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WMR-HRS Exports Poised to Gain

By: Jim Peterson
Posted: Sep 13 2023

Current export sales of HRS wheat are at 103 million bushels, as of the end of August, which is on par with a year ago, and already at 50% of USDA’s projection.   Odds favor USDA showing higher projections in future reports due to the positive early pace, shortage of higher protein, quality wheat on the world market and lower Canadian production.  HRS is currently the largest export class from the U.S., offsetting HRW which has constrained supplies and intense world competition from many sources.

The current top ten markets for U.S. HRS export sales are shown in the accompanying table.  All of the markets are traditional customers of U.S. HRS wheat, but some shifts have taken place in rankings.   The Philippines accounts for nearly 25% of current sales, but is slightly below a year ago on purchases due to sticky flour demand.  Mexico was a strong market last year, and continues that pace again this year.  They are up by nearly 20% in purchases and have overtaken Japan as our number two market.  Shortfalls in HRW production, the ability to buy direct via rail, and the value millers have found in using HRS as a “blending or improver” wheat for other sources of wheat, is driving demand.

Taiwan, Japan and Korea round out the top five markets with 10% and 12% higher sales to Japan and Taiwan, respectively, while Korea is slightly below.  Vietnam continues to show it is a growth market for HRS sales, with early season sales up 40 percent.  Thailand holds the number seven spot for demand but is down about 20% year-to-year.  Honduras, Panama and Jamaica round out the top ten.  Our top ten markets account for 86% of the current sales, indicative of the current world situation in non-traditional markets, where U.S. HRS prices remain well above world values.

The final quality profile of the 2023 HRS crop will be a key variable in our ability to optimize future export sales.  While much of the crop has been good quality, variability exists.  There are portions of the crop which is very low in protein levels, and color or vitreous kernel counts is lower in broad areas.  Some areas are seeing significant pricing spreads for quality as a result.   Protein could command stronger price premiums as the marketing year progresses, as the majority of our international buyers specify 13.5% protein or higher, and the crop average protein is likely to fall between 13.5 and 14 percent. 

Overall U.S. demand continues to be challenged in the world market, with sales at 290 million bushels, down 20% from a year ago.   As the accompany chart shows, world wheat prices have been under significant pressure since early summer, depicted by Chicago futures.  HRS and HRW futures continue to trade at a premium, but have been pressed lower by world values.   Black sea origin wheat continues to make its way onto the world market, in spite of no renewal of the shipping agreement, and Russian wheat continues to set the price for world wheat values.  

Some factors which could shift the current challenging demand pace for U.S. wheat include potential imports by India to curb food inflation, stronger imports of quality wheat by China, and low quality wheat in many parts of northern and eastern Europe due to rains at harvest.   While U.S. supplies remain relatively tight, and higher priced in the world market, quality remains strong across most classes, especially relative to many world competitors.   There is a greater share of feed quality wheat in world production this year, and as the marketing year progresses, demand for quality wheat is expected to increase, which would be beneficial in driving a stronger U.S. export sales pace into the second half of the marketing year.

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