U.S. wheat sales to Asia play second fiddle to soybeans shipments, which provides an opportunity for other exporters
Canada has a golden opportunity to increase spring wheat sales to Asia this year because the grain-handling system south of the border is clogged with soybeans.
“We will have some capacity for exports that they will not have until we move into the March-April period,” said MarketsFarm analyst Bruce Burnett.
There has been an explosion in American soybean exports through the first seven weeks of the 2020-21 marketing campaign with 11.42 million tonnes shipped versus 6.16 million tonnes a year ago.
“Right now soybeans are sort of ruling the roost, so it does squeeze wheat,” he said.
The United States is shipping out nearly two million tonnes of the oilseed a week, half through ports in the Pacific Northwest and the other half through the Gulf of Mexico.
“It’s an astounding amount of grain,” said Burnett.
Exporters are still shipping hard red winter wheat through the Gulf and some spring wheat is moving out of the Pacific Northwest but only previously reserved slots heading to traditional markets. Any additional business will have to wait.
Claire Hutchins, a markets analyst with U.S. Wheat Associates, said the situation has led to the unusual dynamic of rising futures prices along with soaring export basis levels.
In a recent USW Wheat Letter report, she said the elevation capacity for wheat is “nearly non-existent.” Hutchins expects that to be the case right through January, assuming Chinese buying remains strong.
So does that create an opportunity for increased Canadian spring wheat sales to Asia?
“You betcha,” said Burnett.
Canadian wheat exporters are not contending with the same soybean and corn competition as their counterparts have in the U.S., although there have been strong sales of other grains, oilseeds and pulses.
He expects Canada to pick up extra wheat business right through February when U.S. soybean exports will likely start to subside.
In the meantime, wheat futures prices remain strong, due in a large part to dryness in the Black Sea region.
SovEcon said almost all winter wheat regions in Russia have received 20 to 40 percent of their normal fall precipitation.
The agriculture consultancy firm forecasts 10 to 15 percent winterkill for the current crop versus a five-year average of 4.8 percent.
SovEcon’s preliminary forecast calls for 75 to 78 million tonnes of Russian wheat production for the upcoming year, down from its new forecast of 84.4 million tonnes for this year’s crop.
The consultancy’s first official forecast for the 2021-22 crop is scheduled for mid-December.
Burnett thinks it is too early to predict a big reduction in Russian production.
“We were facing the same situation last year at this time to be honest,” he said.
In fact, he is not yet sure how big this year’s crop is. The U.S. Department of Agriculture estimates Russia produced 83 million tonnes of wheat, the second biggest crop on record.
However, Russia’s f.o.b. values are the highest they have been in more than two years.
The market is wondering why Russian prices are so high if farmers harvested a bumper crop?
Are farmers holding back on deliveries?
Are there logistical problems getting the crop to export position?
Or is the crop as bountiful as is being reported?
“I still wonder a bit about what has happened to this gigantic Russian crop,” said Burnett.