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2013 U.S. wheat export outlook
Reduced wheat production in the Southern Hemisphere over the past six months suggests a strong export market for U.S. wheat over the next six months. With both Australia and Argentina harvesting short crops, U.S. wheat will face only light competition until Northern Hemisphere crops arrive in May-June.
“The outlook is good for at least the next six months,” says Steve Mercer, spokesman for U.S. Wheat Associates, which promotes U.S. wheat overseas.
Even though U.S. wheat prices remain high, the lack of wheat from other sources makes American prices competitive. Australia and Argentina have little to export, and Russia is not a big exporter this year, either. Last fall, Ukraine even considered a formal suspension of wheat exports in order to conserve its short supply.
Russia imposed a formal wheat export ban in the summer of 2010, which sent world prices soaring. It also hurt Russia's relationship with its long-term customers, perhaps making it and Ukraine think twice before imposing formal bans.
Still, with old-crop supplies tight, Black Sea wheat exports are expected to remain light until at least May or June, when the new crop can be evaluated, says Mercer. Shipments from Russia seem to be near a standstill this winter after a short harvest last summer. In fact, notes Mercer, Russia's 2012 wheat harvest was 8.43% smaller than the 2010 harvest that triggered the export ban.
Dryness in western Australia cut this year's wheat harvest to an estimated 21 million metric tons, from 29.5 million a year earlier. USDA expects only 16.5 million tons of Australian wheat exports this year, mainly to eastern and southern Asia, down from 25 million in 2011.
South american supplies
In Argentina, the shortfall is even worse, as government policies encouraged farmers to plant crops other than wheat, says Mercer. A wet harvest reduced output even further and caused quality problems. Thus, Argentina's wheat exports are seen at just 5.5 million tons, down from 12.7 million a year earlier, after a 26% drop in the wheat harvest.
With Argentina's crop so small, Brazil (the world's largest wheat importer) will have to look beyond its neighbor for supplies. Still, USDA predicts a 4.1% drop in Brazil's wheat imports this marketing year, which ends May 31.
Ukraine is forecast to export just 3.3 million tons this year, down from 5.44 million last year. Mercer thinks most of the 3.3 million has already shipped.
The big change comes in Russia, which exported a hefty 21.63 million tons of wheat last year after a bumper 2011 crop. This year, Russia's wheat exports are expected to drop to 10 million tons. That could help the U.S. capture some wheat business in Mideast and Mediterranean markets, where in recent years Black Sea wheat has been enjoying a price advantage from lower freight costs.
Also in the Black Sea region, Kazakhstan is forecast to export only 7 million tons of wheat this year, down from 11.39 million last year.
While the European Union's wheat exports are projected to grow about 6.45% this year, many importers will look instead to North America to make up the drop from the Black Sea and the Southern Hemisphere.
North American supplies
Mercer points out that both Canada and the U.S. are going to draw down wheat stocks this year in order to supply those foreign customers.
USDA sees the U.S. drawing down its wheat reserves by 5.35% this year, in order to achieve a 4.8% gain in exports. The U.S. has the wheat to do it, after a 13.5% larger harvest last summer.
Canada, which saw 2012 wheat production rise by 5.7% over 2011, is nonetheless expected to draw down stocks by 4.25% in order to raise exports by 9.5%.