OVERVIEW FOR 2019/20

Global production is down with smaller crops in Russia and Australia more than offsetting larger crops in the European Union. Global trade is raised slightly with stronger demand from Turkey. Higher exports for the European Union and Ukraine more than offset lower shipments from Russia. The projected U.S. season-average farm price is unchanged at $4.55 per bushel.

WHEAT PRICES

Prices for U.S. wheat classes were up during the month of December, buoyed by strong export sales and the potential for trade to China. Hard Red Winter (HRW) and Soft Red Winter (SRW) gained $14/ton and $6/ton respectively to $237 and $251, and were also supported by dry conditions for newly planted (2020/21) winter wheat. Soft White Winter (SWW) gained $5/ton to $233 and Hard Red Spring (HRS) surged $14/ton to $278.

Global: Overall, exporter prices firmed during the month of December. EU and Russian prices were supported by strong international demand. In addition to a strong pace of exports, EU prices also found support from wet conditions in western Member States. U.S. prices were supported by advancements in trade talks with China, providing renewed optimism about potential sales to that market. Argentina’s prices rose based on strong export sales ahead of a recent government decision to raise export taxes on wheat, corn, and soybean. Australia’s prices surged even further based on tight supplies. Canada’s prices soared based on strong international demand.

Month Ending Prices for Major Wheat Exporters

Month Ending

Argentina

Australia

Russia

EU

US

Canada

December

$208

$286

$218

$217

$237

$266

November

$197

$265

$208

$208

$223

$238

October

$196

$265

$210

$201

$215

$247

Source: IGC

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

By-Class Summaries: Durum

Durum is the smallest class of U.S. wheat, representing about 5 percent of total production. Most of the production is in North Dakota, with smaller amounts grown in Montana, California, and Arizona. Durum is a very hard variety of wheat, used in making premium pasta products, couscous, and some Mediterranean breads. The largest export markets for U.S. durum are typically the European Union (mainly Italy) and Algeria. The United States is almost always a net importer of durum, relying mainly on shipments from Canada.

2019/20 Durum Exports Ahead of Last Year’s Pace

Durum exports so far have proceeded at a faster rate than last year’s slower-than-average pace. As of December 26, durum total commitments are nearly doubled compared to last year and are ahead of pace to hit the year-end projection of 40 million bushels. Commitments to the European Union are particularly strong this year.

U.S. Durum Imports Weak This Year

U.S. durum imports are projected at 40 million bushels (1.1 million tons), down from 52 million bushels (1.4 million tons) last year. The quarterly pace of imports has been noticeably slower this year in spite of a smaller domestic crop. Note that these statistics include flour and products (semolina, couscous, pasta, etc.). Imports of products have been relatively constant this year, but imports of grain have dropped off considerably, representing less than half of durum imports to date.

The slow U.S. durum imports primarily result from unusually large stocks at the end of 2018/19. Much of these supplies were held in the Northern Plains, where most U.S. durum is produced. With nearly all imports of durum coming from Canada, the large supplies on the U.S. side of the border have reduced the incentive for that trade. Even with the fast pace of exports and the slow movement of imports, the United States is expected to remain a net importer of durum in 2019/20.

Turkey and the European Union Lead Global Pasta Exports

Global pasta trade totaled more than 5.5 million tons in 2018/19 (wheat grain equivalent), with the top two exporters, Turkey and the European Union, accounting for about half of that total. Even though both countries produce some durum, their export-oriented industries rely on imported supplies.

Turkey allows duty-free wheat imports under its inward processing regime so long as the resulting products are exported. Thus, Turkey imports durum wheat, primarily from Canada, Kazakhstan, and Russia, then processes and re-exports the resulting pasta. A large proportion of Turkey’s pasta exports are destined for Sub-Saharan Africa.

With its production relatively limited, the European Union allows for duty-free importation of durum wheat. EU imports of durum are primarily sourced from Canada and the United States, with smaller amounts from Kazakhstan and Russia. Italy accounts for the majority of EU durum imports. Italian pasta is then exported to a wide variety of markets. About one third of EU pasta exports are destined for the United States and Japan.

While global pasta exports are dominated by a few key players, imports, on the other hand, are more dispersed across a variety of markets. The United States is the world’s leading importer of pasta, but accounts for just over 10 percent of global trade. U.S. pasta imports come mainly from the European Union (Italy), China, and Canada.