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Sustained demand for U.S. wheat in new price environment

U.S. wheat export sales 8% behind last year's pace.

Six months into marketing year 2017-18 (June to May), total U.S. export sales of 19.5 million metric tons (mmt) are 8% behind last year’s pace, according to the U.S. Department of Agriculture’s export sales data through Jan. 4. However, the estimated total value of U.S. wheat export sales is 4% greater than last year on the same date at $4.72 billion. This is due to slightly higher export prices, according to the USDA data and U.S. Wheat Associates (USW) price report data.

Stephanie Bryant-Erdmann, USW market analyst, said a deeper analysis of USDA data shows that total sales to six of the top 10 U.S. export markets in 2016-17 are ahead of last year’s pace, demonstrating strong demand for U.S. wheat. Sales of soft red winter (SRW) and soft white (SW) wheat are both ahead of last year’s pace. USDA projects that total 2017-18 exports will fall slightly to 26.5 mmt, which, if realized, would be 8% below 2016-17 but 1% above the five-year average pace.

USDA reported year-to-date exports of hard red winter (HRW) wheat at 7.79 mmt, down 10% from the prior year. Still, 2017-18 export sales are 10% ahead of the five-year average due to competitive prices for medium-protein HRW and the good overall quality of this year’s crop. The estimated value of year-to-date HRW export sales is 6% above 2016-17 due to a 14% increase in the average U.S. HRW freight-on-board (FOB) price that is supported by the increased premiums for higher-protein HRW wheat.

According to Bryant-Erdmann, Mexico is currently the number-one purchaser of HRW wheat. As of Jan. 4, HRW sales to Mexico totaled 1.58 mmt, up 28% from last year’s pace. Sales to Indonesia are also up 28% year over year to 430,000 mt. HRW wheat purchases by Algeria totaled 456,000 mt, more than double last year’s sales on this date. To date, HRW sales to Venezuela totaling 120,000 mt are nearly four times greater than the 2016-17 pace.

Both export sales volume and value of SRW wheat for 2017-18 are up due to the excellent quality of this year’s crop and relatively competitive pricing. Export sales are up 7% year over year to 2.02 mmt, boosting the estimated export sales value to $400 million, or 12% more so far this year. As of Jan. 4, total sales to 11 of the top 20 U.S. SRW wheat export markets from 2016-17 are higher than last year. Sales to Colombia are 12% ahead of 2016-17, at 198,000 mt. Nigerian SRW purchases totaled 234,000 mt, up 12% from last year. Sales to other Central and South American countries, including Brazil, Peru, Panama, Venezuela and El Salvador, are also ahead of the 2016-17 pace, Bryant-Erdmann noted.

Hard red spring (HRS) wheat sales of 5.15 mmt are down 25% for the year and are 7% below the five-year average. Higher prices due to smaller 2017-18 production have slowed HRS exports thus far in 2017-18, but global demand for HRS wheat is strong. Year to date in 2017-18, the average FOB price of HRS wheat is $293/mt ($7.97/bu.), compared to $241/mt ($6.55/bu.) in 2016-17, according to USW price report data. As of Jan. 4, buyers in Japan purchased 878,000 mt, up 20% from 2016-17. Sales to Taiwan of 518,000 mt are up 17% from last year’s sales on the same date. The Philippines continues to import the largest volume of HRS wheat, although at a 6% slower pace so far.

As of Jan. 4, Bryant-Erdmann reported that exports of soft white wheat are up 22% year over year at 4.30 mmt. That is 28% greater than the five-year average. Sales to the top 10 soft white wheat customers are ahead of last year’s pace, supporting an estimated export value of $896 million, up 25% from the prior year. Philippine millers purchased 946,000 mt, up 16% compared to last year’s sales on the same date. Sales to South Korea are up 43% to 674,000 mt. Sales to China, Thailand and Indonesia are also up. Year to date, Indonesia has purchased 515,000 mt, compared to total 2016-17 purchases of 270,000 mt. Sales to Thailand are up 18% year over year to 217,000 mt. China's purchases of 306,000 mt of soft white wheat are already greater than 2016-17 total.

Year-to-date durum exports totaled 272,000 mt, down 32% from the same time last year and below the five-year average, with tighter supplies and resulting higher prices. The average export price for U.S. durum is up 5% over last year at this time, according to USW data. To date, Bryant-Erdman said Nigeria, the European Union, Algeria and Guatemala are the top durum buyers. A significant portion of first-quarter 2017-18 sales is considered “sales to unknown designations.”

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