HAMBURG/PARIS - US grain is set to flood into the huge Middle East and North African markets, outgunning the EU whose supplies are drying up as both producers scramble to exploit Russia's grain export ban, analysts say Friday. "The US is likely to be a big winner to fill the gap left by Russia's export ban which some angry importers are now calling the Great Grain Robbery," one trader said. "The EU is unlikely to be able to keep up its recent export surge as it does not have the large supplies the US has." A surge in EU sales following Russia's ban may not be sustainable as wheat stocks in top EU exporter France are fast selling out while the bloc's second largest producer Germany is facing last minute rain damage to its harvest, they said. Grain prices surged to two-year highs in early August as Russia's worst drought in a century devastated crops and the country stunned importers by imposing a sudden grain export ban up to Dec. 31. A huge wave of French wheat sales was made to fill the vacuum left after Russia, the world's third largest wheat exporter last year, tore up its sales contracts to huge grain consuming countries in the Middle East. But the lucrative tidal wave of unexpected export business might wipe French grain stores clean early in the season while German wheat export supplies may be strangled by constant rain during the country's harvest, market observers say. Some traders estimate a massive 4 million tonnes of French wheat has already been sold for export in the first two months of the new season as importers like Egypt, Tunisia, Yemen and Libya make multi-million dollar wheat purchases to make their bread after previously counting on Russian supplies. Some trade estimates put the French wheat export surplus at only 8-9 million tonnes in the entire year-long 2010/11 season. "I think France still has a fair amount of wheat available for sale and will continue selling for a while," said Keith Flury of German commodity analysts FO Licht. "But I think the US has large wheat stocks and I think we will see more sales by the US into the huge North African/Middle East market soon." In a rush to make up for lost Russian wheat, Egyptian state buyer GASC has bought 720,000 tonnes of French wheat alone in August - its first French purchase since early June - while traders said some 250,000 tonnes of French wheat was being shipped in August to Egyptian private buyers. "The first exporter to benefit from Russia's pullback from the export scene is the European Union, France in particular," said Emmanuel Jayet, agriculture analyst with Societe Generale. "But the availability of European wheat exports could soon be tested," he said, stressing the US Department of Agriculture's estimates 2010/11 EU wheat stocks at their lowest level in over a decade. Signs of greater US sales are intensifying. On Thursday, weekly export sales data of US corn, soybeans and wheat hit the highest point ever for the three crops combined. But export licences for EU soft wheat this week also surged to 856,000 tonnes from 324,000 in the previous week and mostly under 300,000 tonnes per week in the rest of August and July. "I do not think this rate of EU export which is mainly to the Middle East and North Africa, can be kept up," one trader said. "France is selling out and Germany has a quality issue from rain, we basically do not know how much German wheat will be good enough for export. "Recent Egyptian purchase tenders have shown that US wheat is priced at around the same level as EU and is only being held back by higher shipping costs, but this could change quickly if EU supplies tighten and prices rise." But the US will not have an open road to the Middle Eastern markets. "Australian and Argentine wheat is also expected to make big inroads into the Middle East market especially from around December when new crops arrive in bulk," a trader said. Canada has also been making heavy sales. "The Canadians are virtually giving their wheat away at the moment but it must also be remembered that Canadian wheat is generally of lower quality." Meanwhile, some exporters believe the full impact of the ban by Russia, which is seen needing to import millions of tonnes of grain itself, is still not fully assessed. It is the Ramadan holy fasting period in Islamic countries and state decision-making is traditionally seen as slow because of holidays. "Egypt has been the fastest to react but we have not heard from several big countries in detail about how they intend to replace Russian wheat which has been taken away from them following the Russian export ban," a trader said. "We have still not heard the end of this."
