French wheat sellers eye 2023-24 for carryover crop

Buyers and sellers of French wheat are withdrawing from the spot cpt Rouen market, as international demand fails to return and the difference between old and new-crop prices narrows.

Basis levels for 11pc protein milling wheat have held steady over the past three weeks despite volatility in both the underlying Euronext futures contracts and at competitors' Black Sea ports, and a sudden — albeit fleeting — return in Moroccan demand.

France was set to ship at least 220,000t of wheat to Morocco in March, according to latest line-up data. The buy side expects France to supply the majority of the total 1.5mn t of soft wheat now booked to arrive in Morocco over March-May, after private importers ramped up purchases from all origins over the past three weeks to meet new government "first come, first served" import quotas of 500,000 t/month for the final three months of the Moroccan marketing year.

But market participants report that exporters at Rouen have already covered around three-quarters of their fob commitments to Morocco and have for the most part withdrawn from the spot cpt market.

For those with final volumes still to buy, cpt prices for 10.5pc wheat have failed to fall as fast as France's standard 11pc milling grade. Northern France harvested a greater proportion of the substandard 10.5pc protein grade in 2022-23 and has marketed this product almost exclusively to Moroccan and Chinese buyers. The difference in bids between 10.5pc and 11pc grades in the local market narrowed steadily over the past week to just €1.50/t ($1.63/t) on 30 March — a spread not seen since December-January, when buyers in China and Morocco bought up large volumes of French 10.5pc wheat.

But unlike in July when prices for the two grades were around €10/t apart, growing competition from Russia and Constanta/Varna/Burgas ports has left little fob demand for France's 11pc grade. France's remaining stocks for 2022-23 are currently held largely at a farmer level rather than in port silos, making it difficult for traders to assess the quality and protein content of the wheat still available to sell.

Farmers weigh up carrying current-crop wheat over to 2023-24 Farmers in northern France still have on average just under two-fifths of their 2022-23 wheat crop left to market, even after a rush to sell on 22-23 March as Euronext futures fell for the sixth day in a row.

Farmers have been slow to return to the market this week and distributors expect that many will carry over a part of their volume to the new marketing year. Over the past two months, attractive prices for ammonia solution inputs for the 2023-24 season relative to the past planting campaign have eased farmer economics, meaning that there is little financial pressure on producers to sell ahead of time.

A current lack of demand for France's standard 11pc protein wheat, which has failed to compete with Black Sea supply in key markets such as Algeria and Egypt, adds a further incentive to carry over crop to 2023-24.

Bids for new-crop 11pc wheat given as basis to the nearest Euronext futures contracts were at a slight premium to futures for delivery to port in July-September, rising to a €1.50-2/t premium for October-December and January-March delivery.

That said, the new-crop market carries its own risks for both French producers and exporters. Competitor Russia's key exporting period typically falls at the start of the July-June marketing year and current offers fob Novorossiysk are around the $260s/t for shipment over July-September, at a substantial discount to French new-crop levels.

For farmers, the decision to carry crop over must be made soon, as some local co-operatives have an end-of-April deadline to secure final volumes from farmers if they plan to sell to exporters under the current 2022-23 campaign.

Barley campaign to end on a high French feed barley has in the past week traded at a premium to milling wheat on a cpt Rouen basis, as exporters sought to fill cargoes sold to China . Only small volumes are still left in the local market.

Bids for old-crop feed barley finally started to slip relative to Euronext wheat futures on 29 March, with buying levels on 30 March reported at a €0.50/t discount to the May futures contract.

But basis levels still held relatively firm compared with new-crop, where prices succumbed to pressure from both a stronger euro against the US dollar and yet another day of rising futures. Bids for barley loading in July-August at Rouen were around a €15/t discount to Euronext futures on 30 March.

Global barley prices for forward shipments partly hinge on whether China is likely to resume imports from Australia . Chinese market participants increasingly expect negotiations over trade disputes to carry on into the northern hemisphere's 2023-24 marketing year. Buyers had initially expected a breakthrough in time for peak demand in May.

By Claudia Jackson

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