European Feed Demand Is Competing With Exports on Wheat

Baltic wheat shipments have run roughly 50 percent above the previous year's pace, and that pull is only one half of the pressure now sitting on European supply. European feed demand is competing directly with export buyers for wheat, because grazing has failed across parts of the continent and cattle and dairy farmers have been forced onto bought-in rations earlier than normal. Egypt, Sudan, Libya, Turkey, the United Arab Emirates and Nigeria have all turned toward European origin as Black Sea supply became harder to rely on, concentrating attention on France, Germany, Poland, Bulgaria, Romania and the Baltic states. Europe can serve that demand, but it is doing so while its own livestock sector bids for grain.

Bertrand Oesterle is Vice President of Clearing and Execution Sales at StoneX Financial Ltd, working with institutional clients on futures clearing and execution across global derivatives and listed markets. His coverage runs across commodity markets including grains and oilseeds, and he follows the physical trade flows, origination patterns and feed demand that connect European farms to international buyers.

   

Key Themes from the Discussion

• Baltic wheat exports have run around 50 percent above the previous year, though some of that volume is Russian origin.
• Failed grazing is forcing European cattle and dairy farmers to choose between bought-in feed and culling animals.
• European wheat now serves export demand and domestic feed rations from the same constrained supply base.

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European Grazing Failure Pushes Cattle Farmers Into Bought-In Rations

Grazing has failed in parts of France to the point where herd condition is visibly deteriorating, and that shortfall lands on farms already working with less maize availability. According to Oesterle, who visited cattle and dairy operations there, "I visited some cattle farmers and some dairy farmers that cows look really, really skinny because there's been no grazing". The choice in front of those farmers is stark, either buy in feed earlier than a normal season would require, or limit the herd and cull. Consequently, European feed demand becomes a purchasing decision made under time pressure rather than a seasonal routine, and wheat is one of the grains being drawn in to fill the gap.

 

European Feed Demand Competes With Export Cargoes for Wheat

European wheat is now being asked to do two jobs at once, and the supply base has not grown to match. International demand has moved toward European origin because Black Sea supply became difficult to count on, while at home the feed ration is absorbing wheat that would otherwise be available for shipment. Reduced maize availability sharpens that competition, because the substitution runs toward wheat rather than away from it. As Oesterle puts it, "there is a conflict at present between the search for European export because there's international demand for it and the switch from wheat into the feed rations because there's less maize available".

 

European Origination Absorbs Buyers Leaving Black Sea Supply

"We see a definite transfer of Russian and Ukrainian origins to European origins", Oesterle says, and the buyer list behind that shift is broad. Egypt has taken several cargoes of French wheat and Sudan at least one, with market talk pointing to six or seven cargoes of French or European Union wheat in total, while Libya, Turkey, the United Arab Emirates and Nigeria have all looked to Europe for supplies. In Asia the same switch is visible, with Bangladesh buying Bulgarian wheat rather than Russian, and Indonesia and other regional buyers taking Argentine and Australian wheat instead. Notably, Turkey sits at the center of the pressure for a commercial reason rather than a political one, since it is the world's largest flour exporter and depends on imported wheat to keep those flour exports moving.

 

--- Written by Frédéric Guétin, StoneX Media Producer

--- Expert: Bertrand Oesterle, StoneX VP of Clearing & Execution Sales