OVERVIEW FOR 2019/20

Global production is lowered this month as smaller crops in Australia and the Black Sea countries more than offset larger crops in the European Union and India. Global trade is lowered, driven by weaker demand in several key Asian markets as well as in Mexico. Smaller projected exports for Argentina, Australia, and Kazakhstan more than offset higher trade for Canada and the European Union. The projected U.S. season-average farm price is lowered $0.20 per bushel to $4.80.

WHEAT PRICES

Prices for most classes of U.S. wheat fell during the month of August, pressured by advancing Northern Hemisphere wheat harvests and weakness in corn prices. Hard Red Winter (HRW) plummeted $16/ton to $196, while Soft Red Winter (SRW) dropped $11/ton to $201. Hard Red Spring (HRS) and Soft White Winter (SWW) fell $9/ton each to $219 and $222, respectively. SWW remains the most expensive of the four quoted classes thanks to steady demand from buyers in Asia as well as tight supplies in Australia, the main competitor for that wheat class.

Global: Overall, most exporter prices dipped during the month of August, pressured by the ongoing wheat harvests in major Northern Hemisphere exporters. U.S. HRW showed the steepest drop based on larger-than-expected supplies as reported in the August NASS Crop Production report as well as weakness in U.S. corn markets. EU prices declined $8/ton on the advancing harvests in major wheat-producing countries, particularly France. Black Sea wheat declined only $7/ton as dry conditions in Russia have reduced yields. Argentina prices fell as well but remain uncompetitive based on seasonally tight supplies. On the other hand, Australia wheat prices rose as dry conditions are once again impacting yield prospects.

Month Ending Prices for Major Wheat Exporters

Month Ending

Argentina

Australia

Black Sea

EU

US

August

$229

$250

$188

$184

$196

July

$243

$248

$195

$192

$212

June

$245

$266

$197

$215

$227

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

Amid Record Wheat Production, Middle East Import Demand Lowered

Production across the Middle East is projected at a record high in 2019/20. The largest year-to-year production increases in the region were for Iran, Iraq, and Syria. Yields in all three countries rebounded to record levels with much higher rainfall totals. Also contributing to the region’s higher production is Saudi Arabia, where wheat production has surged as a result of changing policy. Previously, the government had in place an almost complete ban on wheat production to conserve water, but has more recently rescinded that policy in recognition of lower water use for wheat relative to forages. Turkey, which has production unchanged from last year’s bumper crop, continues to be the top producer in the region.

Interestingly, the higher Middle East production has outpaced the growth in consumption resulting in imports forecast at their lowest level in 3 years. The largest reduction in import demand is for Iraq with its larger crop. Projected imports are also lower for Iran and Syria for the same reason. With abundant domestic supplies, Turkey’s imports are projected lower, but would still be the second-highest on record. Import demand there is expected to remain strong as Turkey’s Inward Processing Regime continues to provide an economic incentive to import wheat for the purposes of exporting flour. Yemen has become an increasingly important market for Turkey’s flour exports. This is expected to continue as Yemen’s imports are projected unchanged in 2019/20. Iran’s wheat import ban remains in place, with exceptions made if the wheat is used to re-export as flour. Iran’s imports and exports are both expected to be relatively small in 2019/20.

Philippines Wheat Imports Surge on Growing Food and Feed Demand

The Philippines is the world’s third largest wheat importer, with imports more than doubling since 2013/14 as food and feed demand soar alongside its expanding population and developing economy. The United States continues to be the largest supplier; however, imports from Australia, Ukraine, and Russia have grown substantially.

Consumption of wheat-based products, mainly bread and noodles, has surged in recent years. A competitive domestic milling sector and changing tastes and preferences have resulted in a gradual shift from rice consumption to wheat. U.S. exports to the Philippines have not only benefitted from growing demand, but also from lower competition from Turkey. Since 2014, anti-dumping duties on Turkish flour shipments have helped the United States to maintain a majority share of the milling market.

As the livestock industry continues to expand and modernize, imported feed wheat has become an integral ingredient in feed rations in addition to domestically grown corn. Since 2008/09, demand for feed wheat has nearly quadrupled, providing a growing market for lower-priced supplies from Ukraine and Russia. However, rising regional concerns for the spread of animal disease have potential to impact feed imports.