One grain, two experiences

North American wheat exports have been a tale of two countries so far in 2018-19.

Sales have been sluggish in the United States and brisk in Canada.

The U.S. shipped out 10.86 million tonnes of wheat through Sept. 20, which is almost one-third of the way through its crop year. That is 20 percent below last year’s pace.

North of the border Canadian wheat is flying out the door. Exporters shipped 2.86 million tonnes through week seven of the 2018-19 program, an 18 percent increase over the same time last year.

The slow start to the U.S. program means it will be difficult for the industry to meet the U.S. Department of Agriculture’s full-year forecast of 27.9 million tonnes, which would be a 14 percent increase over the previous year.

Rich Nelson, chief strategist with Allendale Inc., said the USDA was counting on stronger-than-usual demand for U.S. wheat because world production was down 28.6 million tonnes in 2018-19.

“That’s a great story. It sounds cool. It sounds reasonable. But it’s simply not happening,” he said.

The disappointing export performance is keeping wheat futures prices from rallying in Kansas and Chicago.

Bruce Burnett, director of markets and weather with Glacier MarketsFarm, said the U.S. wheat export program is usually front-loaded.

“They’re the first global participant to harvest new crop hard red winter wheat. That usually gets them off to a good start,” he said.

“That has not happened this year and so it raises some concerns.”

The disappointing sales program is partly due to a strong U.S. dollar, which is making exports from Russia, Canada, Argentina and other countries more competitive.

Burnett agreed with Nelson that sluggish exports is keeping a lid on futures prices.

“You just haven’t seen the price movement that certainly I expected to see after we got through harvest,” he said.

The slow start means it is unlikely the wheat industry will meet the USDA’s export target but it is likely the pace of shipments could pick up in coming months.

“If you look at the dynamics this year, there is a case to be made that they’ll be stronger longer in their export program,” said Burnett.

Russian exporters have been shipping as much wheat as possible early in the marketing year because they fear export controls are looming. That means there could be a sales window for U.S. wheat after the turn of the calendar.

There won’t be too much competition from Australian wheat due to drought in the eastern part of that country.

That is why Burnett believes there is potential for prices to recover, maybe not to the August highs but some strengthening is likely in the cards once U.S. wheat starts moving.

There are signs that could be starting to happen. Total net exports for the week ending Sept. 20 were 657,111 tonnes, up from 468,433 tonnes the previous week.

Meanwhile, Canadian wheat has been heading to overseas markets in a big way, with sales up 20 percent year-over-year.

Burnett said this is due to the fact that the European Union had a poor crop and Australia’s prime hard wheat crop is in trouble, so North America is the only viable alternative for high-protein wheat.

That can also be seen in the U.S. statistics where spring wheat exports are down nine percent year-on-year compared to a 38 percent decline in hard red winter wheat shipments.

Canadian sales have also been bolstered by good stock levels entering into the 2018-19 crop year, helping to boost pre-harvest business and by the weak Canadian dollar.

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