Heading into the last quarter of the 2020/21 marketing year (June-May), U.S. wheat exports are on track to reach their highest level in four years. Based on steady demand, the United States Department of Agriculture (USDA) projects total U.S. wheat exports to reach 26.8 million metric tons (MMT), which would be 6% greater than the five-year average. On average, 50% of U.S. wheat production and 50% of the Idaho crop is exported. The two classes with the greatest increase in export demand this year are soft white (SW) and hard red spring (HRS), which represented a combined 79% of Idaho’s production in 2020.
In the first months of the marketing year, demand was driven by a need to stabilize and guarantee the food supply amid the Covid-19 outbreak. At the same time, China started ramping up purchases following the implementation of the Phase One trade agreement between the U.S. and China, which has shot the country from #12 to the #3 spot among all U.S. wheat buyers behind Mexico and the Philippines. Low supply in Australia and rumors of limiting Russian exports have also benefitted U.S. exports and supported domestic prices. As of February 4, U.S. wheat exports totaled 23.0 MMT (845.3 million bushels), up 5% compared to the same day last year.
Total U.S. white wheat sales to date, represented mainly by SW, were 36% ahead of last year at 5.98 MMT (219.7 million bushels). SW sales have benefited from unusually high prices of soft red winter (SRW) and a severe decrease in white wheat production in Australia due to drought. Additionally, Mexico has invested in improved railroad infrastructure the last three years, allowing wheat buyers to purchase SW more easily by train from Southern Idaho, which they did when SRW prices increased. China has purchased 779,000 metric tons of SW to-date, compared to just 131,000 metric tons a year earlier, and representing 29% of all U.S. wheat sales to China this marketing year. Sales to the Philippines and South Korea, the top two SW markets in marketing year 2019/20, are ahead of last year’s pace due to competitive prices and strong U.S. Wheat Associates (USW) educational programs, supported by IWC and other state wheat commissions, that helped customers stay informed and make timely buying decisions in the first half of MY 2020/21.
Total HRS export sales-to-date of 6.90 MMT (253.6 million bushels) are 9% ahead of this time last year and are 4% ahead of the five-year average. Sales to the Philippines and Japan, the top two markets for HRS, are up 6% and 1% respectively on competitive prices and increased focus on food stability following the COVID-19 outbreak, according to export traders. Export sales to China, now the third largest market for HRS, are up more than 900% on the year at 634,000 MT following the Phase One trade agreement. HRS makes up 23% of China’s U.S. wheat purchases to-date.
Hard Red Winter (HRW) is the largest class of U.S. wheat both by production and export sales. As of February 4, sales of 7.76 MMT (285.0 million bushels) are 5% off of last year but ahead of the 5-year average. Significant increases in exports to Nigeria, China, and Brazil haven’t offset reduced sales to Colombia, Taiwan, or Mexico -- the largest market for HRW. To-date, China has purchased 1.13 MMT of HRW compared to no purchases in 2019/20, which can be attributed to the Phase One agreement, and makes China the second-largest market for HRW behind Mexico this year. All HRW exports to China have been shipped from the Gulf of Mexico. Export sales to Mexico are down 11% on the year at 1.78 MMT due to volatility in the value of the peso and significantly reduced restaurant demand following the COVID-19 outbreak.
Export sales of SRW are down 22% compared to last year at 1.71 MMT (60.7 million bushels) due to high prices and low availability. Between early June and late December 2020, the average SRW export price was $247/MT, 12% higher than the same period last year and well above Russia, a key competitor in Nigeria and Latin America.
Durum exports are off 20% compared to last year as the top seven markets have all decreased purchases, including Italy and Algeria, who accounted for a combined 80% of total U.S. durum exports last year. While Idaho produces durum, it is normally used domestically.
Strong demand for U.S. wheat exports has contributed to the significant increase in futures markets since August, pushing prices to the highest level seen in years. Looking ahead, Australian wheat will likely become more competitive following its second largest crop on record and could dip into U.S. market share in Asia. However, Russia implemented an export quota from February 15 – June 30, 2021 in which a €25/metric ton charge is applied to all wheat sold within the quota, and increases to €50 once the quota is filled. Starting July 1, it will change to a “floating tax” of 70% of any value over $200/metric ton. Russia is aiming to tackle rising food inflation, but the wheat tax is mostly a political move as Russia hit record production in 2020. The U.S. stands to gain ground in Africa and Latin America if Russian wheat is less competitive.
