World Grain - March 2013 - 20

GRAINMARKETREVIEW

World wheat ending stocks
(million bushels)

8,000

Wheat
U.S. Soft Red Winter wheat
becomes the export champion

7,000

6,000

5,000

by Chris Lyddon
2012-13**

2011-12*

2010-11

2009-10

2008-09

2007-08

2006-07

2005-06

2004-05

2003-04

20

2002-03

4,000
U.S. Soft Red Winter (SRW) wheat has taken over the world
export markets in early 2013 after prices fell by enough to make
it competitive. It’s against a background of wheat prices generally drifting down amid bearish U.S. Department of Agriculture
(USDA) reports.
“In just 60 days, SRW wheat sales have soared and indications
are the accelerated pace could continue for at least the next few
months,” Casey Chumrau, U.S. Wheat market analyst, wrote in that
organization’s Wheat Letter.
“What a difference two months make,” she said, pointing out
that as of Dec. 1, 2012 export sales of U.S. SRW wheat were 9%
behind the 2011-12 pace and that on Dec. 11 the USDA projected
total 2012-13 U.S. SRW exports at 3.95 million tonnes, down 18%
on the year.
“But in just 60 days, SRW wheat sales have soared and indications are the accelerated pace could continue for at least the next
few months,” she said. “The catalyst for the change was SRW prices falling below the competition for the ﬁrst time in six months.
Wheat buyers noticed, and sales of 1.27 million tonnes since December put 2012-13 SRW sales to date at 3.06 tonnes, notably 27%
above last year’s pace. Egypt has been the most aggressive customer, accounting for almost half the December and January sales.”
She also explained that, for example, Egypt’s General Authority
for Supply Commodities (GASC) has recently purchased an additional 60,000 tonnes of SRW for March delivery. “Bids on this
GASC tender for U.S. SRW ranged from $307 to $324 per tonne
free on board (FOB),” Chumrau said. “The closest competing offer
was for French wheat at $355 per tonne.”
In its Agri Commodities Monthly, Dutch bank Rabobank cut its
CBOT Wheat price forecast for ﬁrst quarter 2013 by 80¢ per bushel
to $7.50 per bushel “as spill-over bearish sentiment from the corn
and soybeans complex is expected to continue,” noting a fall in
nearby CBOT wheat prices in the ﬁrst two weeks of February to
levels last seen in July 2012.
“CBOT corn and soybean prices have fallen by similar amounts.
The broad theme across the grains complex is weaker than expected
U.S. export sales driving prices lower,” it said. “Rabobank believes
that there may be further downside in the short term.”
“While the bearish momentum of early February will be difﬁcult
to recover from, we think improved U.S. export sales and higher
feed demand will help support prices at current levels and expect a
return of bullish momentum following the next USDA Grain Stocks
Report on March 28,” the bank’s analysts said. “We anticipate the
report to renew focus on critically low corn stocks and also im-

* Projected
**Forecast
Source: USDA, Foreign Agricultural Service, Production, Supply, and Distribution Database and
USDA, World Agricultural Outlook Board, World Agricultural Supply and Demand Estimates

ply increased wheat feed and residual use — both of which should
support wheat prices. Rabobank believes that wheat feeding will
exceed the USDA’s forecast, particularly due to consumption in the
U.S. Southern Plains, where cash prices currently favor wheat feeding by $20 per tonne,” it said.
It also believes that strong global import demand and cheap U.S.
wheat are likely to result in higher U.S. wheat export sales.
“The elimination of import tariffs in countries such as Russia
(5% tariff) and Brazil (10% tariff) are likely to increase their import
demand in the remaining months of the season,” it said. “We raise
our Russian wheat import forecast for 2013-14 by 500,000 tonnes
to 2.5 million tonnes, 1 million tonnes above USDA expectations
as Russian wheat stocks dwindle and prices continue to hit recordhigh levels.
“Our forecast for Brazilian wheat imports is up 1 million tonnes
to 8 million tonnes, 300,000 tonnes above the USDA’s. We revise
Argentina’s wheat exports down 500,000 tonnes to 4 million tonnes
for 2012-13 which, in our opinion, suggests that Brazil will need
to import at least 4 million tonnes from outside Argentina,” it said.
“North American origins are poised to gain a signiﬁcant share of
this business, trading at a discount to competitive origins with U.S.
HRS (14% protein) wheat currently priced at $19-per-tonne discount to comparable German varieties.”
“U.S. SRW is the world’s cheapest (except India) at a FOB discount of $25 per tonne to other origins,” it said.
Despite the success of U.S. exporters, the E.U. is still granting
wheat export licenses “at pace,” according to the British grains organization HGCA, which said the exports are supported by Algerian
buying activity. However, the HGCA quoted its French counterpart,
FranceAgriMer, as having revised French end-season stocks higher
due to weaker trade within the E.U. and poorer feed demand.
Chris Lyddon is World Grain’s European editor.
He may be contacted at: chris.lyddon@ntlworld.com.
We want to hear from you — Send comments and inquiries to worldgrain@sosland.
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March 2013 / World Grain / www.World-Grain.com
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World Grain - March 2013

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