Milling & Baking News - November 8, 2016 - 7

Editorial

Lagging exports weigh on prices

or all who think about the future of grain- That 62% expansion in this century's world trade
based foods and developments that might contrasts with the 18% fall in U.S. exports. The resignificantly affect the outlook, hardly any- sult is that U.S. shipments of wheat and products
thing is more important than the current level of currently account for a dismal 13% of global trade,
wheat prices and what, if anything, may surpris- contrasted with 29% in 2000-01 and the all-time
ingly prompt a change. This is the second season of high of 50% in 1973-74.
national average prices under $5 per bushel , which
The situation of one area explains this shattering
is sharply below the recent past and has caused a loss of market by the U.S. export wheat business.
sizable decrease in ingredient costs. It is widely That area is the Black Sea region, primarily made
agreed that the bottom has been reached for this up of Russia and Ukraine. It was domestic shortcrop season, leaving the question of whether this ages of wheat in that region and the decision of
means the market is ready to register more than its then Communist leaders to import that led to
a moderate rebound from
the explosion of U.S. exports
history-making lows. While
and prices in the 1970s. Now
In seeking to understand what may
weather and its impact on
four decades later the rereverse the weakness in exporting,
production are usual quesgion's grain production has
hardly anything is more instructive
tions in looking ahead, the
recovered to be in line with
than contrasting American exports
present situation brings into
the potential of this vast
with global trade.
sharp focus export business
land mass with a longitude
and the possibility that a surprise could occur to not too different from the most productive Americause much larger foreign shipments of the price- can regions. Yes, it is positively amazing that the
depressing domestic supply.
region that once was the world's largest wheat
Exports of wheat and wheat products have been importer has been transformed by national politibelow 900 million bushels for three crop years in a cal and economic actions into the world's leading
row beginning in 2014-15. This is sharply reduced exporter. Suffice it to note that Russia and Ukraine
from the outgo exceeding 1 billion bushels in nearly combined are likely to export 35 million tonnes of
every season of the prior 40 years. The record outgo wheat in this 2016-17 season, accounting for 22%
in 1981-82 was nearly double the current pace (1,771 of world trade, contrasted with the 13% U.S. share.
million versus 875 million). While large crops, espeIn trying to fathom what could transform the
cially of lower grade feed wheat, have weighed on current U.S. wheat situation from a market domiprices, nothing has been more negative than this ex- nated by abundant supplies and lagging demand,
port drag. Thus, the average farm price of wheat for all that is needed is to look at the carryover forethis season is estimated by the Economic Research cast at this season's end. The E.R.S. ending stock
Service at $4.50 per bushel, compared with $4.90 in projection is 1,029 million bushels, which marks
2015-16 and $5.90 in 2014-15. The nearby peak was the first time since 1988, or in 30 years, that the
$7.77 in 2012-13, a comparison strikingly defining U.S. ending wheat stocks will have exceeded 1 bilhow wheat has moved recently.
lion bushels. That carryover is up just 50 million
In seeking to understand what may reverse the bushels from a year ago, meaning that it would not
weakness in exporting, hardly anything is more take much of a demand rise to lead to a carryover
instructive than contrasting American exports reduction. Sure, expanded wheat feeding could do
with global trade. The latter is near the all-time re- that. But it is exports where the shift may occur to
cord of 6 billion bushels that first was reached in cause a carryover decrease and its inherent hint of
2013-14. This compares with 3.7 billion in 2000-01. bullishness. MBN
MORTON SOSLAND, EDITOR-IN-CHIEF
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