Canada had a thriving wheat export program last year with the notable exception of one key market.
Grain elevators shipped out 18.25 million tonnes of the crop in 2018-19, the biggest program in the last 15 years, according to Canadian Grain Commission statistics.
However, sales to the United States plummeted to 752,200 tonnes, a 53 percent reduction from 2017-18. It was the smallest U.S. program since 2005-06 when 447,176 tonnes were shipped.
The U.S. was Canada’s eighth biggest buyer in 2018-19, accounting for less than half of what was shipped to markets such as Indonesia, China and Japan.
The U.S. is often the top market for Canadian wheat.
“That is interesting that we fell that far,” said Jim Peterson, marketing director of the North Dakota Wheat Commission.
“To have that level of shift does surprise me.”
He thought sales would be down approximately 25 percent, not double that. It is rare for the U.S. to import less than one million tonnes of Canadian wheat.
The U.S. had an ample supply of good quality hard red winter wheat and spring wheat last year, which caused prices to be subdued.
Peterson believes Canadian exporters found better value for their wheat in overseas markets.
He surmised that the U.S. trade war with China probably helped Canadian sales into that important market.
The grain commission statistics lend credence to that theory.
Indonesia was the top market for Canadian wheat in 2018-19 with sales of 2.43 million tonnes, up 43 percent from the previous year.
China was the second biggest buyer, importing 1.89 million tonnes, up 78 percent.
Neil Townsend, chief market analyst with FarmLink Marketing Solutions, thinks China was recharging its stockpile of high quality wheat, so that might be a one-off.
“Our biggest competition into China in the coming year will be the fact that we shipped them so much wheat last year,” he said.
Townsend thinks Indonesia is the more interesting market because it may soon surpass Egypt as the world’s biggest buyer of the crop.
Australia’s drought-reduced crop prevented it from providing much competition in markets such as China and Indonesia. It looks like it could be harvesting a similar-sized crop this year with lower carry-in from the previous harvest.
“I expect Canadian volumes to be probably even higher than they were last year into Indonesia,” he said.
Townsend doesn’t think there have been any structural changes in the U.S. wheat market. Instead, it just had good winter and spring crops combined with a lacklustre export program last year.
“I don’t think they are eating any less wheat or anything like that,” he said.
Peterson expects a rebound in Canadian sales to the U.S. in 2019-20, but not back to traditional levels.
The grain commission only has statistics for the first month of 2019-20 and so far the pattern is the same. Canada shipped 26,900 tonnes to the U.S. in August, down from 72,500 tonnes the same month a year ago.
However, Peterson expects the pace to pick up because the U.S. hard red winter crop has an average protein content of 11.3 percent, a full percentage point below the previous year. The U.S. spring wheat crop is also experiencing quality problems.
That would usually create big demand for Canadian spring wheat.
However, U.S. millers want a No. 1 or No. 2 quality wheat, and they may have trouble sourcing that from Canada because there are likely going to be quality issues with the spring wheat crop.
Peterson believes Canadian exporters will place a priority on servicing high-value markets such as Japan, China and the European Union, especially with reduced competition out of Australia.
He expects producers in Canada and the U.S. who were lucky enough to harvest top quality spring wheat will be locking their bins waiting for rising prices later in the year.