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Demand for Spring Wheat Remains Strong

Posted: Oct 08 2020

HRS exports in the 2019-20 marketing year (June 1 – May 31) reached 253 million bushels (MB), up slightly from the previous year and early market year data indicates that 2020-21 could be another strong year for spring wheat demand.  Strong demand for high quality wheat and production shortfalls in some competing countries helped propel demand the last two years, specifically in the Asian region.  Over three-fourths of total U.S. HRS exports find a home on the Asian continent.  Latin American is the next biggest destination, followed by Europe and Africa/Middle East.  The chart below shows the top 10 export destinations for U.S. HRS for the 2019-20 market year.

The top HRS markets don’t change substantially from year to year as many are long-term, consistent buyers.  The Philippines remains the largest market with sales during the last marketing year reaching 63.6 MB, down just slightly from the previous year’s record.  Despite concerns that overall wheat demand might trend lower due to COVID-19 economic impacts,  bread demand actually increased in the Philippines in the second quarter of the year with one large bread baker reporting a 35 percent increase in bread sales. Sales to Japan were nearly four MB higher in 2019-20 reaching just over 35 MB.  

Taiwan and Korea rounded out the top four markets with 23 and 16 MB in sales, respectively.  Bangladesh, a non-traditional spring wheat market has been a top five market the last two years with sales around 13 MB.  U.S. HRS was price competitive and logistics allowed for good sales of U.S. wheat into the country.  This isn’t the case every year, but opportunity exists in this market.  According the Matt Weimar, U.S. Wheat Associates Regional Vice President – South Asia, the Bangladesh market for strong gluten wheat like HRS could be over 20 MB, but it is questionable how consistent of a market it will be.  Another new market to the top 10 was Vietnam where sales reached just over 11 MB, nearly double the previous year.  Higher demand for U.S. HRS in Vietnam was partially due to Australia’s smaller crop, but also due to growing demand for higher quality wheat classes.  Remaining markets in the top 10 were Thailand, Italy, Mexico and Indonesia.  China, a top five market in recent years was absent from the top 10 export destination list in 2019-20 due to ongoing trade disputes and tariffs.  Canadian spring wheat replaced most of the U.S. sales there.

Export sales the first four months of the 2020-21 marketing year indicate continued strong demand for U.S. Hard Red Spring.  Total sales through September 24, 2020 have reached 150 MB, up 13 percent from a year ago.  The accompanying chart shows the top 10 markets so far for the current marketing year, compared to year ago levels.

Sales to the Philippines are running ahead of last year’s pace with almost 40 MB, about 19 percent higher.  Actual shipments are running at an average pace though as many mills have reported having purchases covered a bit farther out than normal this year, according to Joe Sowers, USW Regional Vice President – Philippines and Korea.  Of uncertainly is whether or not sales will continue at this higher pace given the early booking and the recovery of the Australian crop and large crop forecast for Canada. 

Japan remains the second largest export market with sales 4 MB higher than a year ago.  China has made significant purchases of U.S. HRS this year with sales so far at 14 MB compared to only 2 million a year ago.  Prior to the trade dispute, China’s average purchases of U.S. HRS were around 20 MB with a high in 2016 of 40 MB.  Jeff Coey, USW Regional Vice President – China and Taiwan, says China’s demand for high quality wheat is growing as demand for pan bread, craft breads, hamburger buns, etc., continues to increase.  China does not need imported wheat in terms of volume (they are the largest producer in the world) but needs high quality wheat as domestic production does not meet the quality needs for many end use products.  Mills prefer U.S. HRS because the bread has good loaf volume, its dough has good mixing tolerance and is ideal in blends with domestic wheat to the Chinese taste for sweet bread.  It is unclear what import demand from China will be in the remaining months of the 2020-21 year.  Challenges include a large Canadian crop and a specification for ergot, which is significantly tighter than for other markets.

Taiwan and Korea tend to be relatively stable customers with sales so far up in Taiwan, but down slightly in Korea.  Export sales to Vietnam have reached 8.5 MB, up from 6.7 million a year ago.  Thailand has made HRS purchases of just over 6 MB, a slight increase from 2019-20.  Sales to Mexico are down on the year, but they remain the eighth largest market with sales just over 5 MB.  Malaysia has entered the top 10 with purchases of 4.7 MB, nearly double last year’s pace.  Italy rounds of the top 10 in the 2020-21 marketing year, with a slightly slower sales pace.  

While sales the first four months of the marketing year indicate strong demand, much uncertainty exists.  COVID-19 has caused demand disruptions as food service demand is down.  Tourism has been greatly impacted by the virus and the Asian region is no exception, but the impacts vary.  Thailand tends to be a travel hub and thus could face some of the greater impacts, while Malaysia may see lesser impacts.  HRS as a class has been less impacted as bread products are generally seen as essential food items, while confectionary products are not.  Also, final crop quality prospects in many countries, increased competition due to a production recovery in Australia and a large crop in Canada will all have impacts on demand going forward.

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