The pace of HRW exports so far has been below average and will need to accelerate to reach the current export forecast of 8.7 million tons (320 million bushels). As of November 29, HRW total commitments (accumulated exports plus outstanding sales) are down one-third compared to last year.
Commitments to Mexico and Nigeria in particular are down from last year, but have begun to improve in recent weeks. This class has been the most heavily impacted by international competition this year as Russia’s robust pace of exports has left little demand for HRW outside of typical customers.
However, Russia’s export pace is expected to slow in the coming months as exportable supplies taper off. This would provide an opportunity for HRW exports as this class of wheat fits a similar demand profile when it is priced competitively.
HRW Closing the Price Gap with Russia
Russia’s prices were very low at the time of its winter wheat harvest in July and August. At that time, Russia’s supplies were plentiful based on large carryin and the third-largest crop on record. Russia’s price advantage has greatly diminished since then as those supplies have become tighter amid an frenetic pace of exports.
This improving price competitiveness for U.S. wheat, combined with the recent pickup in export sales, is an indicator of a changing competitive dynamic.
HRS Exports Expected to Rebound in 2018/19
U.S. HRS exports are expected to reach a robust 8.2 million tons (300 million bushels), up 31 percent from last year and above the 5-year average. Total commitments of this class as of November 29 are up 6 percent from last year. This year, HRS exports to China have dropped off completely based on the retaliatory duties placed on U.S. wheat.
Exports to Latin America are down from last year based on strong competition from Canada in several key markets. However, demand has been strengthening in other countries such as the Philippines and Bangladesh.
As Australian Crop Withers, Buyers Turn to the United States and Canada
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The primary competition for U.S. HRS exports to much of the Asia-Pacific region comes from Canada and Australia. Canada’s exports are forecast to reach 24.0 million tons, the second-highest on record. In addition to filling in for Australia’s diminished presence in the Asia region, Canada is in a prime position to fill in for reduced U.S. exports to China. Canada is the largest competitor for U.S. HRS with much of its exports being a similar type of high-protein spring wheat.
It is atypical that U.S. HRS would have strong exports while Canada also has near-record shipments, but it is possible this year in light of strong Asian demand and weakened competition from Australia. Australia has much tighter supplies this year due to a severe drought, so buyers have had to turn to other suppliers to meet demand.
SRW Export Pace Picking Up
SRW exports are forecast at 3.5 million tons (130 million bushels), up more than 40 percent from last year. Total commitments, however, are only up slightly from a year ago. Sales have been slow and steady throughout much of the year, but picked up in recent weeks based on successful bids in Egypt’s GASC tenders.
At FOB prices, SRW is now selling at a discount to Black Sea wheat, which should allow for at least a small amount of exports to continue into North Africa in addition to sales to typical buyers such as Mexico.
White Wheat Exports Forecast at Highest Level in More Than 20 Years
U.S. white wheat exports are forecast at 5.3 million tons (220 million bushels), up 14 percent from last year and the highest since 1996/97. However, sales to date are actually down from a year ago, mainly due to lost sales to China. Exports are expected to pick up in the coming months based on strong demand from Asian countries. Drought in Australia, the main competitor for U.S. wheat in the region, should push more demand to U.S. white wheat.
Record Pace of Russian Wheat Exports
Russia’s exports are projected down from last year’s record based on smaller exportable supplies. However, its export pace currently is actually stronger than last year. With massive supplies and a price advantage, Russian wheat has dominated the global market for several months. The forecast for Russia’s exports is raised this month to 36.5 million tons, but monthly shipments are still expected to slow as winter arrives and supplies become tighter.
As this occurs, the U.S. export pace will likely pick up as its pricing becomes more competitive. Recognizing that large carryin stocks are a significant reason for the robust early pace of shipments, Russia’s 2017/18 feed and residual has been trimmed 1.0 million tons to 20.0 million and 2018/19 beginning stocks are boosted by the same amount.