OVERVIEW

Global wheat production, already at a record, is raised even higher this month mainly on larger crops in Argentina, the EU, and Russia. Global trade is boosted to a new record with stronger import demand from several Asian countries and Brazil. Larger exports for Australia, Argentina, and the EU are partially offset by a decrease for Canada. The U.S. season-average farm price is raised $0.10 to $3.80 per bushel.

U.S. PRICES:

Price changes for wheat classes were relatively modest during December. Hard Red Winter (HRW) was up $8/ton to $191 and Hard Red Spring (HRS) gained $2/ton to $255 based on a slight pickup in foreign demand, highlighted by India's announced elimination of its import duty. Soft Red Winter (SRW) and Soft White Winter (SWW) were both down $1/ton to $174 and $187 respectively, continuing to be weighed by large global supplies.

INDIA SHIFTS TO NET IMPORTER AS SUPPLIES TIGHTEN

India's wheat supplies in 2016/17 have tightened relative to growing domestic demand, leading the country to shift from a net exporter to a net importer. Reacting to tight supplies, the government eliminated its import duty in December 2016. Imports are estimated at 3.7 million tons in 2016/17, which would be the highest in 10 years. This is particularly noteworthy given that just 3 years ago India was exporting over 6 million tons, making it the eighth largest exporter at the time.

This is not the first time that India has switched from an exporter to an importer. India followed a similar pattern in 2005/06 when production was down and stocks were exceptionally tight. Akin to the current situation, the government eliminated its import duty and imports surged in 2006/07 to the highest level in over 30 years (6.7 million tons). Furthermore, exports were banned during that period. With a build-up in supplies toward the end of that marketing year, the duty was reinstated and imports fell substantially the next year. Production and stocks grew for several years until the export ban was lifted in 2011 and India re-emerged as a net exporter.

India's recent exports have mainly been to Bangladesh, Indonesia, and the United Arab Emirates. Currently a net importer, India joins these markets in sourcing wheat from Australia, Russia, and Ukraine. With abundant global supplies, it will not be difficult to find the needed wheat in exporting countries.

TRADE CHANGES IN 2016/17

Selected Exporters

  • Argentina is up 800,000 tons to 9.0 million on a faster pace of shipments as well as a larger crop.
  • Australia is boosted 500,000 tons to 23.5 million due to ample supplies, competitive prices, and larger expected demand from Asian countries.
  • Canada is lowered 500,000 tons to 21.0 million due to slower-than-expected exports.
  • The EU is raised 500,000 tons to 25.5 million based on a faster-than-expected pace of trade.
  • Ukraine is lifted 200,000 tons to 15.7 million based on stronger demand from Asian countries.

Selected Importers

  • Bangladesh is raised 200,000 tons to 5.3 million on a stronger pace of trade and higher expected food use.
  • Brazil is up 300,000 tons to 7.3 million on rebounding food use, evidenced by the fast pace of trade.
  • India is boosted 700,000 tons to 3.7 million as the removal of the import duty is expected to spur additional demand.
  • Vietnam is up 300,000 tons to 3.6 million based on stronger trade and expectations of larger feed and residual use.