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EU Wheat Can Hold Its Own Against Russian Export Flood

European farmers will not have to struggle to sell their wheat this season, despite a flood of cheap Russian exports onto world markets as the EU benefits from ample internal demand and from its established African buyers.

Although it is very unlikely to repeat the hefty sales numbers from last season when it benefited from Russia s pullout of the market after a drought slashed crops, the 27-member bloc could sell all of its surplus this season, provided U.S. grains remain supported by weather problems, analysts and traders say.

To many destinations French and even German wheat is cheaper than U.S. wheat, soft red and hard red. This makes us think Europe will export everything it can, said Andre Defois, head analyst at France s Strategie Grains.

Russia has dominated the global wheat export market since the start of the July when it returned from a near year-long absence, shipping around five million tonnes wheat in just two months, nearly a third of analysts forecasts for the whole season.

The floods of cheap Russian wheat, combined with a near 10 per cent drop in output in France, by far the European Union s major wheat exporter, after severe drought in the spring, will inevitably mean a sharp drop in EU exports this year.

All in all, EU states should ship around 14 million tonnes of soft wheat in 2011-12, down from 19 million last season, Strategie Grains said.

Analyst and traders have little doubt that the 27-member bloc will be able to ship its surplus as it benefits from strong internal demand and constant demand from its traditional buyers.

The price situation (of European wheat being cheaper than U.S. wheat and corn) and the fact that we have a lot of inelastic and regular demand from North Africa mean that we export at a very correct rhythm and that we will have no trouble exporting all of our exportable surplus, Defois said.

Although Russian prices are rising fast going in Egypt tenders from US$243.50 a tonne FOB early July to $295/T at the end of August they are still offered at a big discount versus European and U.S. wheat.

In Egypt s Aug 25 tender for shipment in Oct 21-31, the lowest bid for French wheat was at $308.87/T FOB, Australian was at $303/T and U.S. SRW at $313.15/T .

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