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OVERVIEW

Global wheat production, already at a record, is raised slightly this month mainly on a larger crop in Pakistan. Global consumption is lowered mainly on reduced U.S. feed and residual use as implied by the latest Grain Stocks report from NASS. Consequently, global stocks, which were already forecast at a record high, are raised further. Global trade is lowered marginally, but remains a record. The U.S. season-average farm price is unchanged at $3.85 per bushel.

U.S. PRICES: Overall, wheat prices were down on abundant supplies and favorable weather conditions for the month of March. Hard Red Winter (HRW) plunged $15/ton to $191, while Soft Red Winter (SRW) eased $3/ton to $182. Hard Red Spring (HRS) plummeted $15/ton to $251, but still holds a solid premium over other U.S. wheat classes. Soft White Winter (SWW) sunk $14/ton to $198 due to improving logistics in the Pacific Northwest in mid-March.

U.S. Share of Mexican Wheat Imports Rebounds

Mexico, the second-largest wheat importer in the Western Hemisphere, has historically imported around three-quarters of its needs from the United States. U.S. wheat has benefitted from a logistical advantage over other suppliers when exporting to Mexico, allowing for a consistent supply to millers. With this advantage in place, U.S. wheat only faced limited competition from Canada. However, the U.S. share of Mexico’s imports has declined in recent years, falling to only 57 percent in 2015/16. Mexico’s imports from the EU, Russia, and Ukraine grew substantially based on abundant supplies and competitive prices. These three non-traditional suppliers accounted for about 25 percent of Mexico’s imports in 2015/16.

In 2016/17, however, Mexico is forecast to import a record 5.2 million tons and the U.S. share has rebounded to 68 percent year-to-date. Favorable prospects continue as outstanding export sales to Mexico are more than double the level of a year ago. Market share has been regained from the EU, where the weather-affected French crop was not priced competitively because of limited exportable supplies. Also contributing to the resurgence in U.S. market share is competitive pricing after a large harvest. Furthermore, Mexican millers have familiarity with the quality and protein of U.S. wheat. As Mexico is the United States’ largest wheat market, the rebounding share of trade is contributing significantly to higher U.S. exports this year.

TRADE CHANGES IN 2016/17

Selected Exporters

  • Australia is cut 1.0 million tons to 23.0 million based on trade data.
  • Brazil is down 200,000 tons to 1.4 million due to the slow pace of feed-quality shipments.
  • Canada is lowered 500,000 tons to 20.0 million due to weak sales from January to March.
  • European Union is up 1.0 million tons to 26.5 million based on expectation of larger sales to Turkey.
  • Kazakhstan is reduced 500,000 tons to 7.0 million due to slower exports.
  • Pakistan is down 200,000 tons to 700,000 based on slowing demand from Afghanistan.
  • Russia is lowered 500,000 tons to 28.0 million based on Turkey imposing a tariff on Russian wheat.
  • Turkey is raised 200,000 tons to 6.0 million based on the fast pace of flour exports.
  • Ukraine is boosted 800,000 tons to 17.3 million based on demand from India.
  • United States is up 300,000 tons to 27.8 million based on the rapid pace of sales and shipments, especially to Mexico.

Selected Importers

  • Egypt is reduced 300,000 tons to 11.5 million. Although there has been a recent uptick in purchases, overall, imports are not expected to overcome the slow start to the season.
  • India is raised 500,000 tons to 6.0 million based on current trade to date.
  • Iran is down 200,000 tons to 1.2 million based on slowing trade.
  • Mexico is up 300,000 tons to 5.2 million based on purchases from the United States.
  • Syria is down 300,000 tons to 2.0 million based on the pace of trade and expectations of a favorable new crop.
  • Thailand is reduced 200,000 tons to 3.6 million based on recent feed wheat import restrictions.
  • Turkey is cut 300,000 tons to 4.5 million based on the slow pace of trade to date and the government’s decision to remove Russia from the list of duty-free wheat suppliers.
  • United States is lowered 200,000 tons to 3.0 million based on the slow pace of imports from Canada and large domestic supplies.
57 Commodity exchange

Australian grains industry at AGIC 2017