World Grain - November 2018 - 20

GRAINMARKET REVIEW

Wheat

Monthly wheat price
(U.S. dollars per tonne)

250

Market faces tight 2018-19 as it
awaits break on Russian exports

200

by Chris Lyddon

100

Sep 2018

Aug 2018

Jul 2018

Jun 2018

May 2018

Apr 2018

Mar 2018

Feb 2018

Jan 2018

Dec 2017

Nov 2017

Oct 2017

Sep 2017

In its Agri Commodities Monthly Report for October, Rabobank
noted short-term support for wheat futures worldwide on the basis of
tightening global fundamentals.
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respect to new 2019-20 crop supplies," Rabobank said, noting that
Northern Hemisphere plantings were nearing completion as it was
published on Oct. 19.
Rabobank called the record Russian export pace, with 13.8 million
tonnes exported from July to September, "unsustainable."
"As Russian exports slow or are potentially restricted, demand
would predominantly shift to the U.S., Argentina or even the E.U.,"
Rabobank said.
Forecast Russian exports for 2018-19 of 34.5 million tonnes would
drive the Russian stocks-to-use ratio down to 8%, an 18-year low.
"Reduced wheat supplies forecast this month for 2018-19 and
strong wheat prices are leading to slightly lower projected use and
trade," the U.S. Department of Agriculture's Economic Research
Service said in its Wheat Outlook report for October. "While global
wheat food use grows along with population increase, at about 2%
a year, projections for global feed use in 2018-19 have been declining. This month feed and residual use of wheat is down another
0.5 million tonnes, and 4.2 million tonnes lower than estimated for
2017-18."
The USDA projects a 3.5-million-tonne year-on-year increase in
feeding of wheat in China, on the basis of policy rather than world
prices, but with total non-U.S. feeding, not including China, down by
7.7 million tonnes year-on-year.
"The high price of wheat relative to other grains is expected to
cause a switch to corn feeding in some places where wheat is normally used as feed," the USDA said. "In comparison to last year,
wheat feed and residual use in 2018-19 is projected down 5 million
tonnes for the E.U., 3 million tonnes for Russia, as well as for South
Korea, Indonesia, Vietnam, Philippines, and some other countries."
The International Grains Council (IGC) in its Grain Market Report
issued at the end of September added, "With currency movements
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wheat export prices were partly reversed by the end of the month."
The IGC's wheat sub-index lost 2% on the month.
"Ample nearby availabilities weighed on sentiment, with much of
the focus on record early-season exports by Russia, which dampened buying interest from other origins," the IGC said. "While RusVLDQJRYHUQPHQWRI¿FLDOVFRQWLQXHGWRUHEXIIPDUNHWWDONRIH[SRUW
restrictions, some price underpinning came from ideas that demand
would shift to other suppliers as Russia's availabilities tighten. There
was also price support from deteriorating production prospects in

150

Wheat (U.S.), no. 1, hard red winter, ordinary protein, export price delivered
at the U.S. Gulf port for prompt or 30 days shipment.
Source: USDA/World Bank

Australia, harvest delays and concerns about potential quality problems in Russia and Canada, as well as an acceleration of international
buying interest.
"In Russia, reports of widening discounts for lower protein supplies underscored generally poorer crop quality than last season,
ZKLOHVLJQL¿FDQWO\KLJKHUSULFHVIRUGHIHUUHGPRQWKVYHUVXVVSRWSRsitions illustrated the tighter supply outlook. Early-September falls
in export prices were mostly reversed later in the month, partly on
currency changes, and quotations (12.5% protein) softened by a net
$3 m/m, to $224 fob, with January values at about $248 fob."
The IGC said prices in the E.U. were "underpinned by tight availabilities and strong internal values amid robust local demand."
Export interest was slow and cumulative export shipments were
about one-third down on the year.
"In France, dollar-denominated grade 1 export quotations fell by
$2, to $241 fob (Rouen), while German B quality dropped by $5, to
$248 fob (Hamburg)," the IGC said.
Argentina's domestic prices were supported by concern over the
effect of dry weather on the new crop, the IGC said, but it quoted
U.S. dollar denominated new crop (December) export quotations
down by $3 on the month, to $222 fob (Up River).
"New season (January) futures in Australia extended contract
highs on escalating production concerns, and APW export values
(October) climbed by $22, to $338 fob (Adelaide)," the IGC said.
"Market sentiment in the U.S. continued to be dented by lackluster exports. Since the August GMR, U.S. SRW export quotations
dropped by $6, to $216 fob (Gulf), while HRW lost $1, to $243 fob
(Gulf), and DNS (14%) receded by $4, to $254 fob (PNW)."
Chris Lyddon is World Grain's European correspondent.
He may be contacted at: chris.lyddon@ntlworld.com.
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November 2018 / World Grain / www.World-Grain.com

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World Grain - November 2018

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