OVERVIEW

For 2017/18, global production is up this month as even larger crops are expected for Russia and Turkey. Global trade is forecast little changed, with smaller imports for Iran and Turkey more than offsetting stronger demand from Indonesia. Exports are lowered for Australia and the European Union, but raised for Russia, Turkey, and Ukraine. U.S. trade is unchanged this month. The season-average farm price is lowered $0.20 to $4.60 per bushel, reflecting the recent downturn in prices and growing international competition.

US PRICES

Overall, wheat prices were down in August, largely on international market competition from the Black Sea Region, which continues to have record-large supplies. Hard Red Spring (HRS) plunged $45/ton to $277, as prices declined on the better-than-expected harvest. Hard Red Winter (HRW) fell $15/ton to $202, while Soft Red Winter (SRW) declined $14/ton to $180 and Soft White Winter (SWW) was down $11/ton to $201.

U.S. Export Pace Booming to Start 2017/18, but Total Exports Still Forecast Lower

Despite a robust start to the year, U.S. wheat exports for 2017/18 are forecast down amid a smaller crop and large competitor supplies. Still, U.S. export commitments (accumulated exports plus outstanding sales) in the first three months of the 2017/18 marketing year (JuneMay) are comparable to the same period last year as slightly higher accumulated exports mostly offset lower outstanding sales. U.S. wheat has been competitive in the global market in recent months, with large shipments to Japan, Mexico, the Philippines, and Nigeria. With abundant carryin supplies, combined with a slightly earlier harvest than some competitors, the United States had relatively strong exports in the early months of the marketing year. However, tighter new-crop supplies, particularly of high-protein spring wheat, will likely lead to slower exports later in the year.

U.S. wheat exports also face strengthening international competition, particularly from the European Union and Russia. The European Union is harvesting a larger crop than last year and is poised to reinvigorate its exports to North African markets. Russia has been a growing force in the export market over the past 5 years. With a record crop and massive carryin stocks, Russia is expected to be the world’s leading wheat supplier, setting a new record for its exports. The pace of exports from both countries is likely to accelerate through much of 2017/18. Competition elsewhere continues as Canada is forecast to export a similar amount as in the previous year. Argentina, Australia, and Ukraine are forecast at historically high levels, but slightly below last year. Considering that global import demand is projected nearly unchanged from last year, these abundant exporter supplies portend a year of tight competition for global market share.

TRADE CHANGES IN 2017/18

Selected Importers

  • Indonesia is raised 500,000 tons to 10.5 million based on larger expected consumption growth.
  • Iran is cut 700,000 tons to 500,000 due to the recent imposition of a ban on wheat imports.
  • Iraq is up 200,000 tons to 2.7 million based on the recent uptick in purchases from government tenders, as well as reports of a lower-quality domestic crop.
  • Syria is down 200,000 tons to 700,000 on lower expected demand based on reduced 2016/17 imports.
  • Turkey is lowered 400,000 tons to 5.0 million based on a larger domestic crop.

Selected Exporters

  • Australia is cut 1.0 million tons to 21.0 million based on a smaller crop as well as lower carryin supplies caused by revisions to the 2015/16 and 2016/17 crops.
  • European Union is reduced 1.0 million tons to 28.5 million based on a smaller crop, a slow early pace of exports, and growing competition from Russia.
  • Russia is raised 1.0 million tons to 32.5 million based on a record crop and competitive prices.
  • Turkey is up 300,000 tons to 6.5 million due to larger supplies and growing demand for imported flour in Iraq.
  • Ukraine is up 500,000 tons to 16.5 million based on expectation of declining domestic consumption and competitive exports.