The spurt in demand by importers for wheat, following the exit of drought-stricken Russia from the market, has left European Union exports running at an "unsustainable" pace, the regional arm of FCStone said.

The pace of exports is running ahead of that in 2008-09, when they hit a bumper 25m tonnes, despite a significantly weaker harvest this year and robust internal consumption.

 "Price has not rationed [domestic] demand", FCStone said, noting forecasts that the region's own wheat consumption was set for only a small dip despite a rise of nearly 70% in London and Paris futures prices since late June.

'Concerted effort'

The squeeze was likely around February-March to see Europe's wheat exporters hand over much of their trade to America, FCStone said. Indeed, the broker raised questions that even the 22m-tonne estimate that the US Department of Agriculture has for EU shipments was achievable.

"By March, we are going to see a concerted effort to alleviate the current export pace," Jaime Nolan, commodity risk manager at FCStone Europe, told Agrimoney.com.

The broker "would assume" that this market signal would be reflected in a growing premium of European wheat prices over those in Chicago.

Prices of London and Paris wheat have already, in rising by some two-thirds since the start of the rally in late June, outperformed those in Chicago, which have appreciated by about one-half.

'Price itself out'

However, European grain may already be high enough to deter importers, Glencore, the commodities giant, said in a market report.

Argentina and Australia, the major southern hemisphere producers - which are starting harvest and preparing themselves to exploit the void in world wheat demand - have both won business this month through tenders by Egypt, the world's top importer of the grain.

In the latest tender, last week, French and US wheat were "virtually identical" when freight costs were taken into account.

The tender "demonstrated how EU wheat is beginning to price itself out of future export business", Glencore said.

Spain turns exporter

FCStone added that squeezes in European supplies, exacerbated by a year which was too dry for many producers, such as France, and too wet for others, such as Poland, was being reflected in unusual trade dynamics within the EU.

"Feed and lower grade bread-making wheat [are] moving in new directions," the broker said.

France, a huge exporter of milling wheat to Egypt, was continuing to buy German and UK feed wheat, and had now begun buying bread wheat from Spain, a country usually among Europe's largest importers.