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Moving Wheat Efficiently Through the Columbia Snake River System

In the Pacific Northwest (PNW), wheat can move by barge to export elevators from as far away as Idaho. That is because of the series of eight locks and dams that make safe, efficient navigation possible on one of the leading trade gateways in the United States — the Columbia Snake River System.

The Pacific Northwest Waterways Association (PNWA) notes that over 8.6 million tons of cargo are moved by barge on the inland portion of the system, feeding the deep draft lower Columbia River. The Columbia Snake River System is the top wheat export gateway in the nation.

Serving Asia, Latin America

Idaho exports more than half of its wheat crop each year. The Port of Lewiston on the Snake River, the most inland U.S. port, is uniquely positioned to source that wheat for the six major PNW export elevators serving Asian and Latin American wheat markets. All aspects of the river system are essential for transporting wheat from farm to market. However, barging through the lower Snake River is the most efficient, affordable, and environmentally friendly way to get that wheat to export locations. For context, one 4-barge tow on this river system moves as much cargo as 144 rail cars or 538 semi-trucks.

An estimated 10% of all U.S. wheat exported every year moves through the four locks and dams on the lower Snake River. The Idaho Wheat Commission and its partners recently shared the short video below that tells the story of how the Columbia Snake River System works for the world’s wheat importers, for the U.S. farmers who grow that wheat, and for the people of the Pacific Northwest.

U.S. Wheat Associates (USW) will share more information about the crucial role of the Columbia Snake River System in future Wheat Letter posts.

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Exporters Share U.S. Wheat with the World

The commitment of the people who participate in every step of the U.S. wheat export supply system helps build an unmatched reputation for both quality and reliability.

The 2021 crop is an unfortunate but telling example of how U.S. farmers overcome significant risks to meet domestic wheat demand and still provide sufficient supplies for export markets. Farmers and commercial elevators can store and efficiently transport U.S. wheat in top condition to meet overseas demand when needed and throughout the marketing year. Prices are discovered through futures exchanges and basis costs that are always available to customers.

High Standards

The rigorous crop inspection and management continues with private export companies where high standards create the consistency and trust overseas customers depend on.

These companies use risk management tools to honor sales contract prices often made months before vessel loading. The Federal Grain Inspection Service (FGIS) independently inspects wheat at vessel loading to certify that the quality matches the customer’s specifications.

FGIS inspector of U.S. wheat

The Federal Grain Inspection Service weighs and inspects every sub-lot of U.S. wheat to certify it meets each customer’s specifications. This inspector is dividing a wheat sample into two equal sub-samples for various inspection processes.

“It’s a critical function the Federal Grain Inspection Service provides to meet our contractual obligation overseas and create that global standardization,” said United Grain Corp. President and CEO Augusto Bassanini. “I think that separates the value of U.S. wheat and other grain products from the rest of the world.”

Those inspections also yield valuable data down to the sub-lot level of 1,000 to 2,000 metric tons that offer customers even more value from their purchases with help from U.S. Wheat Associates (USW).

Personal Integrity

“Creating that difference for U.S. wheat is all done through relationships,” Bassanini said. “We couldn’t do it without the people, whether in this organization, whether in U.S. Wheat Associates. Really, it is that quality of those individuals that really creates, again, the unrivaled value to our customers.”

Augusto Bassanini

Augusto Bassanini, President and CEO, United Grain, Vancouver, Wash.

United Grain and Bassanini generously offered their story in USW’s video presentation “Wholesome: The Journey of U.S. Wheat” as a representative of all private export companies that share the U.S. wheat crop with the world. Now “Wheat Letter” shares that story below.

Learn more about how USW works with buyers and the U.S. wheat export supply system here.

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Transporting the Crop: U.S. Grain Handlers Ask, “What Can We Do for You?”

As U.S. grain handlers transport wheat from the farm to grain companies by truck, river or rail, it is tested and sorted to meet customer specifications at every step of its journey to export elevators on the Gulf, Great Lakes or Pacific Northwest.

Logistics are a critical part of the work grain handlers do to make sure U.S. wheat arrives at export houses in peak condition and they take their jobs seriously. General Manager Paul Katovich and his colleagues at Highline Grain in Washington state think about the farm families they have served for generations. At the same time, like grain handlers across the United States, his organization is upgrading processes, storage and facilities to ensure those farmers and, ultimately, customers overseas are well served.

“We are all stewards of this platform,” Katovich said. “It is why we do what we do … with a greater purpose. What we talk about internally, in a group setting or when we go overseas, or when we have customers come here is, ‘What is it that we can do for you.’”

As a part of its film, “Wholesome: The Journey of U.S. Wheat,”  USW is sharing individual chapters of the video throughout the year. “Grain Handlers: Transporting the Crop” provides more information about the essential work of U.S. grain handlers.

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Study the U.S. Wheat Export Supply System With Our Exclusive Map

In 2020, U.S. Wheat Associates (USW) introduced the first digital map of the U.S. wheat export supply system as a visual planning tool for its overseas representatives and their customers. The “USW Wheat Export Supply System” map is posted here on the USW website and was built in cooperation with Heartland GIS using funds from the USDA Foreign Agricultural Service Agricultural Trade Promotion program.

“With six distinct wheat classes grown across many states and delivered by many different routes, the U.S. wheat supply chain truly is driven by geography,” said USW Vice President of Overseas Operations Mike Spier. “The map provides a geographical information system that our team of representatives can use to help the world’s wheat buyers literally see where the wheat they are buying is grown and how it can be transported to the export elevator.”

“Assisting overseas customers is a very important service that helps add value to U.S. wheat,” said USW Vice President of Communications Steve Mercer. “This map is a unique and very useful addition to the trade service our representatives conduct all around the world.”

Picture of U.S. wheat export supply map.

The map includes a selection tool that allows the viewer to identify, in any combination, U.S. wheat production by class, wheat shuttle loading terminals, Class 1 U.S. rail lines and spurs, river terminals, major rivers and export elevator locations.

“Working with U.S. Wheat Associates and its state wheat commissions, we used data from multiple sources, including satellite imagery, to identify wheat planted area between 2013 and 2019,” said Todd Tucky, Owner and Senior Consultant of Heartland GIS. “I believe this is the most accurate representation ever developed of where individual wheat classes have been produced in the United States.”

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A Visit to an Export Elevator with United Grain Corporation

The United Grain Corporation (UGC) wheat, corn, and soybean export elevator in Vancouver, Wash., on the Columbia River, is the largest of its kind on the U.S. West Coast with storage of more than 220,000 metric tons. It was originally built in the 1920s and purchased by United Grain in 1970.

Like other U.S. facilities serving U.S. wheat buyers, the United Grain export elevator is part of the world’s most efficient supply system and is constantly improving.

“Every year we do upgrades and maintenance that make the facility the cutting edge operation it is today,” said Brian Liedl, UGC Director of Merchandising.

Video Tour

Earlier this year, U.S. Wheat Associates (USW) worked with United Grain to record a video tour of this amazing export elevator facility. USW Vice President and West Coast Office Director Steve Wirsching joined Liedl on a walk around the entire elevator and a detailed discussion of its systems. The program covers shuttle trains arriving from interior elevators and rapidly unloading wheat, explains how the facility separates and stores wheat by class and quality, discusses its investment in high-speed cleaning systems, and the essential work of federal grain inspectors.

Federal Control

Inside the inspection office, Liedl explained to Wirsching that under U.S. law, grain weight is measured and quality is tested by the Federal Grain Inspection Service before it is loaded onto a vessel for delivery.

“After our shipping bins are filled, those independent inspectors have control of the grain and only release it to be loaded after they determine it meets that customer’s specifications,” he said.

This program was created originally as part of a three-day USW seminar called “Contracting for Wheat Value” for Chinese customers. We are sharing it here to demonstrate how U.S. grain companies and the federal government are working to ensure all importers get the wheat they want as efficiently as possible.

Thank you to United Grain Corporation for their collaboration on this video.

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Federal Agency Helps Keep the Wheat Moving

By Michael Anderson, USW Assistant Director, West Coast Office

The uncertain nature of COVID-19 and the unprecedented changes it brought to how we live our lives has made every industry stop and consider how it can meet customer demands while protecting the health of its employees. While the novelty of the virus may have worn off, its presence has become a fact of life.

As the pandemic continues, the U.S. wheat supply chain is still working hard to meet the needs of customers, ensuring that the U.S. wheat store stays open. One crucial link in that chain is the Federal Grain Inspection Service (FGIS) division of the U.S. Department of Agriculture (USDA) Agriculture Marketing Service. The work of FGIS is valued by overseas wheat buyers because they are assured that an independent agency has certified shipments to meet the weight and quality requirements specified in the sales contract.

“Our system of standardized, independent grain inspection makes U.S. wheat more valuable,” said USW Chairman Darren Padget, a wheat farmer from Grass Valley, OR. “The proof of that came this year when many of our overseas buyers expressed a real concern that the pandemic would interrupt federal grain inspection and our supply chain.”

U.S. Wheat Associates (USW) recently spoke with FGIS about the measures the agency is taking to protect the integrity of the work and its essential workers during the COVID-19 pandemic. Following are the answers provided by an agency spokesperson:

USW: How has the pandemic affected how FGIS manages its team of inspectors?

FGIS: “Within the Federal Grain Inspection Service (FGIS) we’ve conducted over 100 staffing actions in the past year (either new hires or promotions into new positions). The increase in hiring actions is a result of both the pandemic and an increase in inspections overall. We developed virtual onboarding so staff could be trained quickly and remotely. Our national network of field offices allows us to send additional staff on detail assignments to busy offices during the natural ebb and flow of the harvests and export patterns. We do this on a limited basis in any given season. When the COVID national emergency started we expanded that practice and set up an active list of interested personnel should a need arise somewhere. However, we have not had any shortages due to the COVID-19 pandemic and that list has not been needed.”

USW: It cannot be easy keeping people socially distanced, when you think about the nature of exporting, transfer of samples/people in and out of facilities that are open around the clock. Yet, you have done that – any special steps that you have taken there?

FGIS: “Exporters have been essential in helping us ensure that FGIS on-site labs and common areas are clean and set up for social distancing. Most of our laboratories allow for social distancing and masks are required when that is not possible. USDA has ensured that all staff have access to cleaning supplies and personal protective equipment. In fact, our labs at AMS made hand sanitizer and masks for fellow employees this past spring when national supplies ran tight.”

USW: The U.S. government declared workers in the food industry and specifically agricultural workers essential in March 2020 to ensure the food supply chain would not be disrupted. Like a lot of essential industries, FGIS inspectors and staff must be taking extra precautions to stay healthy and avoid the risk of quarantine. Any special instructions that have been provided to them, or directives in terms of helping to keep them healthy?

FGIS: “We follow guidelines from the Centers for Disease Control and Prevention. We also mandate that employees clean their work-spaces after each shift, and do not enter any vessel offices while conducting stowage exams on ships.”

USW: Looking ahead, what can buyers of U.S. wheat and other commodities expect?

FGIS: “Our goal is to provide service safely, without interruption. We know the U.S. grain supply is essential to providing nutritious food around the world and we are proud of the role we play to keep those products moving with accurate and timely grades and weights for grain exports. FGIS has had no interruptions since the national emergency began and none are planned. We will continue to take actions to ensure inspection and weighing service can be provided safely, and we will continue to adapt and adjust to meet the needs of our customers.”

Through the committed efforts that extend from the farm to the FGIS inspectors and export elevator staff, wheat grown in the United States continues to flow to importing customers to continue feeding people around the world.

The Federal Grain Inspection Service (FGIS), as an objective third party, certifies that all exported wheat meets import specifications.

 

 

 

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U.S. Wheat Commercial Sales Significantly Ahead of Last Year’s Pace

By Claire Hutchins, USW Market Analyst

USDA currently estimates the United States will export 26.5 million metric tons (MMT) of wheat in 2020/21, 1 percent ahead of last year’s pace, if realized. Five months into marketing year (MY) 2020/21, total U.S. wheat commercial sales are 12 percent ahead of last year’s pace at 16.8 MMT and are 15 percent ahead of the 5-year average.

To date, export sales of hard red winter (HRW), hard red spring (HRS) and white wheat (soft and hard) are significantly ahead of last year’s pace. Sales of soft red winter (SRW) and durum lag 2019/20. Success in individual markets such as China and Brazil due to policy changes and follow-on trade and technical service by U.S. Wheat Associates (USW) are supporting overall sales. As in other markets, competitive pricing for U.S. wheat early in MY 2020/21 helped fuel a faster import pace even by traditionally strong U.S. wheat buyers like the Philippines and South Korea.

HRW. Total HRW sales are 12 percent ahead of last year at 6.12 MMT. Stable exports to Mexico, Nigeria and Japan, the top three markets for HRW, and significantly stronger export programs to China and Brazil are supporting HRW sales in the first third of MY 2020/21.

As of Oct. 29, China has purchased 981,000 metric tons (MT) of HRW after no purchases in 2019/20. Strong HRW export sales so far in 2020/21 can be attributed to the Phase One agreement between the United States and China, as well as competitive HRW prices early in the marketing year. So far in MY 2020/21, China is the second largest market for HRW behind Mexico.

HRW export sales to Brazil are nearly two times more than this time last year at 513,000 MT and are 49 percent ahead of the 5-year average. According to Miguel Galdos, USW Regional Director, South America, the opportunity to advance sales to Brazil came with the Brazilian government opening a tariff rate quota (TRQ) allowing up to 750,000 MT of non-Mercosur (South America’s free trade bloc) wheat to enter the country tariff-free. Strong USW educational programs in Brazil are encouraging millers to take advantage of the high quality and competitive prices of U.S. wheat. To date, Brazil is the fifth largest market for HRW.

“USW provides the best trade and technical service to our customers and we are here for Brazilian mills for any need they have,” said Galdos.

Source: USDA FAS export sales data as of Oct. 29, 2020

HRS. Total HRS export sales of 4.72 MMT are 15 percent ahead of this time last year and are 8 percent ahead of the 5-year average. Sales to the Philippines, the top market for HRS, are 22 percent ahead of last year at 1.30 MMT and are 34 percent ahead of the 5-year average. Rising per capita consumption combined with population growth and competitive HRS prices early in the marketing year supported strong sales to the Philippines at the start of 2020/21.

In Japan, the second largest market for HRS, sales of 569,000 MT are up 20 percent on the year.

“We had good start this year in the Japanese market following the U.S. and Japan trade agreement implemented on January 1,” said Rick Nakano, USW Country Director, Japan. “This gives U.S. wheat a better opportunity to be traded on equal footing with similar classes of wheat from Canada. This results is a great outcome for U.S. wheat to compete equally again with Canadian wheat to meet the needs of Japan’s flour millers.”

Source: USDA FAS export sales data as of Oct. 29, 2020

White. Total U.S. white wheat sales are 41 percent ahead of this time in 2019/20 at 4.02 MMT and are 36 percent ahead of the 5-year average. In the Philippines, the largest market for U.S. soft white wheat, export sales are up 42 percent on the year and are 40 percent ahead of the 5-year average.

The increased demand by Philippine millers is partially due to early customer buying in response to tight export elevation capacity in the Pacific Northwest (PNW). Strong USW educational programs in the Philippines helped customers stay informed and make timely buying decisions in the first third of MY 2020/21.

Sales to South Korea, the second largest market for U.S. soft white wheat, are 79 percent ahead of last year’s pace and are 53 percent ahead of the 5-year average. Soft white wheat on a C&F (FOB and freight) landed basis to South Korea has been priced very competitively.

Looking ahead, Australia’s larger 2020 crop is coming to market and its prices are coming down. USDA predicts the 2020/21 Australian wheat crop will reach 28.5 MMT this year, 87% ahead of last year as beneficial rains pull the country out of a three-year drought.

Source: USDA FAS export sales data as of Oct. 29, 2020

SRW export sales are a different story. Total SRW export sales are down 26 percent on the year at 1.36 MMT, 21 percent behind the 5-year average. SRW export sales to all of the country’s top 10 overseas markets are behind last year’s pace.

“SRW prices are just too high right now,” said one grain trader, “the United States is priced out of the world market, especially to our buyers in Latin America and Nigeria.”

Between early June and late October, the average export price for SRW was $233/MT, 12 percent higher than the same period last year. Limited exportable supplies of SRW along the Mississippi River due to lower planted area in key states and extremely tight export elevation capacity in the Center Gulf due to increased export demand for soybeans and corn continue to support SRW export prices early in MY 2020/21.

Durum. Year-to-date durum sales in 2020/21 are 19 percent behind last year’s pace at 541,000 MT but are 30 percent ahead of the 5-year average. Total sales to Italy, the largest market for U.S. durum, are only 3 percent behind last year’s pace, but are 66 percent ahead of the 5-year average.

 

 

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U.S. Wheat Export Prices Firm on Higher Futures Prices and Export Basis Values

By Claire Hutchins, U.S. Wheat Associates Market Analyst

It is no secret that wheat futures prices have reached unexpected heights recently. Higher futures prices usually pressure export basis values when farmers sell wheat “into the rally” because that increases exportable U.S. wheat supplies. However, we are seeing a completely different phenomenon in the recent market. Extremely tight elevation capacity out of the Gulf and Pacific Northwest (PNW) due to massive U.S. agricultural commodity exports to China is sustaining high wheat export basis values, despite increased farmer selling.

CBOT soft red winter (SRW) futures and KCBT hard red winter (HRW) futures, specifically, have jumped over the past month beyond expected levels. Between Sept. 11 and Oct. 9, for example, CBOT SRW futures prices increased 11 percent to $5.94/bu, the highest since December 2014. Over the same period, KCBT HRW future prices jumped 13 percent to $5.36/bu, the highest since August 2018. MGE hard red spring (HRS) futures have increased too, by 6 percent since Sept. 11 to close at $5.44/bu on Oct. 9.

Source: DTN and USW Price Charting Tools

U.S. grain traders agree generally that the “run up” in futures prices is attributed to technical buying, where “managed money” or commodity funds buy significant amounts of U.S. wheat futures contracts with the expectation that the contracts will gain value over time. While not the whole story, part of this technical buying spree can be attributed to varying severities of dryness from Argentina to the U.S. Great Plains to the Black Sea.

These high export basis levels could hold on. “Increased farmer selling hasn’t made a dent on export basis,” said one grain trader. Limited elevation capacity is the reason.  That is because China has purchased 22.1 million metric tons (MMT) of U.S. soybeans, 9.98 MMT of corn and 1.48 MMT of wheat for delivery in 2020/21, as of Oct.1. Such demand causing “nearly non-existent” elevation capacity for wheat is sending export basis values higher.

“October, November and now nearly all of December are at capacity; we can’t add a lot more business for those months. If anyone were to sell anything for those delivery periods, it would raise elevation costs substantially more,” said another industry contact.

Additionally, export elevators are likely to charge more to elevate wheat in the next couple of months because they expect to store and export more corn and soybeans. It is more complex and expensive for export elevators to handle multiple commodities at the same time, said a representative from the U.S. grain trade.

Between June 5 and Oct. 9, Gulf HRS 14.0 percent protein export basis (on a 12 percent moisture basis) jumped 55 percent to $2.40/bu, Gulf HRW 11.5 percent protein export basis jumped 31 percent to $1.90/bu and Gulf SRW export basis jumped 80 percent to $1.35/bu.

Over the same period, PNW HRS 14.0 percent protein export basis increased 55 percent to end at $2.40/bu and PNW HRW 11.5 percent protein export basis increased 47 percent to close at $2.50/bu.

The two components of FOB are the futures price plus export basis so when both go up, the FOB prices jump substantially.

Between Sept. 11 and Oct. 9, Gulf HRS 14.0 percent protein FOB jumped 6 percent to end at $288/MT, the highest since June 2018. Gulf HRW 11.5 jumped 9 percent to close at $267/MT, the highest since December 2014. SRW increased 11 percent to end at $277/MT, the highest in over five years.

Over the same period, PNW HRS 14.0 percent protein increased 7 percent to close at $288/MT, the highest since May 2018, and PNW HRW 11.5 percent protein jumped 9 percent to end at $289/MT, the highest in more than five years.

What does this mean moving forward?

While U.S. Wheat Associates (USW) does not have a crystal ball, based on our information, we expect  export basis levels will stay at these higher levels through January assuming Chinese buying remains strong.  Futures prices could come down off their recent rally if, for example, “managed money” reverses its long position in wheat futures, but there would have to be a significant downward correction to take pressure off current FOB values.

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USW Demonstrates Hard Red Winter Wheat Performance to Chinese Customers

Chinese trading concern COFCO, as part of a commitment to purchase U.S. farm products, for the first time in recent history purchased hard red winter (HRW) wheat in marketing years 2019/20 and 2020/21. COFCO has purchased about 672,000 metric tons (MT) of HRW for immediate sale to Chinese flour mills.

On behalf of the farmers we represent, U.S. Wheat Associates (USW) helps buyers and end users make the best use possible of U.S. wheat. Because HRW has not been commonly used in China, the USW team in China decided to sample and test the wheat purchased to demonstrate the usefulness of this versatile class.

A representative sample of HRW for the study came directly from a COFCO shipment taken at a port in southern China’s Guangdong Province.

Thoughtful Test Design

USW Technical Specialist Dr. Ting Liu thoughtfully designed the study. After referring to some customer inquiries and previous studies done on HRW for various regional markets, Dr. Liu and USW Country Director Shirley Lu selected several end use applications to test using different flour blends with HRW that could be measured for performance against locally produced control flours.

The USW team worked closely with local flour mills and the Sino-American Baking School (SABS) in Guangzhou to mill the HRW sample on a Buhler laboratory mill. They analysed the characteristics of single HRW flour and blends with flour from U.S. hard red spring (HRS) and soft white (SW) wheat. Nine end products were produced and tested, including pan and sweet breads, sweet rolls, hamburger buns, baguettes, croissants, pizza dough, noodles and steamed breads.

“After some very intensive work in the test bakery, the hard red winter single flour and blends cooperated so well our team decided to run some tests twice to confirm the stellar results they observed,” said USW Regional Vice President for China and Taiwan Jeff Coey.

Sharing Results

On Aug. 14, 2020, USW conducted an online presentation to share the test results with an estimated 200 contacts from China’s mills and wheat trading organizations. The presentation focused on measured HRW wheat and flour quality, along with results of the baking tests. USW also shared typical HRW quality data from the 2019/20 crop and initial information on conditions of the 2020/21 crop.

In opening remarks to the participants, Coey said “in terms of end use quality, I want to advise you to consider U.S. hard red winter a very reliable medium- to high-gluten strength wheat that should perform well for you in a variety of your most demanding applications.”

Sharing photos and data from end products produced with single and blended flours, USW Beijing colleagues informed Chinese customers about the excellent performance of U.S. HRW in an Aug. 14 webinar.

The USW Beijing team greatly appreciates the cooperation of: COFCO for the chance to sample an actual HRW shipment; the Wheat Marketing Center, Portland, Ore., for data from their previous work on pizza dough and noodle results; the SABS staff who helped USW conduct its tests before its regular course schedule started; and several Chinese flour mills who allowed USW to use their instrumentation to help complete the testing.

Additional specific results or the tests are available from the USW Beijing office and the regional USW office in Hong Kong.

 

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Trade Policy Opportunities and Competitive Prices Support U.S. Wheat Export Sales Early in the Marketing Year

By Claire Hutchins, USW Market Analyst

USDA estimates the United States will export 25.9 million metric tons (MMT) of wheat in 2020/21, 2 percent behind last year’s pace if realized. However, two months into marketing year (MY) 2020/21, total U.S. wheat commercial sales are 8 percent ahead of last year’s pace at 9.62 MMT and are 12 percent ahead of the 5-year average.

To date, export sales of hard red spring (HRS) wheat, white wheat and durum are significantly ahead of last year’s pace. Sales of hard red winter (HRW) wheat are nearly in line with last year, while sales of soft red winter (SRW) lag 2019/20. Success in individual markets such as China and Brazil due to policy changes and strong education programs by U.S. Wheat Associates (USW) are supporting overall sales. As in other markets, competitive pricing for U.S. wheat is helping fuel a faster import pace by traditionally strong U.S. wheat buyers like the Philippines, Japan and South Korea.

Here is more detail about the current factors underlying U.S. wheat export sales.

HRS. Total HRS export sales of 2.85 MMT are 28 percent ahead of this time last year and are 12 percent ahead of the 5-year average. Sales to the Philippines, the top market for HRS, are 23 percent ahead of last year at 768,000 MT and are 52 percent ahead of the 5-year average. Rising per capita consumption combined with population growth and competitive HRS prices are supporting strong sales to the Philippines early in MY 2020/21.

In Japan, the second largest market for HRS, sales of 379,000 MT are up 52 percent on the year.

“We had good start this year in the Japanese market following the U.S. and Japan trade agreement implemented on January 1,” said Rick Nakano, USW Country Director in Japan. “This gives U.S. wheat a better opportunity to be traded on equal footing with similar classes of wheat from Canada. This results in a great outcome for U.S. wheat to satisfy the needs of Japanese millers that now pay the same price mark-up as for Canadian wheat. Additionally, the relative price increase for Canadian spring wheat has also supported HRS demand in the Japanese market.”

Source: USDA ERS export sales data as of July 23, 2020

White. Total U.S. white wheat sales are 23 percent ahead of last year at 1.93 MMT, 12 percent ahead of the 5-year average. In South Korea, the second largest market for U.S. soft white wheat, export sales are up 27 percent on the year and are 4 percent ahead of the 5-year average.

“The price of U.S. white wheat has been much more competitive than comparable Australian classes during the first and second quarter of 2020,” said C.Y. Kang, USW Country Director in South Korea. Kang added that HRS and U.S. white wheat sales to South Korea are up on the year in part because South Korean instant noodle production is up on increased demand during the COVID-19 pandemic.

Sales to Japan, the third largest market for U.S. white wheat are 3 percent ahead of this time last year at 235,000 MT.

“The demand for U.S. Western White (WW) wheat, a blend of U.S. soft white wheat and U.S. club wheat, has been stable in Japan with strong consumption for confectionery products including sponge cake and biscuits. U.S. WW is a unique product and cannot be substituted by Australian, Canadian or domestically grown Japanese wheat,” said Nakano.

Source: USDA ERS export sales data as of July 23, 2020; about 99% of white wheat sales are soft white and soft white sub-classes

HRW. Total HRW sales are slightly below last year at 3.52 MMT, but 21 percent ahead of the 5-year average. Strong export programs to China and Brazil are supporting HRW sales in the first few months of 2020/21.

As of July 23, China has purchased 669,000 metric tons (MT) of HRW after no purchases in 2019/20. Strong HRW export sales so far in 2020/21 can be attributed to the Phase One agreement between the United States and China and HRW’s competitive prices compared to other classes of U.S. wheat. So far in marketing year 2020/21, China is the largest market for HRW.

HRW export sales to Brazil are more than double this time last year at 257,000 MT and are 85 percent ahead of the 5-year average. According to Miguel Galdos, USW Regional Director in South America, increased sales to Brazil can be attributed to the Brazilian government opening a tariff rate quota (TRQ) which allows up to 750,000 MT of non-Mercosur (South America’s free trade bloc) wheat to enter the country tariff-free. Strong educational programs in Brazil by USW are encouraging millers to take advantage of the high quality and competitive prices of U.S. wheat. To date, Brazil is the fifth largest market for HRW.

“USW provides the best trade and technical service to our customers and we are here for Brazilian mills for any need they have,” said Galdos.

Source: USDA ERS export sales data as of July 23, 2020

Durum. Total durum export sales are 6 percent ahead of this time last year at 385,000 MT and are 57 percent ahead of the 5-year average. Export sales to Italy, the largest market for U.S. durum, are more than double this time last year and are significantly higher than the 5-year average.

“Italy needs the high protein content of durum from North America, because it does not produce enough high protein durum locally,” said Rutger Koekoek, USW Regional Marketing Director for the European Region.

It is expected that Italy will produce an average volume of durum this year and will need to import large volumes of North American durum wheat again in MY 2020/21.

“I am still expecting an above average export volume of U.S. durum to Italy this marketing year,” said Koekoek.

SRW export sales are a different story. Total SRW export sales are down 21 percent on the year to 927,000 MT, 17 percent behind the 5-year average.

“It is a price story,” said one grain trader, “we’re priced out of the world market, especially to our buyers in Latin America and Nigeria.” Between early January and late July, the average export price for SRW was $234/MT, 8 percent higher than the same period last year and 12 percent higher than the 5-year average.

In Colombia, the second largest market for SRW, export sale of 73,000 MT are 18 percent behind last year’s pace and 22 percent behind the 5-year average.

“Colombian mills bought more wheat than they needed between March and May due to demand uncertainty around COVID-19. They are now covered for the next couple of months. Higher prices are also impacting 2020/21 SRW sales to Colombia,” said Galdos.

High SRW export prices early in 2020, which continued into late July, are also having a significant impact on SRW demand in Nigeria, which has imported no SRW yet in 2020/21.

Source: USDA ERS export sales data as of July 23, 2020

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