15 July 2022, Spain: Dry and hot weather in Spain and Italy towards the end of the 2021-22 marketing year could boost the former’s wheat import demand in the 2022-23 season, as lower output is likely to increase the gap between domestic production and demand.
Spanish wheat production in 2022-23 is pegged at 6.8mn t, according to data from the US Department of Agriculture’s Foreign Agricultural Service (USDA FAS), published on 12 July. This is a drop of 18pc on the year, while estimated harvested areas for the 2022-23 season have fallen by 3pc on the year.
Large parts of Spain received below 20pc of typical rainfall in the past two months, and the coming two weeks are forecast to be even drier. Northwest and central-north Spain — which account for most of the country’s wheat output — have seen temperatures two or more degrees above normal over the past two months, with the forecast for more above-average temperatures in the coming weeks.
The decrease in Spain’s own wheat production is likely to boost import demand, with demand destruction not likely to occur to a significant enough extent to cover all of the additional supply reduction. In July-April of the 2021-22 marketing year, Spain’s largest supplier of wheat imports was France, accounting for a quarter of the 4.52mn t received, with the next five-largest importers — all from the EU — accounting for a total of 70pc of supplies. With the bloc’s production in 2022-23 also forecast lower, Spain may have to look for additional suppliers.
Italy’s output decrease is less pronounced than that of Spain, with production in 2022-23 estimated at 6.3mn t, down on the year by just 5pc, under USDA FAS estimates. That said, the decrease is forecast despite an estimated marginal rise in harvested areas, up by less than 1pc on the year.
Despite the USDA’s conservative revision to expectations, Italy declared a state of emergency last week until the end of the calendar year because of drought in the areas around the Po river and the eastern Alps. Rainfall in northern Italy over the past two months has been below 40pc of the typical amount for the time of year and is not forecast to significantly improve in the coming two weeks. As for temperatures, northern Italy has been three to four degrees hotter over the past two months than usual, with conditions forecast to continue in the next two weeks.
That said, a reduction in Italian wheat output in 2022-23 is likely to have more of an impact on the country’s durum wheat fundamentals. An average of 60pc of Italy’s wheat production in 2016-2019 was durum wheat, with the country exporting some 248,300t in July-March 2021-22, accounting for 78pc of all of Italy’s wheat exports for the period.