Wheat Outlook: Russian Exports Raised to New Record, U.S. Exports Cut by 25Mln Bushels

Unseasonably mild weather in Russia facilitated winter grain shipments, while sustained price competitiveness continues to stimulate global demand for Russian wheat. Projected exports for 2017/18 Russian wheat are raised a further 1,500,000 tons this month to a new record 37.5 million tons.

Faced with strong competition from Russia, Argentina, Canada, and other wheat-exporting nations, the U.S. share of global trade continues to fall. Rising domestic prices for U.S. wheat put further downward pressure on the 2017/18 export projection, lowered 25 million bushels this month to 925 million.

The U.S. all wheat season-average midpoint price is raised a nickel to $4.65 per bushel.

Domestic Outlook

Domestic Changes at a Glance

  • U.S. all wheat exports for 2017/18 are trimmed 25 million bushels to 925 million on rising relative prices for U.S. wheat.
  • The season-average farm price is raised 5 cents to $4.65 per bushel on strengthening cash prices.
  • At USDA’s Agricultural Outlook Forum (AOF), February 22-23, updated 2018/19 projections for wheat and other commodities were presented.
  • USDA, NASS Prospective Plantings and Grain Stocks reports are due out on March 29 and will provide details on third-quarter stocks and domestic use, as well as, farmer expectations for wheat planted area by class for the 2018/19 marketing year.

U.S. Exports Lowered for Second Consecutive Month

The U.S. wheat balance sheet is little changed this month with the exception of modest updates to 2017/18 exports and ending stocks.

All wheat exports for the current marketing year are lowered 25 million bushels to 925 million, down 130 million bushels from the 2016/17 estimate, and the fourth lowest volume in the past decade.

Through February, domestic wheat prices generally strengthened, reducing U.S. wheat’s competitiveness in international markets.

Argentina and Russia continue to be formidable forces in global wheat trade and to limit export marketing opportunities. The U.S. share of total global exports has fallen to 13.8 percent in 2017/18, down from near 20 percent just 5 years ago for the 2012/13 marketing year.

Grain News on AgFax

In 2012/13, Russia’s share of global wheat exports was slightly above 8 percent; Argentina’s share was just 2.5 percent. Based on updated 2017/18 export projections, Russia’s share of world trade is now slightly above 20 percent, while Argentina’s share is nearing 7 percent.

By class, U.S. exports of Hard Red Winter (HRW) wheat are lowered 15 million bushels this month to 380 million; Hard Red Spring (HRS) exports are lowered 10 million bushels to 235 million.

In both domestic cash and export markets, prices for HRW have trended sharply higher since late January. Prices for both HRW and HRS have been partially supported by concerns about dry and droughty conditions—first in the key spring wheat growing States of the Northern Plains towards the end of the summer and more recently in key winter wheat growing States located in the Southern Plains.

Strengthening HRW cash prices have contributed to rising export prices. U.S. HRW (11.5% protein) Gulf export prices have climbed steadily since early December and have been at least $24 per ton above Argentinian and Black Sea Milling wheat export prices since that time.

More recently, separation between the U.S. HRW FOB price and these comparator prices has expanded and, on March 5th, the U.S. price rose to $67 per metric ton above the Argentinian price and $56 above the Black Sea Milling price.

The growing differences underscore the weakening competitiveness of the U.S. in export markets and support the 15 million bushel reduction in winter wheat exports. See Wheat Data tables for an updated time series for various prices for wheat by class in a variety of domestic and international locations. Please also see this month’s Wheat Outlook International section for more details on global developments.

This month’s 25 million bushel export reduction lifts carryout by 25 million bushels, now forecast at 1,034 million bushels and 146 million below last year’s figure. Last year’s ending stocks of 1,180 million bushels were the highest since 1987/88 when stocks exceeded 1,260 million.

However the stocks-to-use ratio in the earlier year was 46 percent and compares to the 55 percent associated with the 2016/17 marketing year and the now 50 percent projected for the 2017/18 marketing year.

Slackness in the all wheat balance sheet is projected to improve some in 2018/19, with total use rising to 2,062 million bushels and carryout down to 984 million with an implied stocks-to-use ratio of near 48 percent.

The all wheat season average farm price is increased 5 cents this month to $4.65 per bushel on rising cash wheat prices. More than 80 percent of the 2017/18 crop is estimated to have been marketed to date, lessening the impact of the recent surges in cash wheat prices on the 2017/18 average farm gate price.

The current projection compares favorably to the $3.89 per bushel received by wheat farmers in 2016/17 when ample stocks of lower-protein wheat weighed down prices. Improving prices for spring wheat in 2017/18 are expected to encourage increased plantings in 2018/19.

Full report.

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