Russia Wheat Exports Down on Lower Supplies

Based on drought in major winter wheat growing areas, Russia’s 2019/20 wheat production forecast was reduced this month by 3.8 million tons, although still up from last year and would be the second-largest on record. Total supplies, however, are projected down from a year ago based on reduced carryin. (For reference, 2018/19 beginning stocks were unusually high following the record 2017/18 crop.) In light of this month’s production cut, Russia exports are lowered by 2.5 million tons to 34.5 million. This represents a year-to-year reduction of 1.5 million tons, which is attributable to tighter overall supplies.

Even with its exports down slightly, Russia is still forecast to be the world’s leading exporter for the third straight year. The next largest supplier, the European Union, is expected to benefit from reduced Russian competition and will likely garner greater market share in North Africa, SubSaharan Africa, and the Middle East. The European Union is projected to export 27.0 million tons, up slightly from last month and up 3.0 million from the previous year. Despite a production cut this month, EU wheat supplies are still projected up significantly from last year, which will support both greater exports and additional feed use. The United States is also expected to benefit from reduced Russian competition as U.S. wheat exports (July-June trade year) are raised by 2.0 million tons this month to 25.5 million.

OVERVIEW FOR 2019/20

Global production is lowered this month as smaller crops in Australia, Canada, the European Union, Russia, and Ukraine more than offset a larger U.S. crop. Global trade is lowered, mainly on reduced imports for Indonesia and Vietnam. Exports are projected lower for Australia, Russia, and Ukraine, creating further opportunities for the European Union and the United States. The U.S. season-average farm price is up $0.10 per bushel to $5.20.

OVERVIEW FOR 2018/19

For 2018/19, global production and trade are down slightly. U.S. exports are reduced and the season-average farm price is lowered $0.04 per bushel to $5.16.

WHEAT PRICES

Prices for most classes of U.S. wheat fell slightly during the month of June, weighed by the continuing advance of the U.S. harvest. Hard Red Winter (HRW) and Soft White Winter (SWW) fell $4/ton to $227 and $233, respectively, while Hard Red Spring (HRS) fell $8/ton to $239. Conversely, Soft Red Winter (SRW) rose $8/ton to $231 with concerns remaining about the impact of wet weather on both the size and the quality of the crop. SRW is now holding a rare premium to HRW.

Global: Overall, exporter prices were mixed during the month of June. Black Sea milling prices had the largest price decline and U.S. prices also dipped – both with the onset of winter wheat harvesting. Similar to last year, Black Sea wheat is starting off the marketing year very competitively priced, which will likely contribute to another fast start to its export season. EU wheat prices are up marginally as concerns over hot and dry conditions have more than offset the impact of harvest pressure. Argentina and Australia are up with seasonally tight supplies.

Month Ending Prices for Major Wheat Exporters

Month Ending

Argentina

Australia

Black Sea

EU

US

June

$245

$266

$197

$215

$227

May

$240

$264

$211

$214

$231

April

$219

$261

$216

$211

$201

Source: IGC

*Note on FOB prices: Argentina- 12.0%, up river; Australia- average of APW; Fremantle, Newcastle, and Port Adelaide; Black Sea- milling; EU- France grade 1, Rouen; US- HRW 11.5% gulf