OVERVIEW FOR 2020/21

Global production is raised this month as larger crops for Canada, Australia, and the European Union more than offset a smaller crop in Argentina. Global consumption is up marginally on greater feed and residual use in Australia and Canada. Global trade is also up, driven by stronger imports for China, and higher exports from Canada and Australia stemming from greater exportable supplies. The projected U.S. season-average farm price is unchanged at $4.50 per bushel.

WHEAT PRICES

Prices for U.S. wheat classes surged following the release of the July WASDE. Hard Red Winter (HRW) was boosted $30 to $245/ton based on strong China sales and constrained rail and port elevation due to China’s demand for corn and soybeans. Soft Red Winter (SRW) climbed $22 to $248/ton, and remains above HRW despite lower SRW shipments and sales relative to this period last year. Soft White Winter (SWW) was up only $4 settling at $288/ton amid competition from Australia’s growing crop, which is projected to be the third largest on record. Hard Red Spring (HRS) surged $37 to $278/ton on strong shipments and sales, especially to Japan, China, and the Philippines.

Global: Price movements for major exporting countries were up with U.S. prices witnessing the most significant climb. Strong sales to China and greater competition for domestic rail and export capacity underpinned recent strength in prices. Russian prices were up on strong demand and constraints from rail lines. EU prices rose on tighter domestic supplies in key producing states. Canadian prices rose despite a larger crop that is the second-largest projected crop on record. Australian prices also climbed despite a larger expected crop (third-largest expected crop on record). Argentine prices were marginally up and witnessed the weakest monthly climb despite being the only listed origin here with lower crop prospects. Global price competition is expected to be fierce in the foreseeable future.

International FOB Export Bids As of September 9th, 2020

Argentina

Australia

Canada

EU

Russia

United States

$244

$244

$239

$228

$219

$245

Record Canadian Wheat Exports Forecast from Near-Record Crop

With favorable weather and larger area, Canadian production is forecast at near-record levels, supporting exports at a record 25.0 million tons, accounting for 13 percent of total global exports.

For the 2020/21 crop, Canadian farmers expanded area for both winter wheat and durum, based on strong prices. The logistical constraints for this year’s exports are expected to be limited compared to the challenges the country faced after its record crop in 2013/14 when a frigid winter and competition for rail transportation constrained exports.

Over the past decade, Canada has expanded its exports particularly to markets that favor its high protein spring wheat. Indonesia is the world’s second-largest wheat importer and continues to increase its purchases of Canadian milling wheat. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) enabled improved Canadian access to the Japanese market. Despite being a major producer and exporter, the United States is also a major importer of Canadian wheat, wheat flour, and products. Over the past few years, China has also emerged as a key buyer, and its imports overall are now expected to rise to 7.0 million tons in 2020/21. Italy is a major buyer of Canadian durum for pasta products.

The high-quality wheat market is expected to face intense competition in the coming year with Australian exports also rebounding. Higher demand from some of the key global buyers such as Indonesia and China will help support the overall Canadian export forecast.

Pakistan Wheat Imports Rising

Pakistan 2020/21 wheat imports are forecast at their largest in over 11 years at 1.0 million tons, driven by robust demand and favorable import policies. Pakistan removed the 60 percent import duty in June amid domestic uncertainties regarding supply. Lower carryin from the previous year and reported locust infestations have incentivized more import-friendly policies to help bolster dwindling domestic supplies and manage a significant rise in domestic wheat prices year-over-year. Domestic supplies had also been trending lower partly due to subsidies which incentivized large exports in 2017/18 and 2018/19.

Surging domestic wheat prices have also driven greater import demand. Compared with the previous year, prices reported by FAO (Food Agriculture Organization) for Karachi wheat in June 2020 were more than 15 percent higher at 45 rupees per kilogram. In the August 2020 publication of the Bureau of Statistics Monthly Review on Price Indices, wheat prices had surged over 40 percent compared with the previous year for urban and rural households (separate price indices). Flour prices had climbed more than one-fifth compared with the previous year – high internal prices for both wheat and wheat flour have helped drive demand for competitively-priced foreign supplies of wheat.

Higher relative prices and domestic supply concerns have encouraged government and private entities to have bought reportedly over 700,000 tons thus far for 2020/21, reflecting Pakistan’s strongest-expected import demand in over a decade.