Wheat Exporter Stocks Surge to Highest in 6 Years, Pressuring Prices Downward

Global wheat production is projected at a record high, outpacing consumption for the fourth consecutive year. This trend is leading to the highest exporter ending stocks since 2010/11, which is overburdening the market and pressuring prices. Major exporters are Argentina, Australia, Canada, EU, Kazakhstan, Russia, Ukraine, and the United States. These stocks are generally available to the world and thus most influential on price direction. In the United States, stocks are projected at their highest since 1987/88 and account for 41 percent of the exporter total in 2016/17.

Export prices have declined to a 7-year low, reflecting market saturation. In this low-price environment, import demand is expected to strengthen, but primarily benefiting the most competitive origins. Currently, the EU and Black Sea countries are the most competitive in price terms, and they also enjoy freight and logistical advantages to the major growth markets of the Middle East and North Africa.

OVERVIEW

Global production in 2016/17 is raised to a new record. Larger crops are projected in Argentina, Australia, Canada, Russia, Serbia, Ukraine, and the United States, while cuts in Algeria and EU crops are partially offsetting. Global trade is up month-to-month, but still slightly below last year's record. The uptick is primarily driven by larger projected imports in Algeria, Bangladesh, China, South Korea, and Turkey. Morocco and the United States are cut due to larger domestic crops. Greater exports for Argentina, Australia, Russia, Turkey, and Ukraine are partly offset by a cut in the EU. The U.S. season-average farm price is lowered $0.20 per bushel to $3.80.

For 2015/16, global trade is revised up to a new record. Imports for Bangladesh, China, Indonesia, and Thailand are all higher, while cuts in Syria and the United States are partly offsetting. U.S. exports are raised, along with Russia and Ukraine. Argentina and Canada are lowered.

U.S. PRICES:

Wheat prices, except soft white wheat (SWW), plunged in June resulting from domestic harvest pressure and large global supplies. Harvesting of the Hard Red Winter (HRW) wheat crop is nearing completion with record yields reported. HRW prices plunged $25 to $182/ton, the lowest price in 6 years. Soft Red Winter (SRW) prices dropped $27 to $177/ton, the lowest in nearly 7 years. Hard Red Spring (HRS) dipped $9/ton to $226. Soft White Winter (SWW) rose $6/ton to $203.

TRADE CHANGES IN 2016/17

Selected Exporters

  • Argentina is up 500,000 tons to 9.0 million on a larger crop.
  • Australia is boosted 500,000 tons to 17.5 million on a larger crop.
  • EU is slashed 1.5 million tons to 34.0 million as a result of a smaller crop. Domestic feed use is raised.
  • Russia is raised 500,000 tons to a record 25.5 million based on a record crop.
  • Turkey is boosted 500,000 tons to 5.5 million as the strong pace of shipments of flour and pasta products is expected to continue.
  • Ukraine is hiked 1.0 million tons to 12.5 million on a larger crop and strong demand for feed-quality wheat.
  • United States is raised 500,000 tons to 25.0 million based on a larger crop and more competitive prices.

Selected Importers

  • Algeria is boosted 500,000 tons to 8.0 million as the result of a smaller crop.
  • Bangladesh is up 300,000 tons to 4.7 million as the low price of wheat is likely to spur large purchases.
  • China is raised 300,000 tons to 3.5 million resulting from quality concerns with the current crop.
  • South Korea is boosted 700,000 tons to 5.0 million as low-priced wheat will encourage larger purchases in feed use.
  • Morocco is cut 500,000 tons to 5.0 million because of large carry-in supplies and a slightly larger crop.
  • Turkey is raised 300,000 tons to 4.8 million resulting from increased demand for flour and product exports. Turkey's inward processing regime allows duty-free imports provided that it is exported as a processed product.
  • United States is cut 150,000 tons to 3.25 million as a result of a larger crop.

TRADE CHANGES IN 2015/16

Selected Exporters- based on trade data

  • Canada is lowered 300,000 tons to 22.2 million.
  • Russia is raised 500,000 tons to 25.0 million.
  • Ukraine is boosted 1.2 million tons to 17.0 million.
  • United States is up 550,000 tons to 21.7 million.

Selected Importers- based on trade data

  • Bangladesh is raised 400,000 tons to 4.6 million.
  • China is up 300,000 tons to 3.3 million.
  • Indonesia is boosted 500,000 tons to 9.6 million.
  • Thailand is raised 300,000 tons to 4.8 million.
  • United States is lowered 100,000 tons to 3.1 million.