The Bad, The Ugly and The Good on Wheat

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The Bad, the Ugly, the Good on Wheat
Lorrie Boyer



“We are seeing less seeded wheat; lowest seeded area on record,  which is being attributed to rain in the plains last season causing planting issues,” says Senior Vice President of Communications for U.S. Wheat Associates, Steve Mercer. The bad here is that the trend is continuing and typically prices would rise for farmers as a result of this situation, but prices are staying flat, according to Mercer. Further, he says that the Russian crop is dominating in price buying in the middle East and “their crop looks good. They are a major player.” That is what causing the lack of price bump for U.S. farmers. That being said, prices are up over this time last year, but “they are not where we expect.” The ugly here is that the most recent USDA Stocks Report shows that there are 1.5 billion bushels of wheat stocks in the U.S. alone. He says that producers have done a good job producing wheat and conditions have been favorable. However, market buyers are taking short positions because they expect prices to go down. Plus, “you’ve got uncertainty continuing in the trade business - most recently there has been a proposal to close the Mexico border to trade with the U.S.” About sixty-percent of the wheat that is exported to Mexico is exported by rail, so closing trade would have a big impact on wheat exports to Mexico from the U.S.

The good, according to Mercer is that Brazil has announced that it is opening up it’s duty free quota to outside wheat. By joining the World Trade Organization, they obligated themselves to importing up to 750,000 MT of wheat. Argentina is their main wheat supplier. This move though, gives U.S. Hard Red Winter Wheat farmers the ability to compete with Argentina on a steady basis every year. In the past, Brazil has been a “swing market” for U.S. wheat, meaning that “some years they import very little, some years they import a lot,” especially, when Argentina cannot supply it. Mercer adds that this is a big lift for U.S. wheat and Brazilians really like HRW.

In other good news, Iraq has announced that they are purchasing substantial amounts of HRW. That keeps demand up for HRW, which should help to support price levels. Additionally,  Nigeria is back in the market for large amounts of U.S. HRW and Russian farmers are hanging on to wheat that have left,hoping for higher prices. That means there is more demand for HRW and other classes of U.S. wheat to be “pretty strong up until Russia starts their harvest,” he says.

Two years ago, Russia produced double what the U.S. Farmers produced and they sold it a lower price. With moisture up in the U.S., Mercer says there should be a good chance for the U.S. to have decent yields this year.


Image result for us wheat associates


U.S. Wheat Associates (USW) is the export market development organization for the U.S. wheat industry. USW promotes the reliability, quality and value of all six U.S. wheat classes to wheat buyers, millers, bakers, food processors and government officials in more than 100 countries around the world.
Its mission is to “Develop, maintain, and expand international markets to enhance wheat’s profitability for U.S. wheat producers and its value for their customers.”

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