World Grain - March 2020 - 16

GRAINMARKET REVIEW

WHEAT

Exports healthy, with market
looking forward to Chinese buying
by Chris Lyddon

Export demand for wheat is strong, with U.S. and E.U. exSRUWHUVEHQH¿WLQJZKLOHWKHPDUNHWLVORRNLQJIRUZDUGWRELJ
imports by China in the wake of the December trade deal between Washington and Beijing.
"International wheat demand has been extremely strong,
with reports showing good demand from China, Southeast
Asia, Africa and Egypt in the last two months from a variety
of origins," Rabobank said in its Agri Commodity Markets
Research report, published on Jan. 30.
³)XUWKHUPRUH&KLQDFRXOGIDYRU86ZKHDWLQRUGHUWR¿OO
its needs within its import quota, set at 9.6 million tonnes,"
Rabobank continued. "Even if actual total import volumes
come in at half of that, any additional U.S. wheat demand has
the potential to support the market."
Traders point out that the 9.6-million-tonne wheat import
quota is based on a calendar year, so it could be purchased
from the 2020-21 crop, while China is under no obligation to
buy the wheat from the United States. There are also concerns
in grain and oilseeds markets generally about the potential for
WKHQRYHOFRURQDYLUXVHSLGHPLFWRD൵HFW&KLQHVHFDSDFLW\WR
accept grains into its ports and distribution system. The bank
also stressed the importance of weather in the wheat market.
"Wet weather has prevented planting in the E.U., particularly in France and the U.K.," Rabobank said. "Temperatures
have been well above normal in Ukraine and Russia for much
of the last month, and there is extensive lack of snow cover."
There was concern the winter wheat crops in Europe might
be vulnerable to frost, but the bank pointed out that with persistent warmer-than-normal weather, the risk is low.
In its Grain Market Report, published Jan. 23, the InternaWLRQDO*UDLQV&RXQFLO,*&UHSRUWHGD¿UPHUWRQHFRPSDUHG
with its previous report in November.
³&RQ¿UPDWLRQWKDW$XVWUDOLD¶VKDUYHVWZDVZHOOEHORZQRUmal provided sustained support," the Council said. "Generally
strong export demand was also positive, with shipments by
$UJHQWLQDWKH(8WKH86DQG8NUDLQHVLJQL¿FDQWO\DKHDG
of the year-earlier pace."
The IGC also reported logistical problems caused by strikes
in France, with some export commitments said to be being
IXO¿OOHGE\RWKHU(8RULJLQV
"This contributed to around 18-month highs in Euronext
futures, with the nearby position at a price premium to encourage prompt delivery," the IGC said. "The more bullish
16

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

250
200
150
100
50
0

Jul 2019 Aug 2019 Sep 2019 Oct 2019 Nov 2019 Dec 2019

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: U.S. Department of Agriculture; World Bank

world price tone was also linked to less-than-ideal conditions
for 2020-21 crops in the E.U. and Black Sea region. Russia's
exports continued to lag the year before, partly because export
competitiveness was compromised by a strong currency.
"U.S. traders were hopeful that improving trade relations
with China could see shipments to that country accelerate, and
this contributed to gains in U.S. futures at times. U.S. price
support also came from historically small winter wheat seedings as well as worries about dryness in some HRW areas."
In its Feb. 13 Wheat Outlook report, the USDA's Economic
Research Service also highlighted export progress.
"The pace of U.S. wheat exports continues to surpass early season expectations, even as prices strengthen," the ERS
said. "During the 2019-20 marketing year, U.S. wheat prices
have at times come close to parity with the European Union
and Black Sea, as in early September and late October when
prevailing prices ranged between $182 to $190 per tonne and
$200 to $213, respectively."
While the European Union and Black Sea export price series largely have been near parity with a recent convergence
around $210 per tonne, the comparable U.S. export price
(hard red winter, 11.5%) has strengthened to between $216
and $223, the ERS said.
"Nonetheless, U.S. inspections continue to rise above 201819 levels and are now approximately 12% ahead of the same
SRLQW ODVW \HDU DQG DKHDG RI WKH ¿YH\HDU DYHUDJH SDFH RI
sales," the ERS said. "Growing global demand, particularly
from Asia and Africa, has helped to fuel U.S. export sales. In
recent months, reduced export prospects from key competitors, including Argentina, Australia, and Canada have created
additional marketing opportunities for U.S. wheat, even as
European Union sales surge."
Chris Lyddon is World Grain's European correspondent.
He may be contacted at: chris.lyddon@ntlworld.com.
We want to hear from you - Send comments and inquiries to
worldgrain@sosland.com. For reprints of WG articles, e-mail reprints@sosland.com.

March 2020 / World Grain / www.World-Grain.com

http://www.World-Grain.com

World Grain - March 2020

Table of Contents for the Digital Edition of World Grain - March 2020