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WMR- Intense World Wheat Export Competition

By: Jim Peterson
Posted: Apr 27 2023

The world wheat market has proven to be a challenging environment for U.S. market share in 2022 and early in 2023.  Record world production, an aggressive export pace from Canada and Australia, strong world resolve to facilitate maximum movements from the Black Sea region, and a strong U.S. dollar all combined to temper U.S. competitiveness.  In addition, stubborn drought conditions in the largest wheat producing sections of the U.S., have kept U.S. wheat supplies tighter relative to many competitors.

The accompanying chart shows the current projections for exports by the four major U.S. wheat classes.  Hard red winter is projected to fall sharply from the 2021 marketing year, down about 100 million bushels.  This is due to the acute tightness in that class of wheat driven by drought in 2022, which elevated prices early, and also the fact that it is the class of wheat which competes most directly with the bulk of world wheat supplies. Current sales are at 84% of the projected goal of 220 million bushels, as of April 13. 

U.S. hard red spring wheat is projected to attain a higher export level than a year ago, up about 10 million bushels.  The current sales pace is at 208 million bushels, or 93% of the goal, and 5% ahead of a year ago.  It is likely HRS will reach the USDA export goal, as it has seen some improvement in export competitiveness in recent months.  Canadian export sales have been unusually aggressive for much of this marketing year, and at times were priced a $1 or more per bushel cheaper than similar grades and protein of U.S. HRS at export points.  Lower handling margins by export companies, lower rail freight costs, and the cheaper Canadian dollar have all benefited Canadian sales. 
For the two soft wheat classes in the U.S., soft white wheat is having a strong year with a projected 33% increase over 2021.  Soft red winter exports are stable with the previous year. USDA did not change the overall export projection in the April supply and demand report, implying optimism that U.S. wheat exports will see some acceleration in the next few weeks.  As of the middle of April, with just six weeks of the marketing year remaining, total U.S. wheat exports stand at 680 million bushels, about 88% of USDA’s latest projection of 775 million bushels. The current sales pace is about 4% behind a year ago at this time.

The trend in wheat prices at the major U.S. futures exchanges illustrates the dynamic that continues to temper U.S. exports.  Chicago prices reflect world wheat price trends, and as shown, that market has fallen sharply since the first of the year.  The two major U.S. hard wheat classes, have also fallen in price, but have maintained a more stable pattern, HRW supported by tight supplies, strong domestic  demand and production concerns for 2023, and HRS by solid domestic mill demand and stable exports.   

The U.S. is still doing well into markets where quality and service are more highly valued components, but price has become a more prominent driver in a greater number of markets this year, given world economic downturns.  Dynamics will likely shift back to more normal trade drivers in the coming year, but it may not happen until there is a down turn in Black Sea wheat exports. 

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