US Wheat: Overall Exports Fall Short of USDA's Expectations.

Overall Exports to Fall Short of USDA’s 2012/13 Expectations as Marketing Year Closes

From US Wheat News

By Casey Chumrau, USW Market Analyst

While the 2012/13 marketing year does not officially close until May 31, it was already clear as of May 16 that total exports will fall shy of USDA’s forecast for 27.9 million metric tons (MMT), below the five-year average of 28.6 MMT and about 3 percent lower than 2011/12. Early last summer, sales were more than 20 percent off the prior year’s pace, but more competitive prices and supply issues in other key wheat producing countries helped U.S. exports make up ground.

As of May 16, USDA reported total 2012/13 accumulated exports and outstanding sales of 27.1 MMT, including higher year-over-year sales for three of the six wheat classes. To date, sales of hard red winter (HRW), the largest U.S. wheat class in terms of production and exports, are 2 percent greater than the prior year at 10.5 MMT but well below the five-year average of 12.4 MMT. As of May 16, sales to four of the top five 2011/12 HRW customers were lower in 2012/13, but increased sales to Brazil, Colombia and Egypt helped offset those reduced sales.

Soft red winter (SRW) will see the largest year-over-year sales increase of all U.S. wheat classes. As of May 16, sales were up 21 percent to 5.36 MMT, well above the five-year average of 4.35 MMT and the highest since 2007/08. In December, tight supplies in the Black Sea pushed world wheat prices higher and U.S. SRW became the least expensive wheat in the world, prompting Egypt to turn to the United States. SRW sales to Egypt in the first half of the marketing year were just 73,300 MT. As of May 16, Egypt had purchased 1.07 MMT of SRW, 39 percent greater than total 2011/12 sales and the most since 2008/09. So far, SRW accounted for 64 percent of Egypt’s total U.S. wheat purchases in 2012/13.

SRW sales to Mexico were also very strong for the second consecutive year at 1.11 MMT to date, down 13 percent from last year but 32 percent greater than the five-year average and the second highest on record. As of May 16, SRW sales to Ecuador have already set a new record at 134,000 MT, doubling 2011/12 sales and up significantly from the five-year average of 58,000 MT. The increased sales are due, in part, to changes at the Canadian Wheat Board, which historically provided Ecuador with special price arrangements.

U.S. durum exports rebounded slightly in 2012/13, up 14 percent to 571,000 MT as of May 16. Lower planted acreage and serious production issues have hindered durum the last two years, pushing the price higher and limiting the exportable supply. Despite higher sales, 2012/13 exports will fall well below the five-year average of 812,000 MT. Higher sales to Algeria, Belgium, Turkey and Mexico helped offset lower sales to the European Union, including Italy, the largest U.S. durum customer.

Exports fell for both hard red spring (HRS) and white wheat in 2012/13. High prices made HRS less competitive, leading to an 11 percent drop in sales to 6.02 MMT as of May 16. To date, sales are lower in four of the top five HRS markets than in 2011/12 and are 15 percent below the five-year average. While total 2012/13 white wheat sales of 4.64 MMT are currently 21 percent lower than last year, they are equal to the five-year average. White wheat sales soared to a record high in 2011/12 when low prices and feed use significantly increased sales to Korea and Japan, the top two white wheat markets. White wheat sales to Mexico returned to an average level in 2012/13 after a severe drought spurred record sales in 2011/12.

Two trade policy changes helped improve commercial wheat sales in 2012/13. The U.S.-Colombia free trade agreement (FTA) was implemented May 15, 2012, permanently eliminating import duties on wheat just two weeks before the beginning of the marketing year. It helped the U.S. regain market share lost to Canada when its FTA with Colombia was implemented nine months earlier. Current year sales to Colombia increased 48 percent year-over-year to 672,000 MT as of May 16 but remain 6 percent below the five-year average. Due to a supply shortage in Merosur countries, Brazil temporarily eliminated its 10 percent import duty on up to 2.0 MMT of wheat from April 1 to July 31, 2013. As of May 16, sales to Brazil of 526,700 MT far surpass total 2011/12 sales of 112,000 MT and will likely increase when the final marketing year data is available. Outstanding sales to Brazil for the 2013/14 marketing year are already 112,000 MT.

USW’s commercial sales report is updated weekly and can be found at: http://www.uswheat.org/reports/commercialSales.