OVERVIEW

For 2017/18, global production is raised on a larger Russian crop. Global trade remains a record as import changes are mainly offsetting. Higher exports for Argentina are negated by a reduction for the EU, which is still expected to be the largest exporter. U.S. imports are forecast larger and exports are unchanged. The season-average farm price is projected $0.05 higher at $4.30 per bushel.

For 2016/17, global production, already a record, is raised marginally. Global trade is revised up slightly, highlighted by larger imports for Brazil and Chile and decreases for Ethiopia and Iran. Exports for Argentina and Ukraine are boosted. U.S. imports are raised marginally and the U.S. season-average farm price is unchanged at $3.90 per bushel.

PRICES:

Wheat prices were mixed in May, where Hard Red Winter (HRW) gained $4/ton to $201, while Hard Red Spring (HRS) rose by $10/ton to $262. HRS continues to rise based on tightening supplies of high-protein wheat and concerns of dry conditions in spring wheat production regions. On the other hand, Soft Red Winter (SRW) and Soft White Winter (SWW) declined $2/ton to $178 and $8/ton to $185, respectively.

U.S. Wheat Price Competitiveness Improved Greatly In 2016/17

The price competitiveness of U.S. wheat relative to other suppliers has had a major impact on total exports in recent years. Throughout nearly all of the 2015/16 U.S. Marketing Year (June-May), Hard Red Winter (HRW) maintained about a $30 per ton premium above EU and Black Sea origins based on abundant competitor supplies and the strong U.S. dollar. This price premium, particularly when combined with freight and logistical advantages for EU and Black Sea exports, kept the United States largely shut out of major wheat markets in North Africa and the Middle East. Furthermore, the U.S. share was also reduced in traditional markets such as Mexico and Nigeria as buyers sourced less expensive wheat. This competition reduced U.S. wheat exports to the lowest level in 44 years, which led to a build-up in stocks.

At the end of 2015/16 and into early 2016/17, U.S. prices became more competitive due to a bumper domestic harvest and lower-than-expected wheat production in the EU. Late rains reduced the size and quality of the French crop, providing the United States with an opportunity to supply wheat into North Africa. This allowed the United States to export 853,000 tons to Morocco compared with only 20,000 a year earlier. Morocco’s overall import demand was elevated in 2016/17 based on severe drought. Similarly, exports to Algeria reached 684,000 tons compared with 90,000 the previous year. Spurred by large supplies and more competitive prices, U.S. exports also rebounded to both Mexico and Nigeria. Overall U.S. exports in 2016/17 are estimated up about one-third from the previous year, making the United States the largest exporter for the first time in 4 years.

In 2017/18, the EU is expected to regain its position as the world’s leading exporter given its significantly larger crop. The United States, on the other hand, is projected to have a much smaller crop, which is offset by the largest beginning stocks in 29 years. U.S. exports are forecast slightly lower in light of large EU supplies and continued competition from Russia, which is projected to be the second-largest exporter. Still, U.S. wheat exports are expected to remain well above the level of 2015/16 based on robust global demand and abundant carry-in supplies.

TRADE CHANGES IN 2017/18

Selected Importers

  • Iran is cut 500,000 tons to 1.5 million on abundant domestic supplies.
  • South Africa is up 200,000 tons to 1.8 million based on a smaller expected crop.
  • United States is up 200,000 tons to 3.5 million reflecting tightening supplies of highprotein wheat.

Selected Exporters

  • Argentina is raised 500,000 tons to 11.5 million due to improved crop prospects.
  • European Union is cut 500,000 tons to 30.5 million based on a smaller crop in Germany.

TRADE CHANGES IN 2016/17

Selected Importers- based on trade data

  • Brazil is boosted 200,000 tons to 7.7 million.
  • Chile is raised 300,000 tons to 1.3 million.
  • Ethiopia is lowered 200,000 tons to 1.3 million.
  • Iran is cut 400,000 tons to 800,000.
  • United States is raised 100,000 tons to 3.2 million.

Selected Exporters- based on trade data

  • Argentina is up 1.0 million tons to 12.0 million.
  • Brazil is lowered 200,000 tons to 600,000.
  • Iran is up 200,000 tons to 400,000 based on news of recent flour exports.
  • Kazakhstan is lowered 200,000 tons to 6.8 million.
  • Russia is down 500,000 tons to 27.5 million.
  • Serbia is down 200,000 tons to 1.1 million.
  • Ukraine is up 500,000 tons to 17.8 million.