OVERVIEW FOR 2020/21

Global production is up with record production in India as well as larger crops in China, Turkey, and Australia more than offsetting declines in the European Union and Ukraine. Global consumption is lowered mainly on reduced feed and residual use in Australia and the European Union. Global trade is up slightly based on significantly larger Iran imports which more than offset a reduction for Turkey. Higher exports for Australia and Russia are expected to more than offset reduced shipments from Ukraine and the European Union. U.S. exports are unchanged, with the projected U.S. season-average farm price also unchanged at $4.60 per bushel.

OVERVIEW FOR 2019/20

Global consumption is lowered this month with reduced feed use in Australia and the European Union. Global trade is up with large imports for Iran, Belarus, China, and Egypt. Exports are raised for Australia and the European Union. U.S. exports are lowered slightly, and the estimated U.S. season-average farm price is unchanged at $4.60 per bushel.

WHEAT PRICES

Prices for most U.S. wheat classes were lower since the end of April based on expectations of a larger global wheat crop and generally favorable conditions for U.S. winter wheat. Price movements were particularly pronounced around the time of USDA releasing the May 2020 WASDE report, which included USDA’s first survey-based forecast of 2020 winter wheat production. HRW dropped $11/ton to $221, while Soft Red Winter (SRW) fell $13/ton to $217, and Soft White Wheat (SWW) declined $11/ton to $225. On the other hand, Hard Red Spring (HRS) increased $5/ton to $250, supported by a lagging pace of spring wheat planting during much of the month as well as a slightly stronger pace of export sales. Most classes of wheat found some support towards the end of May based on forecasts for hot and dry weather across some winter wheat growing areas and renewed concerns over dryness in Europe and the Black Sea.

Global: Prices for major exporting countries showed mixed direction during the month of May. Australia showed the strongest decline based on favorable planting conditions with a significantly larger crop expected. Russia and the United States were pressured lower as harvest approaches with relatively favorable conditions. Conversely, EU prices were supported by concerns of dry conditions in some Member States. Argentina edged higher on seasonally tightening supplies. Canada’s prices moved higher during the month, returning to a more normal premium over U.S. HRW.

Month Ending Prices for Major Wheat Exporters

Month Ending

Argentina

Australia

Russia

EU

US

Canada

March

$248

$277

$224

$223

$240

$240

April

$238

$288

$227

$220

$232

$230

May

$240

$278

$220

$221

$226

$238

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%), Vancouver

With EU Wheat Production Down Significantly, Reduced Feed Use Allows for Continued Strong Exports

EU wheat production in 2020/21 is projected down by 13.8 million tons from nearly 155 million tons the previous year. With tighter supplies expected, EU wheat is becoming less competitive with other grains in feed rations, specifically corn and barley. Corn feed use is projected up from 62.2 million tons to 65.0 million on a larger domestic crop and robust imports. In light of large global supplies, corn is expected to be very competitive relative to feed wheat. Corn supplies are particularly abundant in Ukraine, which has a record-large crop projected and remains the principal supplier of corn to the European Union. Barley feed use is also projected larger as supplies will be plentiful based on a second consecutive bumper crop and large carryin stocks. Considering the abundant corn and barley supplies, coupled with a smaller wheat crop, EU wheat feed and residual is projected down from 52.5 million tons to 49.5 million, which would be the lowest since 2013/14.

With less wheat needed in feed rations, the European Union is expected to continue as a major exporter of wheat despite a substantially smaller crop. EU wheat exports are projected at 28.0 million tons, down 8.5 million from 2019/20, but still the second-largest export volume in 5 years. The European Union is projected to be the second-largest wheat exporter in 2020/21 with Russia forecast to regain its position as top global wheat exporter.

Australia Wheat Exports to Rebound Despite Negative Drought Impacts on Key Markets

After several years of drought, favorable planting conditions for the 2020/21 harvest support a large rebound in export volumes with a potential to regain lost markets. Australia’s wheat exports have taken a tumble over the last few years as a result of 3 consecutive years of drought conditions curtailing exportable supplies. Despite tight supplies and higher prices, Australia has been able to maintain exports to a few key markets: the Philippines, South Korea, and Japan, but exports to a couple of key markets have taken a nosedive.

The most notable decline has been exports to Indonesia, historically the largest market for Australia. Trade has fallen over 75 percent to a mere 1.0 million ton in 2018/19 from Australia’s pre-drought exports of nearly 5 million tons in 2016/17. When supplies became tight, Australian wheat prices skyrocketed causing Indonesia’s price-sensitive importers to seek more competitively priced suppliers such as Ukraine, Canada, and Argentina. Another major loss for Australia was China where it once held more than 40 percent of the market but shipments became negligible in 2018/19. Australia’s weakened exports to China can also be attributed to China’s overall reduced imports in 2018/19.

TY 2019/20 exports are expected to decline further to 9.5 millions tons. However, anticipated favorable planting conditions coupled with reduced EU and Ukraine crops and exports in the coming year will pave the way for Australia to have stronger 2020/21 exports. Furthermore, Australia’s 2020/21 feed and residual is expected to fall 1.4 million to 3.5 million tons as a result of increased pasture feeding with the recovery from drought coupled with abundant barley supplies for feeding. This will further augment the exportable wheat supplies.