Global Markets: Wheat – Exporter Stocks Tighten to Satisfy Record Import Demand

Global wheat trade for 2018/19 is forecast at a record, driven by strong demand resulting from rising incomes and shifting diets largely in Asia and Africa. While Argentina, Australia, Canada, and the United States are forecast to have slightly higher production, the European Union and Black Sea region (mainly Russia) are down sharply. To satisfy this growing demand, major exporters’ stocks will shrink.

After several years of record production and large carry-in supplies, major exporter ending stocks are forecast to decline about 25 percent from last year’s level. Russia is forecast again to be the top exporter despite its smaller crop. Its large stocks are expected to support the export forecast. In contrast, the United States is still expected to hold large stocks due to strong competition of low-priced wheat from the European Union and the Black Sea.

South American Wheat Imports Driven Higher by Stronger Brazilian Demand

South American wheat imports for 2018/19 are forecast at the highest level on record with Brazil accounting for nearly half of the total. Production for Brazil is expected to be larger than the weather-affected 2017/18 crop but still below average. Brazil’s imports (Jul-Jun basis) are forecast up 800,000 tons to 7.5 million in light of tight domestic stocks and rising consumption.

Brazil’s largest wheat supplier is Argentina, which is expected to have another large crop later this year (harvest begins around December). In addition to low prices, Argentina also benefits from duty-free access to Brazil (exporters from outside of Mercosur pay a 10-percent duty).

For the next several months, Argentine wheat is in tight supply and prices are not competitive, suggesting there could be more opportunities for other exporters to supply wheat to Brazil, such as the United States and Canada. Paraguay and Uruguay, also members of the Mercosur trade bloc, are regular suppliers to Brazil, but both have smaller crops this year along with little carry over supplies to be relevant exporters in the region.

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Russia could compete for some of this trade as Brazilian millers have recently completed the first purchase of Russian wheat in more than 8 years. Russian wheat was banned for import into Brazil for many years for phytosanitary reasons until December 2017.

Across the rest of the region, imports are rising slightly with demand. Colombia and Ecuador are both forecast to import more based on rising food and feed use. Chile’s imports are projected higher with a slightly smaller domestic crop and continued demand growth.

Conversely, Peru’s imports are down marginally with a larger crop. Venezuela’s imports are projected unchanged from the previous year as its economic situation has not improved.

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