French wheat exports suffer from Russian competition in 2023

Export flows of French wheat faced stiff competition through 2023 as resurgent Russian wheat production and aggressive marketing forced traders to look beyond their usual markets

French wheat, typically a mainstay in Algerian tenders, became steadily out-competed by cheaper, and readily available amid record harvests, Russian supplies.

Traders said in previous years France could rely on a steady flow of grains being sold into North Africa, particularly Algeria, where volumes of exports in 2019 reached nearly 5 million tonnes.

However, record Russian grain harvests, which include a potential wheat harvest of around 92 million tonnes for 2023-2024, have driven global wheat prices down and left French supplies too expensive in comparison to compete.

Russian competition pulls down French wheat exports

Fastmarkets Agriculture data shows that, up until mid-2020, the price spread between Russian and French wheat was negligible at usually a few dollars per tonne apart.

As prices started to climb from near $200 per tonne to $300 per tonne at the start of 2021, the spread between French and Russian 11.5% FOB wheat cargoes began to widen, reaching at times a $25 per tonne premium for French wheat over Russian.

However, with wheat markets trying to figure out the impacts of Russia’s invasion of Ukraine in February 2022, French FOB 11.5% wheat prices rose dramatically to set multi-year highs as the global wheat complex reacted to fears of shortages and supply constraints.

By the first quarter of 2022, French FOB 11.5 wheat cargoes were trading at $471.50 per tonne, but the Russian equivalent cargoes were trading much cheaper at $410 per tonne – in part a reflection of huge Russian wheat supplies and uncertainty of trade amid escalating sanctions.

That spread widened to as much as $89.25 per tonne by April-2022, where traders were purchasing Russian cargoes at $360 per tonne, compared with French cargoes priced at $435.75 per tonne.

Between January 2022 and December 2023, the average spread between these cargoes was around $20 per tonne, while between January 2020 and December 2021, the average spread was just $1.50 per tonne.

The rising tide of Russian exports also weighed on Euronext milling wheat futures, pulling them down from a high of €438.25 per tonne in May 2022, to lows of €213 per tonne in November 2023. 

Total Russian wheat exports amounted to 30.85 million tonne between the start of the 2023-24 marketing year in July and mid-December, a 33.8% year-on-year increase.

French exports to Algeria had been on a steady decline from 2019, falling to 2 million tonnes in 2021, with a small rise seen in 2022 before plummetting in 2023 to just below 300,000 tonnes in the year to October, according to Fastmarkets Agriculture data.

Meanwhile, cheaper Russian wheat sources as well as the country’s aggressive export drive have meant exports to North African countries grew over the same period, with Algeria receiving 1.47 million tonnes of wheat, up 68% on a year-on-year basis, Libya taking 1.34 million tonnes, up 50%, and Tunisia taking 629,000 tonnes, up 285%.

French wheat traders look to the Middle East and Africa

As buyers of French cargoes within the Mediterranean turn to the Black Sea for their grains, French traders have begun to look further afield for new opportunities.

French agricultural trading firm InVivo recently established an office in Saudi Arabia to grow sales into that country and the wider states of the Gulf Cooperation Council.

Traders also point to opportunities to grow sales into west African countries such as Nigeria and Senegal, in part looking to capitalise on efforts by importers to ensure they maintain diverse supply options.

However Russian exports have also increased their reach.

Flows of grains to other destinations east of the Suez Canal also climbed, with a 230% increase in sales to China at 647,000 tonnes, a staggering 8,137% increase in sales to Indonesia at 892,000 tonnes, and a 163% gain in Bangladesh sales at 1.8 million tonnes.

The pressures of the Russian grain trade are not just solely weighing on French exports, but also wider European Union (EU) competitiveness too.

EU member states have sold just 350,000 tonnes of milling wheat to Egypt in 2023, compared with 1.89 million tonnes the bloc sold in 2022, a decline of 81%.

Exports into Algeria by the bloc have also declined significantly.

The average annual wheat exports by the EU between 2019 and 2022 was 5.4 million tonnes, but in 2023 the EU has exported around 50% of that total, with just 2.75 million tonnes.

Since the start of the 2023-24 marketing year, Russian-origin wheat has been awarded 18 cargoes across 10 tenders, with a total volume of 2.785 million tonnes, and an average price of $288.62 per tonne

In contrast, France in the same period recorded just a single cargo win, with a 120,000 tonne cargo sold in October at $279.49 per tonne. Romania and Bulgaria together secured 10 cargoes in 6 tenders for a total volume of 600,000 tonnes, at an average price of $271.52 per tonne on a CFR basis.

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