Wheat Exporter Stocks Projected at 5-Year High;Export Prices Drop to 5-Year Lows

The projected glut in 2015/16 global wheat supplies is pressuring export prices to the lowest level since July 2010. While world production and consumption are forecast at a record and global trade at a near-record, stocks continue to build. Although lower prices are stimulating additional demand, it is not enough to offset burdensome supplies. Exporter stocks are generally available to the world, and are therefore inversely related to global prices.

The United States and the European Union (Western Europe, in particular) have ample storage facilities and, combined, are expected to carry over 60 percent of 2015/16 exporter ending stocks. Although U.S. export prices are at a 5-year low, they remain mostly uncompetitive beyond traditional markets, resulting in stocks projected at a 6-year high. Production in the EU is projected at a record and stocks are at an 8-year high. While EU exports are the second highest ever, intensified competition with Russia and Ukraine is constraining exports. It is likely that exporter prices will remain under downward pressure, but much depends upon the development of the 2016/17 Northern Hemisphere wheat crop.

OVERVIEW

Global production in 2015/16 is raised to a new record level based upon larger-than-anticipated crops in Canada and the EU. Elevated global trade results in higher exports in Argentina, Canada, and Ukraine, more than offsetting a cut in the EU. U.S. exports and the season-average farm price are both unchanged this month.

U.S. PRICES:

Domestic: Prices for all U.S. wheat classes fell to some degree in the last month. Although Hard Red Spring (HRS) rebounded slightly, overall HRS was down $1 to $247/ton. Hard Red Winter (HRW) dropped $8 to $210/ton. Soft White Wheat (SWW) fell $11 but remains just above

HRW at $211/ton. Soft Red Winter (SRW) prices experienced the sharpest decline, dropping $20 to $202/ton.

TRADE CHANGES IN 2015/16

Selected Exporters

  • Argentina is raised 1.0 million tons to 6.5 million on the announced elimination of export taxes and quotas by the incoming government.
  • Canada is up 500,000 tons to 21.0 million on the continued strong pace of trade to date and a larger than anticipated crop.
  • European Union is down 1.0 million tons to 32.5 million on a slower than expected pace and sluggish export licenses.
  • Ukraine is boosted 500,000 tons to 15.5 million based upon a significantly faster pace of feed-quality wheat shipments, particularly to Southeast Asia.

Selected Importers

  • Ethiopia is raised 300,000 tons to a record 1.9 million as the government is expected to announce additional tenders in response to severe emergency food needs in droughtstricken areas and to replenish diminishing stocks.
  • Indonesia is up 300,000 tons to 8.1 million due to recent purchases of feed-quality wheat, particularly from Ukraine.
  • Thailand is lifted 300,000 tons to 3.5 million on the fast pace of trade to-date, particularly feed-quality wheat. Domestically, reports of rotten rice largely unsuitable for use in animal feed rations further enhances the likelihood of continued feed-quality wheat purchases.