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Weekly Outlook: US Wheat Exports Off To A Slow Start

by 5m Editor
11 August 2009, at 7:30am

US - The USDA currently projects 2009-10 marketing year exports of US wheat at 925 million bushels.

That projection is 90 million bushels (8.9 per cent) less than exports of the previous year and 339 million less than exports during the 2007-08 marketing year. Exports at the projected level would be the second smallest in seven years and the third smallest in 25 years.

The 2009-10 marketing year began on 1 June and weekly USDA export inspection estimates are available to 6 August. Cumulative export inspections during the first 9.6 weeks of the marketing year were reported at 130.7 million bushels, 99.2 million less than the total of a year ago. Weekly inspections have averaged 13.7 million bushels so far this year. To reach the USDA projection of 925 million bushels, weekly inspections need to average 18.7 million bushels during the remainder of the marketing year. As of 30 July, the USDA reported outstanding (unshipped) export sales of 148 million bushels. Unshipped sales a year earlier stood at 276 million bushels. The slow pace of export inspections, and to a lesser extent, export sales relative to that of a year ago is a little misleading because the pace was very fast early last year. Still, the pace of exports lags that needed to reach the USDA projection.

The USDA’s weekly US Export Sales report shows a breakdown of exports and export sales by destination and by class of wheat. To 30 July, export commitments (exports plus outstanding sales) compared to those of last year were down 60 per cent for hard red winter wheat, 63 per cent for soft red winter wheat, and 26 per cent for hard red spring wheat. Export commitments were 17 per cent larger for white wheat and 15 per cent larger for durum wheat. Commitments for all classes of wheat were down by 46 per cent.

Among the largest importers of US wheat, commitments were down 27 per cent to the Philippines, 45 per cent to Japan, 48 per cent to Mexico, and 87 per cent to Egypt. Egypt buys only soft red winter wheat from the US.

Prospects for smaller US wheat exports this year are partly a reflection of the overall decline in world wheat exports expected this year. Exports from origins other than the U.S. are projected at 3.63 billion bushels, 364 million (nine per cent) less than exported during the 2008-09 marketing year. The largest decline (27 perc ent) is projected for the European Union. The overall decline in world exports expected for this year reflects prospects for larger production in countries that typically import wheat. In those countries that the USDA designates as major importers, production is estimated to be 335 million bushels (five per cent) larger than production of a year earlier.

World wheat production in 2009-10 is expected to be down 950 million bushels (four per cent) and consumption is expected to increase by 235 million bushels (one per cent). Still, worldwide year ending inventories of wheat are expected to grow by 512 million bushels (eight per cent). Eighty per cent of the increase in world wheat inventories is expected to occur in China. Stocks among major exporting countries are expected to decline, with most of that occurring in the European Union.

Wheat prices have declined sharply in recent weeks. September 2009 futures at Chicago, for example, traded near $7.00 in early June and are now near $5.00. The average spot cash price of soft red winter wheat in southern Illinois is near $3.20, reflecting an on-going very weak basis. The poor export demand for US wheat, particularly for soft red winter wheat, is one reason for such low prices. There are two fundamental factors that could be the basis for a modest price recovery in wheat. First, is the strengthening of the El Niño weather pattern. A continuation of a strong El Niño poses an increased risk of dry conditions in some Australian wheat production regions. Second, is the acreage response of US wheat producers. Current low cash price bids for the 2010 soft red winter wheat crop point to some further reduction in seedings this fall.