Spread between German, Polish and Baltic 12.5% wheat disappears

5 Jul 2023 | Serina Gothard

German 12.5% protein wheat offers have fallen to parity with other Baltic exporters over the last week, despite a period of bad weather that has raised concerns over potential production figures. 

German wheat premiums peaked at plus €10/mt over the Euronext milling wheat contract at the end of May, but have eroded as harvest picked up steam and as rivals priced more competitively. 

However, weather worries meant German 12.5% values have been slow to soften versus rivals - until a combination of poor demand and increased competition raised fears that the country could be frozen out.

Faced with the reality of the situation, German traders were compelled to reassess their pricing strategy to remain competitive.

German 12.5% was assessed at a €4/mt discount to the December Euronext contract on Tuesday, which equates to $252.25/mt, based on offers heard at a €1-3/mt discount to December.

Polish and Baltic 12.5% wheat was also assessed at a €4/mt discount to the December Euronext contract, putting them all at parity for the first time since late December 2022.

“Old crop stocks are fairly exhausted by now, but traders in Germany are still keen on putting new crop logistics on,” said one market participant, warning that sellers “can’t afford to have a wide spread against the Baltics and Poland at the moment, considering that we are seeing little demand.”

Against that, Russian 12.5% wheat continues to price even more competitively, assessed at $232/mt, $20.25/mt lower than that of the northern European countries as the country continues to try and place a record-breaking wheat crop.  

By contrast, German soft wheat production is set to reach 22.3 million mt in 2023, on par with last year's level and 2% higher than the 21.8 million mt five-year average, according to the latest data from the European Commission.   

Polish soft wheat production is expected at 13 million mt, slightly below last year’s production level of 13.4 million mt but 9% higher than the five-year average of 11.9 million mt.

The Baltic soft wheat projection is forecast at 7.2 million mt, below the 2022 forecast of 7.8 million mt.  

Between July 1, 2022, and July 2, 2023, the data from the European Commission reveals that the Baltics exported 5.06 million mt of wheat, while Germany and Poland exported 3.9 million mt and 3.5 million mt, respectively.

The price moves have come despite unpredictable weather patterns across Germany, that have caused industry sources to warn of potential trouble.

“In many parts of the country, a prolonged drought in May and June caused significant damage to crops, so yield expectations this year are again below the long-term average,” said Joachim Ruckwid, president of the German Farmers Association.

Possible damage to protein content is expected although barley, which is harvested later, does not seem to have been as badly affected.