LONDON, ENGLAND — Future growth of E.U. wheat production will depend heavily on export opportunities in the global market — particularly in Africa, the Middle East and Southeast Asia, according to a new report from Rabobank. E.U.-28 wheat production has increased by roughly 25%, or 31 million tonnes, in the past 15 years, driven almost exclusively by yield growth, according to Rabobank’s latest report “The Future of E.U. Wheat: A Look into the Crystal Ball… and at the Bigger Picture.”

In addition to the two major wheat-producing countries (France and Germany), the Baltic countries of Latvia and Lithuania, as well as the Black Sea countries of Romania and Bulgaria have increased their wheat output significantly. In the future, these countries should continue to expand their wheat production, resulting in higher E.U. wheat production, according to Rabobank. 

Since 2000, nearly one-third of the additionally harvested quantity was consumed in the E.U., particularly in the industrial sector, the report said. The remainder — around 18 million tonnes — has found its way to the global market. Rabobank said E.U. wheat consumption should grow only marginally in the future, with the additional E.U. production mostly flowing into the export market. 
Nearly two-thirds of the increase in E.U. wheat production is finding its way to the world market.
Source: USDA, Rabobank 2016

Rabobank said the majority of the increasing E.U. exports have gone to Africa and the Middle East, but also that Southeast Asia may be a promising market for E.U. wheat. Fifty-seven percent of E.U. wheat exports found their way to Africa. In 2002, around 5 million tonnes of E.U. wheat — almost half of all E.U. exports — went to North Africa, while by 2015, those exports reached 11.5 million tonnes, accounting for 37% of all E.U. exports, Rabobank said. E.U. wheat trade to Sub-Saharan Africa tripled during the same period, to 6 million tonnes annually, and is now reaching an E.U. export share of 20%.

In the future, Rabobank expects imports of wheat to Sub-Saharan Africa to grow faster than those to North Africa, driven in large part by population and higher income. Within the next decade, the southern part of Africa will import more wheat than the north, Rabobank said, but North Africa is expected to remain the main destination for E.U. wheat. The import growth rates in West Africa and East Africa will be significantly higher, though, Rabobank noted in the report. The climatic conditions in East Africa do not allow for wheat farming, and almost the entire demand must therefore be covered by imports, mainly from the U.S. and the E.U., according to Rabobank. In contrast, West Africa is producing wheat. Consumption in West Africa is increasing much faster than production, and imports from many origins — including the E.U., the U.S., Russia, Australia, Ukraine and Argentina — are growing.
North Africa remains the key destination for E.U. wheat; however, Sub-Saharan African and Asian exports are showing strong growth.
Source: GTIS: Rabobank 2016

Approximately 20% to 25% of E.U. wheat exports are going to the Middle East, with Saudi Arabia and Iran being the main destinations, according to the report. E.U. wheat imports account for about two-thirds of Saudi Arabia’s 3.5 million tonne import total and about 50% of Iran’s very volatile 1 million to 6.5 million tonnes. The future demand for imports in Iran heavily depends on the population growth and the local wheat production, Rabobank said, noting that the country usually is able to cover 80% of its demand with its local production of about 15 million tonnes. The main competitors for E.U. wheat flows into Iran will continue to be Russia and Kazakhstan. After lifting the sanctions against Iraq, not only the E.U., but also other regions are hoping to expand their exports, according to the report.

Whether noteworthy U.S. wheat exports to Iran also will occur remains to be seen, as the last significant U.S. volumes were traded there in the 1970s. In Saudi Arabia, the strong increase of wheat imports in the last decade was accompanied by a drastic reduction in domestic production, Rabobank said. During that time, the Saudi Arabian wheat output shrank from about 2.5 million tonnes to virtually nothing. The future increase in imports likely will be substantially slower, as it primarily will be driven by the 2% growth of the 32 million population, with the E.U. competing with Canada, Australia and other export nations to accommodate Saudi Arabia’s demand, the report said.

According to the report, annual growth of wheat demand into Southeast Asia of just under 5% per year will result in an increase of the annual imports by 5 million tonnes, to about 25 million tonnes in 2020. However, Australia, the U.S. and, increasingly, Ukraine will supply large shares of this demand, with the E.U. also expanding its exports to the region, Rabobank said 

The future growth of E.U. wheat production will heavily depend on export opportunities in the global market, particularly in Africa, the Middle East and Southeast Asia. The projected demand increases in these regions is strong; however, other export nations also are aligning their wheat trade toward these destination markets, the report said.