In the December WASDE (World Agricultural Supply and Demand Estimates), the USDA lowered projected 2018/19 marketing year U.S. Hard Red Winter (HRW) wheat exports and increased Russian wheat exports.

This is bad news.

Coming into the December WASDE report, the market expected 2108/19 HRW wheat marketing year exports to be lowered. The reason was that HRW wheat export sales for the 2018/19 marketing year were 36 percent lower than at this time last year. The November WASDE projected a 3 percent reduction in HRW exports. With a projected 3 percent reduction in exports, and with actual exports 36 percent below last year, something had to give.

What gave was USDA’s HRW export projection. The USDA lowered the HRW wheat marketing year export projection from 360 million bushels to 320 million bushels. Now HRW 2018/19 wheat exports are projected to be 14 percent less than 2017/18 exports of 371 million bushels.

MORE RUSSIAN EXPORTS

Negative news for both HRW and Hard Red Spring (HRS) wheat is that 2018/19 marketing year Russian wheat exports were increased 55 million bushels. Russian 2018/19 wheat beginning stocks were increased 37 million bushels and 2018/19 ending stocks were decreased 19 million bushels.

Editorial: It appears questionable to me that for the last two years, Russia has found additional wheat to export. During the 2017/18 marketing year, projections of Russian production went from 2.46 billion bushels in May 2017 to 3.1 billion bushels in November 2017. This year, the increase (not nearly as much as last year) is coming by increasing the wheat stocks estimate. In both cases, if the real supply of wheat had been known, prices may have been lower and Russia’s wheat returns could have been less.

The point is that the 55 million bushels increase in Russian exports comes at the expense of a 40 million bushel reduction in U.S. HRW exports. Australian exports were lowered 37 million bushels.

MAYBE GOOD NEWS        

The December WASDE may have contained good news for U.S. HRW wheat prices. A fact is that more hard red (HRW and HRS) wheat will be used during the 2018/19 marketing year than was produced. This is true for the world and for the U.S.

Neither does the WASDE change the fact that, at the present time, Russia’s 2019 wheat crop is reported to be in poorer condition than this time last year, and Russian planted acres may be lower than last year. Even if Russian 2019 wheat production is the same as 2018 production (2.572 billion bushels), Russia’s total 2019/20 marketing year supply will be less than the 2018/19 marketing year supply.

Russian beginning wheat stocks for the 2018/19 marketing year were 436 million bushels. Beginning stocks for the 2019/20 marketing year are projected to be 197 million bushels. That’s 239 million bushels less wheat for Russian export in 2019/20 than in 2018/19.

Some news may be negative for now, but the fact remains that more wheat will be used during the 2018/19 marketing year than was produced. On June 1, 2018, there was a shortage of bread milling wheat (protein). If all 2018/19 hard wheat production is used, by default, there has to be a shortage of bread milling wheat on June 1, 2019.

A shortage of milling wheat on June 1, 2019, implies that the market will need U.S. hard wheat, and June/July 2019 prices will reflect the increased demand. And that is good news.