Grain. World Markets and Trade. Sep 2013 Sept. 13, 2013
Rising Exporter Wheat Production Meets Surging Import Demand
As a whole, major exporting countries’ wheat production is projected to reach a near-record, boosting exportable supplies. The Black Sea region accounts for most of the increase, but the EU and Canada are also up significantly. The United States is the only exporter with a smaller crop, but even so, exports are projected higher than last year.
In the past 2 years, global trade was driven by wheat substitution for corn in feed rations. Tight corn supplies and high prices created incentives for feeders to use more wheat. As the Northern Hemisphere corn harvest progresses, less feed-quality wheat will be imported as a result of ample corn supplies and plunging prices.
Import demand for milling-quality wheat, on the other hand, is surging. This is evidenced by greater U.S. export commitments (shipments plus outstanding sales) that are up 38 percent from last year, and strong EU export licenses which are double a year ago. In July and August, Russia exported nearly 30 percent (5 million tons) of its full-year projection. Wheat prices have tumbled as the record Northern Hemisphere wheat harvest nears completion. Some countries, China, Egypt, and Pakistan for example, are aggressively buying cheaper wheat to replenish depleted reserves.
WHEAT: WORLD MARKETS AND TRADE
Global production for 2013/14 is raised this month and projected at a record, mostly driven by larger crops in Canada and the EU. Trade is up marginally. U.S. exports and the season-average U.S. farm price are unchanged. For 2012/13, global trade is unchanged.
Domestic: Over the past month, wheat prices were mixed, but nearly unchanged. Hard Red Winter (HRW) dropped $6 to $312/ton and Soft Red Winter (SRW) slid $8 to $268/ton. Hard Red Spring (HRS) rose $3 to $323/ton and Soft White Wheat (SWW) increased $2 to $281/ton.
TRADE CHANGES IN 2013/14
• Canada is up 500,000 tons to 20.5 million, the highest in 19 years, due to an enormous crop.
• European Union is boosted 1.0 million tons to 23.0 million supported by strong earlyseason export licenses as well as a larger crop.
• Paraguay is lowered 300,000 tons to 700,000 based on frost-induced production losses.
• United Arab Emirates is cut 400,000 tons to 300,000 due to more competitive direct shipments of wheat and flour from Black Sea exporters.
• Uzbekistan is down 300,000 tons to 400,000 as abundant Kazakh flour exports are expected to displace Uzbek shipments to Afghanistan.
• Egypt is boosted 500,000 tons to 9.5 million on the pace of recent purchases.
• Iran is up 500,000 tons to 4.5 million on a smaller crop.
• South Korea is lowered 500,000 tons to 4.3 million in response to tender cancellations for feed-quality wheat and accelerated purchases of lower-priced corn.
• Saudi Arabia is cut 300,000 tons to 2.7 million because the government has not approved an import subsidy for feed-quality wheat.
• United States is raised 200,000 tons to 3.7 million on expectations of larger purchases of Canadian wheat.
TRADE CHANGES IN 2012/13
Selected Exporters - based on trade data
• India is raised 319,000 tons to 8.6 million tons.
• Uzbekistan is lowered 300,000 tons to 400,000 tons.
Selected Importers - based on trade data
• European Union is cut 400,000 tons to 5.3 million.
RICE: WORLD MARKETS AND TRADE
Still at record levels, global production and consumption for 2013/14 are projected down slightly from last month, largely due to a smaller crop in China. Ending stocks, virtually unchanged month-to-month, are expected to grow for the seventh consecutive year. Trade in 2013 and 2014, on the other hand, is up marginally from last month on Iranian demand but still slightly below the 2012 record.
Quotes for Thai 100B dropped more than $40/ton this month, cutting the premium over Viet 5% to around $85. Largely policy-driven, the price gap between these suppliers has been volatile since mid-2009, ranging from $8/ton to over $200 on more than one occasion. The most recent widening occurred when the Thai government drove prices up by purchasing domestic supplies while Vietnamese traders dropped prices to compete with India. Thai quotes are now plummeting as the government tries to sell its massive stocks. Huge exportable supplies in the region are pushing quotes down elsewhere in Asia, though to a lesser degree.
• Brazil is down 100,000 tons to 750,000 in 2013 on a slow pace of shipments, especially to West Africa.
• India is raised 300,000 tons in 2013 and 2014 to 10.0 million and 9.3 million, respectively, on account of greater trade with Iran.
• Iran is up 300,000 tons to 1.8 million in 2013 and 2014 on the pace of purchases from India.
• Philippines is cut 500,000 tons to 1.0 million in 2013 on a slow-down in shipments from Vietnam. The pace is expected to continue into 2014, causing a 100,000 ton drop to 1.1 million.
COARSE GRAINS: WORLD MARKETS AND TRADE
World corn production in 2013/14 is down as smaller crops in Argentina, Canada, and Serbia more than offset higher production in the United States. Global trade is largely unchanged, despite softening prices, prompting South Korea to boost corn feeding at the expense of wheat.
The U.S. export estimate is unchanged but the season-average farm price is lowered as expectations for a record crop pressure prices. For 2012/13, U.S. exports are unchanged for the Oct/Sept trade year; the season-average farm price is reduced slightly.
Chinese sorghum is boosted 300,000 tons to 700,000 for 2013/14 based on reports of purchases from Australia and the United States. (Imports for 2012/13 are also boosted sharply, to 500,000 tons.) Although the exact timing of shipments is uncertain, total sorghum imports by China through the second half of calendar year 2013 are expected over 1.0 million tons. Since privatesector corn import quotas have been exhausted and are not available again until January 2014, sorghum has emerged as a price-competitive alternative to domestic Chinese feed grains.
U.S. corn quotes have shed over $90/ton since the peak in early July. In recent days, Brazilian prices have dropped as the country resumes shipments of its record 2012/13 crop. Ukraine has begun to harvest a record crop, pressuring global prices.
TRADE CHANGES IN 2013/14
• Brazilian corn is raised 500,000 tons to 20.5 million because shipments are expected to accelerate as the soybean export campaign subsides (2012/13 exports are cut 500,000 tons to 26.5 million).
• Paraguayan corn is cut 300,000 tons to 2.0 million and Serbian corn is lowered 400,000 tons to 1.6 million due to smaller crops.
• Canadian and Ukrainian barley are each up 200,000 tons, to 1.4 million and 2.2 million, respectively, because of larger production and less competition from Russia.
• Russian barley is cut 500,000 tons to 3.3 million on reduced exportable supplies.
• U.S. sorghum is raised 200,000 tons to 4.0 million because of strong demand from China and greater exportable supplies.
• South Korean corn is raised 500,000 tons to 9.4 million as relative prices improve corn’s competitiveness against wheat for feeding.
TRADE CHANGES IN 2012/13
Selected Exporters – based on trade data
• Argentine corn is down 500,000 tons to 23.0 million.
• EU corn is boosted 200,000 tons to 1.9 million.
• South African corn is up 300,000 tons to 2.2 million.
• Ukrainian corn is trimmed 200,000 tons to 13.3 million.
• EU barley is raised 500,000 tons to 4.8 million.
• Argentine sorghum is cut 200,000 tons to 3.4 million.
• Australian sorghum is boosted 200,000 tons to 1.2 million.
Selected Importers – based on trade data
• EU corn is up 500,000 tons to 11.3 million.
• Tunisian barley is raised 300,000 tons to 800,000