The U.S. may be more competitive in the world export market than expected. The USDA projects 2019/20 U.S. hard red winter (HRW) wheat marketing year exports will be 15% higher than the 2018/19 HRW wheat exports. Current HRW wheat export sales are 38% higher than during the same time in the 2018/19 wheat marketing year.
All U.S. wheat export sales are 9% higher than last year. The USDA projects U.S. 2019/20 wheat marketing year wheat exports to be 1.5% higher than last year.
What makes the higher than projected export demand questionable is that the average protein for the 2019 HRW wheat crop was 11.3% protein compared to a 12.6% average protein for the 2018 wheat crop. The export market tends to demand, and the Black Sea wheat exporters tend to ship, 12.5% or higher protein wheat.
One reason for higher exports may be that U.S. HRW wheat prices have been competitive in the world market. At this writing, the Texas Gulf spot price for wheat is $5.38. Using 25 cents handling and loading charges, that price would be $5.63 FOB (free on board vessel).
Russia sold wheat to Egypt for $6.09 (FOB). The difference in price ($6.09 - $5.63) makes up for some of the Black Sea Exporters’ ocean freight advantage.
The Black Sea exporters still have a price advantage for the North African market. The U.S. may have a slight price advantage in the Pacific Rim and some Asian countries.
Another factor that may make U.S. wheat competitive is that Russia may not have as much wheat to export as currently projected. Current USDA estimates show Russian wheat beginning stocks to be 287 million bushels and 2019 production to be 2.719 billion bushels. Russia’s total supply for 2019/20 would be 3.0 billion bushels compared to 3.1 billion bushels for 2018/19 and 3.5 billion bushels for 2017/18. Russia’s wheat available for export is about 400 million bushels less than it was two years ago.
Russia may also have crop condition problems with its 2020 wheat crop. Since Russian wheat stocks are tight, Russia may limit exports to protect the 2020/21 marketing year wheat supply. The problem here is if the Russian 2020 wheat crop recovers, Russian wheat exports may increase during the spring months, which would limit wheat price increases.
Part of Russia’s decline in exportable wheat has been offset by increased wheat production in Ukraine. Ukraine’s 2019 wheat production is projected to be a record 1.066 billion bushels compared to 921 million bushels last year. Ukraine’s wheat exports are projected to be 146 million bushels higher than during the 2018/19 marketing year.
During the last five years, Australian wheat exports have averaged 575 million bushels per year with 832 million bushels exported during the 2015/16 wheat marketing year. Three below average wheat crops in a row have resulted in Australia exporting 331 million bushels during the 2018/19 marketing year. They are projected to also export 331 million bushels during the 2019/20 marketing year.
The world is producing a record wheat crop of 28.1 billion bushels. World wheat ending stocks are projected to be a record 10.6 billion bushels. At the beginning of the 2020 world wheat harvest, about 38% of the world’s 2020/21 marketing year’s wheat needs will already be in the bin.
What this situation implies is that even with a world excess supply of wheat, the U.S. can compete in the wheat export market. This capability depends mostly on a competitive price. And, given current world wheat supply and demand conditions, the price is about $5.38 at the Texas Gulf and $4.10 in Texas and Oklahoma.