Minor exporters are playing a major role in world wheat markets this
year, and that’s one reason why wheat prices have fallen in the past
month.
Analysts say nontraditional exporters such as India and the countries
of the former Soviet Union have surprised markets with their ability to
push wheat onto the world market.
“It’s bigger than what I thought it would be,” said Canadian Wheat
Board analyst Dwayne Lee about FSU exports this autumn. Russia exported
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about 1.4 million tonnes of wheat in September alone.
“There has been a lot of talk about their logistics system not being
able to handle a big program, but that would suggest otherwise,” said
Lee.
The CWB lowered wheat prices by between $11 and $17 per tonne in the
Pool Return Outlook released Nov. 28. Durum dropped $5-$13 per tonne.
Feed barley was unchanged. Malting barley was up $9 per tonne for
two-row and $10 for six-row.
Prices are still high compared to recent years. Poor crops in Canada,
the United States and Australia, and economic problems in Argentina,
have hobbled many of the traditionally largest exporters.
But new exporters have been playing a far larger role in the market
than in previous years, and that has dampened prices. Lee said the
minor exporters have moved from an average of 15 percent of the world
market to about 25 percent last year, and could reach 35 percent this
year.
Kansas State University market analyst Bill Tierney said the
nontraditional exporters are a wild card because it is hard to know
what they can bring to market.
“What is the quality of the wheat they’re exporting?”
Analysts can get a reasonably accurate estimate of the gross size of
various countries’ wheat crops, but not even people in those countries
know the final quality.
“The problems with harvesting and storing and transporting crops grown
in the FSU and the export quality of wheat out of India and other
nontraditional exporters are huge compared to the problems that
occasionally arise in countries that have export-oriented grain
merchandising systems, like the United States and Canada,” said Tierney.
“The big problem is not knowing how much of an exportable surplus the
FSU has. The problem is working out what is it good for.”
Tierney said the world market is awash in cheap soft wheat. It needs
milling quality hard red wheats. Only as nontraditional exports come to
market over the winter will it become clearer how much high quality
wheat they can supply. The less they can supply, the better world
prices will be.
“I don’t think our intelligence network can tell us exactly what they
have,” said Tierney.
Lee said the feed barley PRO was unchanged because even though North
American and Australian production is low, the European Union produced
a large crop that fills the gap. The FSU also has large exportable
stocks.
Durum dropped because large EU and Syrian production increased
competition. Also, good moisture so far promises a good durum crop in
North Africa, a key market.
The cheeriest part of the PRO is the forecast for malt barley. With
Australian production probably falling by half, world supplies are
going to be stretched.
“Global malting barley supplies are down substantially and prices are
continuing to rise,” said Lee.
