Wheat. World Markets and Trade. April 2018 – USDA April 10, 2018
Sub-Saharan Africa Drives Growth in Global Wheat Imports
Global wheat trade is forecast at a record for 2017/18, with Sub-Saharan Africa projected to have the strongest year-over-year import growth of any region. In fact, over the last decade as a whole, Sub-Saharan Africa has been a major driver of rising global wheat trade. Stagnant production and rapid consumption growth have been the main motivators of rising import demand in the region. Consumption is escalating on long-term trends of urbanization, rising incomes, and population growth.
This year specifically, record global production and relatively low prices have further catalyzed import demand in Sub-Saharan Africa. Russia is an increasingly important supplier for the region as many of these markets are primarily focused on obtaining low-priced supplies. In light of Russia’s record crop and large exportable surplus, Sub-Saharan Africa’s demand growth has provided an outlet to absorb some of those excess supplies. See feature article on page 6 of this publication for more details.
After Sub-Saharan Africa, the region with the next largest projected growth in imports this year is the Middle East. There, higher imports are offsetting Iraq’s lower crop quality and Turkey’s diminished stocks. In contrast, the largest forecast reduction from 2016/17 is for South Asia on account of sharply lower imports for India due to its ample 2017 harvest. Also down from the previous year are imports for North Africa (larger crops for Algeria, Morocco, and Tunisia) and South America (reduced demand in Brazil).
For 2017/18, record global production is raised slightly this month, mainly on a larger crop for Morocco. Global trade is forecast down fractionally but remains a record. Imports are forecast up for Algeria, Japan, Kenya, Philippines, and Turkey. Exports are projected higher for Argentina, Kazakhstan, and Russia but lower for Australia and the European Union. The U.S. season-average farm price is unchanged at $4.65 per bushel.
US. Overall, U.S. wheat prices were mixed during the month of March. Hard Red Winter (HRW) plunged $25/ton to $230 on continued pressure from abundant global supplies. Beneficial rains fell across parts of the Central Plains, but the core HRW region remains in a drought. USDA published the first Crop Progress reports, indicating that the winter wheat crop is in well below-average-condition, particularly in Kansas, Oklahoma, and Texas (major HRWproducing states). Soft Red Winter (SRW) fell $9/ton to $204 amid generally favorable conditions for crop development. On the other hand, Hard Red Spring (HRS) advanced $6/ton to $284, underpinned by concerns about planting conditions in the Northern Plains. Soft White Wheat (SWW) gained $5/ton to $222.
Global: Prices for Australia and U.S. wheat are relatively competitive against each other. The Black Sea region offers wheat at lower prices, which some importing countries choose to purchase despite the lower protein content. Since mid-February, prices have been narrowing between the Black Sea region, Argentina, and the high-quality exporters. Argentina wheat prices have gradually increased on tightening supplies as much of its surplus has been exported in recent months. The recent favorable weather condition in some areas of the U.S. HRW growing region has supported a decline in prices. Competition in the market has pressured prices for Australia and the United States lower. These origins remain at a premium, but some buyers are more inclined to pay a premium for higher quality wheat when the price spread is narrow due to efficiencies gained in processing.
Growth in Demand Seen Across Many Markets in Sub-Saharan Africa
As discussed on the cover of this publication, Sub-Saharan Africa is the region propelling year to-year growth in global import demand in 2017/18. The major countries driving this change are:
• Nigeria: Imports are forecast up 5 percent from the previous year. In urban areas of the country, wheat is generally more affordable and available than locally grown staples such as cassava, millet, and yam. Furthermore, wheat has been used for humanitarian aid to insecure farming communities.
• Sudan: Imports are forecast up 6 percent, offsetting a smaller crop. Consumption is forecast higher as implied by strong imports.
• Kenya: Imports are projected at 2.3 million tons, up 30 percent from last year based on rapid consumption growth and expansion in milling capacity.
• South Africa: Imports are forecast up more than 60 percent from the previous year as the latest crop was damaged by drought.
• Ethiopia: Imports are projected up nearly 70 percent as government tendering has increased to meeting growing demand and to rebuild wheat stocks.
• Angola: Imports are forecast at 1.2 million tons, which is up nearly 200,000 tons from the previous year. The country’s milling capacity has expanded and consumption (as implied by the pace of trade) is growing rapidly.
• Tanzania: Imports are forecast at 1.1 million, up 30 percent from a year before. Rising demand for wheat products is met through imports as domestic production is less than 10 percent of consumption.
• A multitude of smaller markets, including Ghana and Mauritania, are also showing significant consumption growth, as indicated by rapid imports to-date.