By: Jim Peterson
Posted: Dec 23 2024
The 2024 marketing year is bringing a shift in export market share amongst major suppliers, but remains a highly competitive environment, keeping prices on the defensive. Overall world wheat trade is projected at 7.9 billion bushels, the lowest level in three years, and down from 8.1 billion last year. A combination of tempered wheat demand in many countries due to struggling economies, and in some cases, larger domestic crops is leading to the lower overall trade forecast.
Russia remains the dominant exporter, accounting for roughly 22% of demand, followed by the EU at 13.5%, but both are capturing a lower share than the past two years. In Russia, a 12% smaller crop this past year, compared to the previous two, and increasing concerns about the potential of their 2025 crop has throttled back their projection. Much of this is expected to take place in the front half of the 2025 calendar year, as their current export sales pace remains robust. Recently, the government has raised their export tax to nearly $1/bushel, which will make Russian wheat less competitive in the near term. The government has also set the February to June 2025, export quota at just 400 million bushels, one-third of the quota for 2024. This was done because recent months have seen a near record export pace from Russia and domestic supplies are tightening. In addition, a recent crop report from the Russian State Weather Agency pegged 37% of Russia’s winter wheat crop in poor condition, with a large share not even sprouted yet.
In the EU, the 2024 harvest produced the smallest crop since 2018, and has curtailed their export competitiveness. Perpetual cold, wet conditions during the growing season impacted both production and quality, with impacts most pronounced in France, Germany and Poland. These are typically some of the strongest competitors for mid quality wheat on the world market, as well as some smaller quantities of higher protein wheat. The quality impacts have shifted more of the crop into feed channels, and also raised the need for imports to boost both protein and milling quality supplies within the EU.
Canada, Australia, the U.S. and Argentina are all benefitting from the lower export push from Russia and the EU. Canada is projected to remain near the 950 million bushel level for a third straight year. A rebound in crop size in 2024, combined with a high grade and protein profile, a weak Canadian dollar, and more competitive inland freight are advantages. Australia is projected to rebound over last year, simply due to greater production. Harvest is still underway, and there have been some rain impacts on quality, but private forecasts have their crop size even larger than USDA’s current projection. USDA is projecting a 1.2 billion bushel crop, up nearly 25% from last year. Depending on the extent of quality impacts from recent rains, current Australian export projections appear too low, and they will be a strong competitor in the Asian region.
Argentina is likely to see the largest year on year gains in exports with very strong production this year and a more supportive government export policy. USDA is currently estimating production at 645 million bushels, up 25% from the past two years. Exports are projected at 422 million bushels, well above the past two years, and local Argentina market analysts expect that could grow to 480 million bushels. They will certainly be a strong competitor in the South American region.
The U.S. is projected 20% higher in potential exports compared to last year, with the December USDA projection raised to 850 million bushels by the end of May. Current sales of all classes are running about 19% ahead of a year ago at 570 million bushels. Hard red winter and soft white are expected to see the largest year-to-year percentage growth, up 64% and 38%, to 220 and 210 million bushels, respectively. Hard red spring is projected to be the largest export class at 270 million bushels, for a second straight year, and up 15% from last year. Soft red winter and durum are projected to have lower exports compared to last year. U.S. export competitiveness has been volatile so far this year, with periods of greater than expected sales, followed by very slow sales. The strength of the U.S. dollar, and extended periods of elevated interior freight costs have been headwinds for a steady export pace. As of late November, with one-half of the marketing year completed, shipments are 32% ahead of a year ago, but sales on the books are down 2%, so a resurgence in demand will be needed in calendar year 2025 to reach projections. USDA anticipates a sharp decline in Russian sales in 2025, opening opportunities for U.S. exports.
U.S. futures markets have been in a downtrend since October, pressured by the increasing crop sizes in Australia and Argentina, the greater than expected early sales pace from Russia, and strong Canadian competition. In recent weeks, futures have seen steady to higher trends in all three markets. This is supported by strength in U.S. corn values, greater expectations of a slowdown in Russian wheat exports in early 2025, and the potential for an accelerating export pace for U.S. wheat.
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