While importer stocks are shrinking, USDA expects global wheat demand to surge to a new record high of 749 MMT, 4 percent above the 5-year average. USDA expects importer ending stocks to fall to 49.8 MMT in 2018/19, the lowest amount in a decade. Simultaneously, many importers are engaging in “just in time” purchases since wheat price movement has rewarded their patience the last few years. While the United States, Canada and Argentina are expected to have increased production, exporter supplies are expected to fall 20.2 MMT year over year. Decreased production is expected in the European Union (EU), Russia, Ukraine, Kazakhstan, and Australia. USDA noted in last week’s World Agricultural Supply and Demand estimates that global wheat production will fall to 737 MMT in 2018/19, the first drop in 5 years and down 3 percent from 2017/18. These price increases are driven by increased global wheat demand, shrinking global wheat supplies and their location. According to International Grains Council (IGC) data, the average price of Australian wheat is up $19 per MT and the average price of Argentine wheat is up $75 per MT. The average global wheat price is up 41 cents per bushel ($15 per MT) with larger increases noted in Australia and Argentina, which compete with the United States in key quality-driven markets. wheat futures markets are mostly ignoring global wheat supply and demand fundamentals, which can be seen in competitors’ wheat prices. With trade policy issues dominating the headlines, U.S. Buyers are uncertain about the effects of unforeseen tariff wars and have altered their typical wheat import cadences. wheat futures prices are not reflecting global supply and demand realities. wheat customers - Mexico, Japan, the Philippines, Korea and Nigeria - are 27 percent behind last year’s pace. trade policies and their own countries’ retaliatory measures. wheat, just what they need for the short-term or are waiting to make purchases, noting uncertainty about U.S. Exporters note that customers are choosing to purchase smaller than normal volumes of U.S. export sales for marketing year 2018/19 (June 1 to May 31) totaled 6.43 MMT, down 32 percent year over year. wheat prices during the summer months however, this year the unique trade environment is also pressuring export demand and driving U.S. Seasonal harvest pressure always impacts U.S. wheat customers, September Kansas City hard red winter (HRW) wheat futures have fallen 51 cents per bushel ($19 per metric ton ), September Chicago soft red winter (SRW) wheat futures dropped 25 cents per bushel ($9 per MT) and Minneapolis hard red spring (HRS) plunged 58 cents per bushel ($21 per MT). Since the steel and aluminum tariffs went into full effect for major U.S. There is an old saying: “When there’s blood on the streets, buy property.” Given recent price movements, that could easily be changed to: “When trade policies are in the news, buy wheat.” By Stephanie Bryant-Erdmann, USW Market Analyst
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