France, the fourth largest wheat exporter globally (with approximately a 10% share of global exports by value), has experienced a rain deficit over the past few months combined with record high temperatures in May, a crucial month for the winter wheat crop development. According to Meteo-France, recent precipitation levels in France are the lowest recorded in the past 60 years. The drought has triggered concerns of a lower wheat output for 2022 and consequently lower exports. This caused the Euronext wheat price to increase by 7.4% week-on-week to EUR 427.5/MT on the 18th of May 2022.
The Russian-Ukraine war has further created supply shortage on the global market and France was seen as a reliable source of wheat supplies. France produces approximately 35 million tonnes of wheat annually, of which it exports half. According to a few farmers, in the worst-case scenario, their wheat crop production might take a 30%-50% hit. Without rain in the next ten days, the yield potential of French grains could be irreversibly affected, especially for soft wheat, which is entering a critical growth period.
Also, the US (second largest wheat exporter globally) and Canada (third largest wheat exporter globally) are experiencing prolonged drought periods. These global drought events in key producing and exporting countries will likely squeeze the wheat supply outlook for 2022, keeping prices elevated in the short-term.
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