North American wheat sales are increasing because of attractive prices and dwindling supplies in other exporting regions.
According to U.S. Wheat Associates (USW), U.S. wheat sales were 10 percent behind the 2011-12 pace as of Nov. 29 but only three percent behind by the end of December.
Egypt, the world’s top wheat importer, bought 707,000 tonnes of U.S. wheat in December compared to 150,400 tonnes in the first six months of the marketing year.
USW said the sales spike has been driven by the lowest U.S. wheat prices of the marketing year.
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China purchased just over 20 million tonnes of wheat, corn, barley and sorghum last year, that is well below the 60 million tonnes purchased in 2021-22.
A strengthening of the euro against the U.S. dollar has made North American wheat more competitive against European Union wheat.
Neil Townsend, director of CWB Market Research, said the other big factors are that Russia, Ukraine and the EU are running out of exportable wheat supplies and Argentina hasn’t been much of a player this year because of a disappointing crop.
The world has done a remarkable job of finding wheat from unexpected places during the first half of the marketing year.
India is forecast to export 6.5 million tonnes of the crop, up from almost nothing the previous two years. As well, the EU is expected to draw down stocks to an unprecedented 10 million tonnes.
“Even though Russia had a brutal crop (and) Argentina had a brutal crop, the world has managed to feed itself without really accelerating U.S. or North American imports,” said Townsend.
“People probably thought business was going to come to the U.S. sooner than it did.”
Even though demand has now shifted to North American wheat, Townsend isn’t expecting an explosion in wheat prices similar to what happened in 2007-08.
U.S. ending stocks were 8.3 million tonnes that year but are expected to be 19.5 million tonnes this year.
“There might be a little bit of incremental gain in the volume of business from North America, but it’s not going to be a real stampede,” said Townsend.
Wheat prices were fading until the U.S. Department of Agriculture released its latest World Agricultural Supply and Demand Estimates report Jan. 11.
A tightening of U.S. corn ending stocks to 15.3 million tonnes from 16.4 million tonnes in the previous report provided support to wheat.
Stocks tightened despite slow corn exports.
“The corn exports have been absolutely dreadful, like really, really pathetic,” said Townsend.
However, the amount of corn going into the U.S. feed market has been impressive, and wheat may pick up some of that business as corn stocks dwindle.
The report caused a pop in U.S. wheat prices, especially for hard red winter and white wheat.
Townsend said Canadian wheat prices are all over the map.
“That’s one of the things that’s probably a little bit disappointing is there doesn’t seem to be any really great Canadian price discovery,” he said.
Townsend believes Canadian exporters have been too aggressive with their pricing into some markets. For instance, he wonders about a recent tender that Glencore won for shipping 50,000 tonnes of wheat to Iraq.
“The Iraq tender was an example of, ‘what were you doing there?’ ” he said.
“You almost think, how can that even be sold out of Canada? It’s kind of a shock, actually.”
The only possible explanation Townsend can present is that, even though it was on the books as Canadian wheat, maybe it came from an optional origin or perhaps Glencore had excess freight on the books and was able to drive down the price by using it.
Townsend’s advice to growers is to sell some of their 2012 wheat into this rising market using a combination of basis and futures contracts.
He said today’s prices are already excellent, and growers shouldn’t count on $10 wheat. Growers should also consider locking in a portion of their 2013 crop.
“How often can you sell December wheat in January the (crop) year before at $9? Not very often. That’s pretty profitable, any way you slice it,” he said.
