Wheat Market: U.S. Export Pace Quickens

Wheat heads. Photo: Oklahoma State University

As wheat futures hit contract lows, trade negotiations with China wind on and the window for export sales delivered in marketing year 2018/19 (June to May) draws to a close, U.S. Wheat Associates (USW) sees a more optimistic picture in the U.S. Department of Agriculture’s (USDA) most recent series of commercial sales data.

During and after the partial U.S. government shutdown, which spanned from Dec. 22, 2018, to Jan. 25, 2019, industry “buzz” was increasingly skeptical that the United States would hit the USDA’s 2018/19 wheat exports projection of 27.2 million metrics tons (MMT).

Given that the USDA’s final commercial sales release before the shutdown (as of Dec. 13, 2018) revealed a 12 percent lag in the year-to-date export pace in December 2017, implying a U.S. export pace of 438,800 metrics tons (MT) per week would be needed to hit USDA’s final trade estimate, numerous trade stories that circulated in January and February did little to mitigate industry consensus.

However, actual sales data gathered during and after the shutdown and released in late February revealed a far more robust trade environment for U.S. wheat. When up-to-date commercial sales information emerged again, it revealed a remarkable uptick in weekly average wheat exports compared to the same six weeks in 2017/18.

Significantly, the numbers showed U.S. wheat exports surpassed last year’s year-to-date sales in a matter of weeks despite uncertainty surrounding the partial government shutdown, delayed USDA reports, domestic weather and transportation issues, and virtually no access to the Chinese market.

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Total exports between Jan. 4 and Feb. 14, 2019, reported on Feb. 22, 2019, totaled 3.57 million metric tons (MMT), which is more than double the accrued export level during the same time last year. In 2017/18, the weekly average export volume totaled 292,000 metric tons (MT) during the six weeks in question.

While exact total sales per week between Jan. 4 and Feb. 14, 2019, are unreported, the weekly average sales pace (3.57 MMT divided by six) hit nearly 600,000 MT. A similarly high export pace continued between Feb. 15 and Feb. 21 and totaled 476,400 MT, a 149 percent increase over the same week in 2018.

Between Dec. 13, 2018, and Feb. 21, 2019, the United States averaged 582,343 MT per week in commercial sales.

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To date, U.S. commercial sales of wheat for marketing year 2018/19 total 22.0 MMT, 81 percent of the USDA’s total projected exports and 2 percent ahead of last year’s commercial sales pace.

With 13 weeks left in marketing year 2018/19, the United States must now export, on average, 403,077 MT per week to hit the USDA’s final export projection of 27.2 MMT, or 8 percent less per week than was required as of mid-December.

USW cannot predict the future pace of U.S. wheat export sales, but the new data does call into question some pessimism about USDA’s sales 2018/19 estimate. If U.S. FOB prices remain more cost-competitive and late-season logistical challenges ease, the United States is in a better position than before to hit the USDA’s wheat export prediction of 27.2 MMT by May 31, 2019.

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