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OVERVIEW FOR 2018/19

Global wheat production is up this month mainly from larger crops in India and Russia, which more than offset smaller crops for Australia and Canada. Global trade is forecast down as global wheat supplies tighten. Imports are lowered for Indonesia. Exports are forecast lower for Australia and Canada. The U.S. season-average farm price is unchanged at $5.10 per bushel.

WHEAT PRICES

US: U.S. wheat prices for the month of August were mostly down on the continued weak pace of export sales, spillover weakness from corn and soy markets, as well as mostly favorable conditions for winter wheat planting. Hard Red Winter (HRW) and Soft Red Winter (SRW) were both down $7/ton to $247 and $224, respectively, while Hard Red Spring (HRS) declined $6/ton to $264. On the other hand, Soft White Winter (SWW) rose $10/ton to $235 based on drought conditions in Australia, which is the major competitor for this class of wheat.

Global: Exporter prices were mostly stable at the end of August, except for Australia and the United States. Drought in Australia has driven its prices up rapidly, as domestic food and feed demand are prioritized over exports. U.S. export prices are down from August, narrowing the spread between U.S. wheat and EU and Black Sea wheat. Black Sea prices remained stable and are the most competitive wheat on the international market.

Month Ending Prices for Major Wheat Exporters

Month Ending

Argentina

Australia

Black Sea

Canada

EU

US

August

$240

$315

$225

$265

$243

$247

July

$240

$280

$223

$265

$246

$254

June

$253

$253

$198

$220

$209

$230

Source: IGC

Note on FOB prices: Argentina- 12.0%, up river; Australia- average of APW; Fremantle, Newcastle, and Port Adelaide; Black Sea milling; Canada- CWRS 13.5% St. Lawrence; EU- France grade 1, Rouen; US- HRW 11.5% Gulf

Australian Wheat Exports Forecast Lowest in a Decade

Australian 2018/19 wheat exports are forecast at 14.0 million tons (July-June trade year), the lowest since 2009/10, due to less production from drought-stricken Queensland and New South Wales. Wheat production is forecast at 20.0 million tons for 2018/19, which would be the lowest since 2007/08. As Australian supplies become tighter, prices have been climbing to levels significantly higher than those of other global exporters.

Although weather conditions in South Australia (SA) and Western Australia (WA) have been more favorable, drought in the east has made exports uncompetitive against other origins with domestic use forecast higher. SA and WA have been shipping wheat east to satisfy feed and food demands in the domestic market. The drought has led to early slaughter of animals, as feeding becomes more costly amid tightening supplies.

Global Wheat Supplies Tightening and Prices Trending Higher

Global Wheat Production and Consumption:

Global wheat production is forecast down 3 percent from last year to the lowest level in 4 years. The largest year-to-year reductions are for the European Union and Russia, down by a combined 28 million tons, while U.S. production is forecast higher by nearly 4 million tons. Global consumption is forecast to continue growing and is set to exceed production by 13 million tons in 2018/19, the largest global shortfall in 6 years. Food, Seed, and Industrial consumption of wheat is projected to continue rising, more than offsetting lower Feed and Residual use.

Stocks-to-Use:

The tightening of global wheat supplies is even more apparent after accounting for China’s impact. China’s stocks have surged for several years in a row and are forecast to account for more than half of global ending stocks this year. China’s large stocks, which are considered mainly unavailable to the global market, mask the extent to which global supplies are tightening. The stocks/use ratio at the end of 2018/19 for the world less China is forecast to be the tightest since 2007/08. With prices rising, many exporters are expected to ship much of their available wheat and will have more limited supplies left over at the end of their respective marketing seasons. Likewise, with higher prices, importers are expected to maintain tighter stock levels.

Wheat Prices:

Wheat prices are already on the upswing in most major exporting countries. The U.S. season-average farm price (SAFP), for instance, is forecast at $5.10 per bushel, up $0.38 from last year, but remains well below the 10-year average. Relatively low corn prices are expected to ration away some demand for feed wheat, particularly in the European Union, which partially mitigates the effect of historically tight wheat supplies.

Black Sea Trade Flows (BST Flows)

FeedDinner 2019