent decrease in output compared to the 2019 harvest. It is also 16 per cent below the five-year average and is the smallest harvested area since 1994.

The farm ministry also slashed the French barley crop estimate by 1MMT, or more than 8 per cent, to 11.3MMT compared to their July number. This is 18 per cent lower than last season’s output. The rapeseed production estimate of 3.3MMT was reduced by less than 0.1MMT in the farm ministry’s August update. This is down 5 per cent year-on-year but is a mammoth 36 per cent below the five-year average.

With the smaller wheat crop, French exports are forecast to fall dramatically to around 13MMT. This is more than 43 per cent lower than 2019/20 marketing year exports of 23MMT. Despite the smaller exportable surplus, recent sales of new crop wheat and barley to China have been robust as Beijing continues its fervent grain import drive.

According to the German Farmers Association, the country’s grain harvest will be 42.4MT, down from 44.3MMT a year earlier and around 5 per cent below the five-year average. They forecast wheat production will end up at around 21.1MMT this harvest, a fall of 1.7MMT, or 7.5 per cent, compared to the 2019/20 season.

The winter barley crop in Germany, mostly used in stockfeed rations, is expected to come in 9 per cent lower than last year at 8.9MMT, but the spring barley crop, predominantly used in malt manufacture for the beer market, will likely increase 7.4% to 2MMT. In comparison to last harvest, this puts total barley output down around 4 per cent.

In contrast, the German Farmers Association has called 2020/21 rapeseed production 3.3MMT, 18 per cent higher than last season’s crop of 2.8MMT. Germany is usually the biggest rapeseed producer in the EU-28 and the primary consumer for edible oil and biodiesel production.

The third-largest wheat producer in the EU-28 is Poland and farmers there are much happier than their French and German counterparts. Thanks to more favourable spring weather, the Polish wheat crop is expected to finish up at around 11.7MMT, more than 6 per cent higher than the previous harvest, and the fifth largest on record. The barley harvest in Poland is expected to be slightly higher than in 2019 at 3.6MMT.

The worst drought in more than a century across parts of Romania has decimated winter crop harvest in 2020.   Typically, the second-largest wheat exporter in the European Union via its Black Sea port of Constanta, this year’s exportable surplus will be down significantly on recent years.

These days, the majority of the wheat that is exported via Constanta is not domestically produced. Thirty years after the end of dictatorship in Romania, the 64km long Danube-Black Sea Canal, that links the Danube River with the port of Constanta, has turned into an economic gateway propelling Romania to the top of EU’s wheat exporters.

Also known as the “Canal of Death”, due to the number of deaths and disappearances during its construction, the waterway now brings grain exports from Slovakia, Hungary and Serbia to the world market via the Black Sea.

Romania’s agriculture ministry called wheat production as low as 5.4MMT in July but has since revised their estimate higher to around 6MMt. This is a year-on-year reduction of 23 per cent and would still be the smallest crop since 2012, exacerbating the shrinking export supplies across the EU-28 in the 2020/21 marketing year.

The Romanian government briefly banned export shipments in April as the coronavirus pandemic sparked concerns about domestic supply. The restrictions were lifted after a week, but the ministry did caution that they may be revived if the drought severely curbed new crop production.

Wheat consumption in Romania is estimated at 3.1MMT, made up of 2.2MMT milling quality, 0.5MMT retained for seed and 0.4MMT for the livestock sector. Based on the revised harvest estimate, the agriculture minister is still calling exports from domestic production 3MMT in the 2020/21, but down almost 50 per cent on the previous year.

Similarly, southern neighbour Bulgaria has seen this year’s wheat production fall significantly on the back of dry weather at critical crop development stages. The wheat crop is forecast to be 1.8MMT, or 29 per cent lower than last year at 4.5MMT. With domestic consumption pegged at around 1.8MMT, exports are expected to fall about 40 per cent to 2.9MMT.

In this month’s update, the USDA reduced their estimate for EU-28 wheat exports to 25.5MMT, a year-on-year fall of 33 per cent. Barley exports didn’t escape the knife with the USDA cutting them by 27 per cent to 5.7MMT. The EU, France in particular, has traditionally been a prominent supplier into North African and the Middle Eastern and the big crops in Russia and Ukraine put them in the box seat to pick up the export slack into those regions this season.

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