OVERVIEW FOR 2018/19

Global wheat production is nearly unchanged this month. Global consumption is down primarily on lower feed and residual use in the European Union and Iran. Global trade is down as lower imports for Bangladesh, Saudi Arabia, the United Arab Emirates, and Vietnam more than offset higher demand from Indonesia and the Philippines. Exports are lowered for Argentina and the United States, but raised for the European Union. The U.S. season-average farm price is up $0.05 to $5.20 per bushel.

WHEAT PRICES

Overall, U.S. wheat prices were mixed, but mostly range-bound during the month of March. Both Hard Red Winter (HRW) and Soft Red Winter (SRW) declined $3/ton to $220 and $209 respectively. Soft White Winter (SWW) dropped $12/ton to $230 on a weak pace of shipments. On the other hand, Hard Red Spring (HRS) rose $3/ton to $261, supported by continuing logistical concerns in the northern United States.

Global exporter quotes were mostly down in March on reports of good new-crop conditions in key Northern Hemisphere countries, particularly the European Union and Russia. U.S. wheat showed the smallest decline amid optimism that U.S. HRW could fill some of Brazil’s recently-announced 750,000-ton Tariff-Rate-Quota (TRQ). Argentine prices dropped the farthest during the month as Brazil’s announced TRQ would present a challenge to its dominant share of that market. Australian prices dropped significantly during the month but remain high relative to other exporters.

Month Ending Prices for Major Wheat Exporters

Month Ending

Argentina

Australia

Black Sea

Canada

EU

US

March

$220

$270

$228

$247

$214

$220

February

$235

$283

$234

$253

$221

$223

January

$243

$313

$246

$265

$240

$240

Source: IGC

Note on FOB prices: Argentina- 12.0%, up river; Australia- average of APW; Fremantle, Newcastle, and Port Adelaide; Black Sea milling; Canada- CWRS 13.5% St. Lawrence; EU- France grade 1, Rouen; US- HRW 11.5% Gulf

Smaller Global Production Leads to Lower Consumption and Tighter Stocks

Global production in 2018/19 was down 4 percent from the previous year to the lowest level in 4 years. Much of the decline was in major exporting countries. The European Union had the largest decline as dry conditions in northern Member States resulted in its smallest crop in 6 years. Russia’s production was down substantially from the previous year’s record, but remained the third-largest on record. Australia was walloped with a second year of drought conditions which resulted in the crop being the smallest in over a decade. On the other hand, the U.S. crop was larger, but not sufficient to offset smaller supplies elsewhere in the world.

Consequent to tighter global supplies, prices have trended higher and consumption is estimated lower. The driving force behind lower consumption has been feed and residual use, which is down 5 percent to the lowest level since 2014/15. With corn supplies being relatively abundant globally, wheat has become less price-competitive in feed rations. The largest reduction in feed use is for the European Union, where imported corn is much more price-competitive than wheat.

Food, Seed, and Industrial (FSI) use has continued higher, led by demand in China, North Africa, and Southeast Asia. FSI is normally a steady component of consumption as food demand for wheat tends to be more price inelastic than feed use. Still, the rate of FSI growth this year is the slowest in about 15 years as tighter supplies have led to some rationing of demand, particularly in Sub-Saharan Africa.

Even with consumption adjusting for the smaller supplies, carryout is still expected lower than last year. Global ending stocks are projected slightly lower, but more than half of that total is accounted for by China and stocks there are generally unavailable to the global market. Stocks held outside of China are down 10 percent to the lowest level in 5 years. The stocks/use ratio for the world less China is projected at 22 percent, the tightest in over a decade.

Stocks held by the top 8 exporters (Argentina, Australia, Canada, European Union, Kazakhstan, Russia, Ukraine, and the United States) account for much of the drop in global stocks. Ending stocks for the European Union and Russia specifically are projected to be much tighter than a year ago. While most major exporting countries in the Northern Hemisphere have generally good conditions for new-crop winter wheat development, it is worth noting that those countries’ ending stocks for 2018/19 are forecast to be relatively tight. While U.S. stocks are forecast down slightly, they are still expected to be abundant.

Beyond China, another exception to the tightening of global stocks is India, where stocks are up significantly in 2018/19 after the country harvested back-to-back record crops. India alternates between being a major importer and exporter depending on its stock levels. With larger stocks, it has now transitioned away from being a major importer, but exports are still not significant.

Philippines Wheat Imports Surge to Record

The Philippines is forecast to import a record 7.0 million tons of wheat for 2018/19. For the past several years, wheat imports have been rising as demand for food and feed grains increases with the growing population. Although primarily a rice-based diet, Philippine preferences are shifting from corn-based products to incorporating more affordable wheat products. Also, animal feeding is expected higher as demand for more protein in the diets continues to grow. This year specifically, the trend towards stronger wheat use have intensified due to typhoon-related losses in the domestic corn crop. With domestic corn prices relatively high, the demand for wheat has surged, both in feed rations and for human consumption.