Global Wheat Prices Supported By Record Global Imports
United States Department of Agriculture Foreign Agricultural ServiceDecember 2020Grain: World Markets and TradeGlobal Wheat Prices Supported by Record Global ImportsGlobal Prices Jump From Previous Year400 /mt350300250200150ChinaU.S.EURussiaCanadaNote: China - National Average Spot Price; Russia - Black Sea Milling; EU- France grade 1, Rouen;US- HRW 11.5% Gulf; Canada- CWRS (13.5%), VancouverSource: FAO (China), IGCWheat prices for major consuming and exporting countries surged from last year despite record globalproduction and ending stocks. Prices found support, in part, from record global imports andconsumption in 2020/21. Furthermore, unexpectedly strong import demand in China and Pakistanhelped bolster global trade to a record this month due to unprecedented demand from both countriesand other major importers, driving stocks in exporting countries lower and strengthening global prices.Global wheat prices have also been pulled higher in recent months on strength in global oilseed andfeed grain prices.Ironically, global wheat prices have risenin recent months despite record globalstocks. Growth in global stocks has mostlybeen supported by higher domesticsupport prices and governmentstockholding in China and India. Chinaholds more than half of global stocks,Million Metric TonsDespite record 2020/21 supplies in China, domestic spot prices in the world’s largest consuming countrywere more than 10 percent higher this November compared with the previous year and the highest in 5years. Strong domestic prices for corn and wheat led to the largest forecast of wheat imports in 25years; FOB prices for major exporters were more than 100/ton less than domestic spot prices for eithercorn or wheat in November (see the FASHigh Global Prices Despite Record Global StocksGrain: World Markets and Trade350November 2020 publication titled “China300Grain Imports Rise Higher” 19United StatesApproved by the World Agricultural Outlook Board/USDA2019/20CanadaFor email subscription, click here to SDAFAS/subscriber/new2020/21Other
representing more than one year’s worth of its wheat consumption. Over the past few months, the rateof sales from auctions of China’s stocks is accelerating, leading to more availability of old-crop wheat inthe domestic market. Nevertheless, China has increasingly relied upon the global market to satisfy itswheat demand. This, in turn, has tightened exporter stocks.For the first quarter of the 2020/21 July/June trade year, Canada and the United States were the largestsupplying countries to China. With record exports of 26.0 million tons, Canada’s stocks are forecastnearly unchanged from the previous year despite a record crop, partly owed to unfettered early-seasondemand from China. Canada was the largest supplier in the first 4 months of the trade year. Stocks inthe United States are projected to fall more than 4 million tons from the previous year, also partly dueto exports projected at their highest level in 4 years aided by strong China import demand.China and Pakistan 2020/21 Import ForecastsHave Surged Since Initial May ForecastMillion Metric Tons1086420May 2020 ForecastDecember 2020 ForecastPakistanChinaBoth China and Pakistan have had the largest upward revisions to their respective imports since theinitial May 2020 forecasts for the 2020/21 crop year in the USDA WASDE. Pakistan imports are forecastat their highest level in 12 years, and up more than 2.4 million compared with the USDA May 2020forecast. Both public and private demand have bolstered domestic supplies with Pakistan reported tohave purchased more than 1.7 million tons in the first 6 months of 2020/21 (see page 6 of the FAS Grain:World Markets and Trade September publication titled “Pakistan Wheat Imports Rising” here). Tightstocks have spurred greater import demand due to robust domestic prices (wholesale and retail), whichhave edged domestic inflation higher. Ukraine and Russia have been the primary suppliers despite BlackSea export prices being at their highest in 5 years.Strengthening global prices for other major commodities and drier early-season winter wheat plantingconditions in Russia and the United States have also supported strengthening wheat prices. Robustimport demand from China, Pakistan, and other major importers is expected to further support globalprices amidst record 2020/21 global trade.Foreign Agricultural Service/USDAGlobal Market Analysis2December 2020
TABLE OF CONTENTSWorld Markets and Trade: Commodities and DataWHEAT. 4RICE . 8COARSE GRAINS . 12ENDNOTES . 16DATA TABLES . 19The Foreign Agricultural Service (FAS) updates its production, supply and distribution (PSD) database forcotton, oilseeds, and grains at 12:00 p.m. on the day the World Agricultural Supply and DemandEstimates (WASDE) report is released. This circular is released by 12:15 p.m.To download the tables in the publication, go to Production, Supply and Distribution Database (PSDOnline): scroll down to Reports, and then click Grains.FAS Reports and Databases:Current World Markets and Trade and World Agricultural Production ReportsArchived World Markets and Trade and World Agricultural Production ReportsProduction, Supply and Distribution Database (PSD Online)Global Agricultural Trade System (U.S. Exports and Imports)Export Sales ReportGlobal Agricultural Information Network (Agricultural Attaché Reports)Other USDA Reports:World Agricultural Supply and Demand Estimates (WASDE)Economic Research ServiceNational Agricultural Statistics ServiceForeign Agricultural Service/USDAGlobal Market Analysis3December 2020
WHEATOVERVIEW FOR 2020/21Global production is up this month with larger crops for Australia, Russia, and Canada more thanoffsetting production cuts in the European Union and Brazil. Global consumption is boosted onhigher feed consumption in Australia, China, and the European Union. Global trade is also up, drivenby higher Australia, Canada, Russia, and United States exports; China and Pakistan imports are raisedfor the fourth consecutive month. The projected U.S. season-average farm price is unchanged at 4.70 per bushel.WHEAT PRICESDomestic: Prices for most U.S. wheat classes were down for the first time in 4 months, pressured bylarger global production estimates. Hard Red Winter (HRW) plunged 15/ton to 261 based onimproved crop conditions in the Southern Plains. Soft Red Winter (SRW) dropped 11/ton to 260 onslow shipments and sales. However, Soft White Winter (SWW) climbed 6/ton and was the only classmoving higher this month to settle at 271 on strong shipments and sales. Hard Red Spring (HRS)witnessed the most significant drop of 18/ton to settle at 279.U.S. Daily FOB Export Bids320300 / MT280260240220200180HRWSRWSWWHRSSource: IGC*Note on FOB prices: HRW (Hard Red Winter); SRW (Soft Red Winter); SWW (Soft White Wheat); HRS (Hard RedSpring)Foreign Agricultural Service/USDAGlobal Market Analysis4December 2020
Global: Despite strong global demand, wheat prices fell slightly in most major exporting countries sincelast month’s WASDE due to larger supply projections. Australia’s production forecast was revisedfurther upwards by ABARES following news of an improving harvest, Canada edged up its 2020production estimate, and an expected rebound in France’s 2021 wheat crop harvest all weighed onprices. Furthermore, news of Russia possibly raising its yet to be announced grain export quota for thespring contributed to dampening global prices. Argentine prices, meanwhile, continued trendingupwards following further estimates of lower 2020/21 production due to drought.Argentina Australia 263CanadaEURussiaUnited States 265 257 254 261 253Note: As of December 8th, 2020International Daily FOB Export Bids300280 / iaUnited StatesSource: IGC*Note on FOB prices: Argentina- 12.0%, up river; Australia- average of APW; Fremantle, Newcastle, and PortAdelaide; Russia - Black Sea- milling; EU- France grade 1, Rouen; US- HRW 11.5% Gulf; Canada- CWRS (13.5%),VancouverForeign Agricultural Service/USDAGlobal Market Analysis5December 2020
MARKET FEATUREAustralia Wheat Exports to Rebound Following Projected Near-Record CropAustralia Wheat Production and ExportsMillion Metric Tons35302520151050ProductionExportsAfter 2 years of drought and unfavorable growing conditions, Australia wheat production is expected torecover to a near-record crop of 30.0 million tons in the 2020/21 marketing year (Oct/Sep). With largersupplies, exports are projected to surge as well to 20.0 million tons for the local marketing year, morethan double the prior year and nearly returning to 2016/17 levels.December Wheat Export Prices 320 300 /MT, fob priceAmidst news of an improvingharvest and rebounding production,Australian wheat prices have fallensignificantly—nearly 8 percent sincelate October. This drop is mostlyattributable to the large crop andtension with China, rather thancurrency movements. Meanwhile,other exporters have experienced arecent surge in prices, and Australiawheat is now priced lower thanmost major exporting countries. 280 260 240 220 200 180With competitive prices for the first20162017201820192020time in years, Australia is in anAustraliaCanadaEUUnited StatesBlack Seaoptimal position to expand exports.Source: IGCHowever, trade tensions with Chinapresent a formidable challenge to export prospects. China was Australia’s largest export market lastyear, accounting for 15 percent of its total wheat exports. Given mounting tensions, Australia wheatcould see the sharp decline in exports to China that other Australia grains have faced. Therefore, inorder to boost exports and make up for lost trade to China, Australia wheat must maintain itsunprecedented price advantage to not only reenter historically important markets, but also to expand tonewer markets.Foreign Agricultural Service/USDAGlobal Market Analysis6December 2020
Historically, Australia has been a dominant supplier of wheat to East and Southeast Asian countries.However, it has lost significant market share in this region since the 2016/17 record crop due toshrinking production and relatively high prices. Australia was only able to maintain stable exports to afew key markets there, while Black Sea countries took advantage of their relatively low prices to expandpresence across Asia.Now that Australia has nearly doubled its exportable supplies, it will need to aggressively buy backmarkets in Southeast Asia that have been most recently supplied by Black Sea countries. Additionally,with its abundant supplies, Australia will need to expand its market share in other Asian countries aswell as to new destinations in other regions. Currently, Australia’s export prices are competitive inAfrica and the Middle East on a delivered basis compared to EU and Black Sea origins, but they will needto remain low to overcome competitors’ freight advantage.Australia Wheat Exports by MarketMillion Metric Tons25201510502015/16China2016/17Other East AsiaIndonesia2017/182018/19Other Southeast AsiaSouth Asia2019/20OtherTRADE CHANGES IN 2020/21 (1,000 00026,000Kazakhstan Exports6,7007,000ChangeReason1,000 Strong shipments to China300 Large shipments to nearby 0500ChinaEuropeanUnionImports8,0008,500500 Continued strong import paceImports5,7006,000300 Larger purchases to offset tight ,7008,000Foreign Agricultural Service/USDAGlobal Market Analysis500 Larger production300 Strong first quarter imports from CanadaSignificant government purchases to replenishstocksContinued tender activity from TMO (state300grains board)7December 2020
RICEOVERVIEW FOR 2020/21Global rice production is forecast nearly unchanged this month as larger crops in Australia and Perumostly offset a smaller crop in South Korea. Global trade is up with higher imports for Nigeria andSaudi Arabia. Larger exports are forecast for India and Brazil.OVERVIEW FOR 2019/20Global rice production is virtually unchanged. Global trade is raised, with stronger demand fromWest Africa and the Middle East. India exports are now at a record, while Pakistan and Vietnamexports are trimmed further.RICE PRICESWeekly FOB Long Grain Rice Export Quotes: Last 12 Months700650600 /MT550500450400350300United StatesThailandVietnamIndiaPakistanUruguayGlobal: Over the past month, U.S. long-grain export quotes have remained high at 625/ton, whileUruguayan quotes continue at 620/ton. Thai quotes escalated to 497/ton on a stronger currency andnew inquiries from foreign buyers amid tight Vietnamese supplies. Vietnamese quotes rose with strongdomestic demand and then settled lower to at 491/ton on reduced demand from the Philippines. Withthe recent harvest, Pakistani quotes dipped but then returned to 410/ton, reflecting strong exportdemand. Meanwhile Indian quotes at 355/ton continue to be the lowest among the major exporters,indicating an abundant supply situation.Foreign Agricultural Service/USDAGlobal Market Analysis8December 2020
MARKET FEATUREAbundant Supply and Low Prices Fuel India Rice ExportsFor 2020, exports from India are expected to reacha record, whereas exports from Thailand areestimated to be the lowest in 24 years, slippingfrom being the second to the third-largest supplierfor the first time since 2012. Meanwhile, closecompetitors Vietnam and Pakistan have also seena modest decline in exports.Rice Exports16Million Metric Tons1412108What has caused the exports to soar dramatically6for India, but tumble for the other exporters in42020? One factor has been import demand.2Demand from many of India’s key markets in the0Middle East and Africa has been robust. Despite201920202021initial indications that Saudi Arabian importdemand would decline, it rose this year and wasIndiaThailandVietnamPakistanprimarily supplied by India. Likewise, demand inWest African markets did not subside as much asexpected. Neighboring Nepal also exhibited strong demand. Conversely, markets in Southeast Asiahave seen lower import demand, dampening the export opportunities for Thailand and Vietnam, whichusually supply the region. Government buying in Indonesia was muted amid sufficient domesticsupplies. Meanwhile, private sector imports in the Philippines have been stymied in recent months asthe government has stopped issuing new import permits with unrest in the farm sector. Meanwhile,imports by China have slid to the lowest in nearly a decade, with purchases from Thailand down sharply.The other key factor has been the sharp contrast of the supply situation and availability of rice fromIndia versus other suppliers. With record production and stocks, India has had ample suppliesthroughout the year. Despite additional domestic consumption with increased distribution to lowincome households during the COVID-19 pandemic and some initial port disruptions with the relatedlockdown, India has been able to maintain steady exports at very low prices, reflecting its abundantavailability.In contrast, Thailand began the year with expectations of a much reduced second crop and higherprices. While fragrant rice continued to flow to markets demanding the premium varieties, relativelyhigh-priced parboiled rice and white rice suffered. In response, India’s parboiled exports have soaredmore than 20 percent, capturing the vast majority of trade to West Africa. Likewise, Thai white riceexports have fallen as deeply discounted Indian white rice shipments have risen to a record, withsignificant gains in African markets. In addition, India has garnered market share from Pakistan, itscompetitor for basmati exports.Looking ahead to 2021, India is still expected to dominate global exports, as its prices are still likely toremain low. However, with larger expected production, Thailand is anticipated to regain some marketshare and its position as the second-largest exporter, supported by higher forecasted imports inSoutheast Asia.Foreign Agricultural Service/USDAGlobal Market Analysis9December 2020
Modest Rebound in Australia Rice Exports Despite Much Larger ProductionAustralia Rice Production & Exports900Thousand MT8007006005004003002001000ProductionMY ExportsAustralia rice production in market year 2020/21 (begins in March 2021) is forecast to jumptremendously compared to last year, which was affected by drought and the smallest crop since2008/09. Exports are also expected to rise, but only moderately. Export growth is constrained asAustralia focuses on rebuilding stocks and faces stiff competition from other exporters that seizedmarkets during Australia’s general absence from the global market.Domestic demand for rice in Australia had been trending up until 2019. After the drop in production,domestic prices spiked and led to weaker consumer demand in 2019/20. Stocks are also forecast todrop to its lowest level since 2008. Thus, much of the new-crop supplies will be used to replenish theAustralian market.Some importers have adapted to Australia’s relative absence from the market in the past couple ofyears by shifting to new exporters that have more abundant supplies. For example, Papua New Guineatypically purchases from its neighbor but has now turned to Taiwan, an atypical exporter. Taiwan riceexports have nearly doubled compared to the previous year, also shipping to Asian, Latin American, andAfrican countries.China has been another key supplier amid Australia’s absence. With an abundant inventory of lowquality stocks, China’s medium-grain exports have risen substantially since 2017, and China is now--byfar--the largest medium-grain supplier globally.China’s exceptionally low prices are the main factor preventing Australia from resuming exports at predrought levels. With higher production, Australian export prices are likely to decline to a certain extentonce the new crop is harvested next year. While Australia may be able to regain some East Asian andMediterranean markets, it will likely face more challenges to regain price-sensitive markets, such asPapua New Guinea.Foreign Agricultural Service/USDAGlobal Market Analysis10December 2020
TRADE CHANGES IN 2021 (1,000 2001,500Saudi xports12,50013,000PakistanExports4,1004,000Change ReasonIncreased demand for imported300 parboiled varieties amid tightdomestic suppliesHigher consumption with150preference for Indian varietiesContinued sales to West African100and Western Hemisphere marketsAbundant supplies and competitive500prices relative to other exportersReduced competitiveness vis-à-vis-100IndiaTRADE CHANGES IN 2020 (1,000 2,300Saudi ayExports835950VietnamExports6,4006,200Foreign Agricultural Service/USDAGlobal Market AnalysisChange Reason100 Larger shipments from IndiaHigher quantities of parboiled rice200 shipped to the region recently,especially from IndiaGovernment not issuing additional-200import permits this yearCompetitively priced shipments100 from India fuel increasedconsumption estimateIncreased shipments to Latin100America700 Raised to a record with strong-100 Sluggish shipmentsHigher shipments to Br
Grain Imports Rise Higher” here). Ironically, global wheat prices have risen in recent months despite record global stocks. Growth in global stocks has mostly been supported by higher domestic support prices and government stockholding in China and India. China holds more than
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