In a year when record global wheat supplies depressed prices, U.S. farmers have struggled to compete in price sensitive markets. Exports of high protein U.S. classes, often the highest priced, are well ahead of last year but overall sales for all classes through April 9 were 24% less than a year earlier. As the 2014/15 marketing year progressed, a surge in the U.S. dollar helped further increase the competitive position of major exporters with ample supply and lower prices.
The ICE U.S. Dollar Index is hovering around a 12-year high after increasing 22% in an 8-month period. A strong dollar makes U.S. products more expensive to global customers. U.S. wheat exporters believe the strong dollar, in part, is contributing to a slower sales pace. USDA projects 2014/15 U.S. wheat sales will reach 24.0 million metric tons (MMT), which would be well below the five-year average of 29.4 MMT and the lowest mark since 2009/10. With just six reporting periods left in the marketing year, total known U.S. exports and commitments equaled 23.7 MMT, according to USDA.
Strong competition is also adding pressure to the export pace. There were quality issues throughout the world crop, but production volume reached a record level for the fifth time in seven years at 725 MMT. Several countries that most directly compete with the U.S. for market share are seeing strong sales. Canadian exports are benefitting from a second consecutive bumper crop and a significant easing of transportation issues compared to last year. According to Grains Canada, 2014/15* sales through April 12 were 14.7 MMT, 8% greater than the same date last year. USDA projects total Canadian exports will reach 23.5 MMT, which would be the most since 1991/92.
Russian exports are also well ahead of last year’s pace despite government intervention. According to SovEcon, Russian wheat exports through March were 19.5 MMT, 27% greater than a year earlier. The agricultural analyst firm expects total 2014/15 exports will reach 21.5 MMT, which would be just shy of the record 21.6 MMT set in 2011/12. This would be quite a feat considering the Agricultural Ministry imposed an export tax on wheat in February, intentionally slowing exports in order to limit inflation and protect the domestic market. The ministry has signaled it may lift the tax on July 1.
Last year, Brazil imported an unusually high volume of U.S. hard red winter (HRW) to help cover the insufficient supply of its Mercosur partner, Argentina. That continued into the start of 2014/15 with 1.53 MMT of HRW imports. Brazil has imported only an average volume of soft red winter (SRW) several months because improved Argentinian production in 2014/15 will allow for increased exports. USDA expects Argentina to export 5.5 MMT in 2014/15, which is nearly enough to fulfill the Brazilian import need of 5.9 MMT. According to the most recent data from the Global Trade Atlas, Argentina’s total sales through February of 1.89 MMT were nearly four times those of a year earlier. However, Argentina’s government still controls the export licenses for wheat and has yet to authorize the full 5.5 MMT.
Despite a year of reduced exports, the U.S. remains the largest single-country supplier of wheat in the world. Lower sales mean there is more wheat in the bin, ready to supply our customers at any time.