World wheat trade continues to expand

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Projected world wheat trade for the international 2011/12 July-June trade year is further increased this month by 1.4 million tons, to 138.1 million. A substantial increase in projected wheat supplies of major wheat-producing and -exporting countries puts further pressure on wheat prices, further reducing the wheat/corn price ratio.

Wheat-importing countries are taking advantage of this opportunity to use more competitively-priced, abundant supplies of lower-quality wheat. The countries in East and South-East Asia are expected to benefit especially from proximity to abundant Australian wheat supplies. Wheat imports by each of the following countries─South Korea, Japan, Philippines, Thailand, and Vietnam─are raised from 0.5 to 0.1 million tons, for a total of 1.2 million tons. Imports are also increased for Mexico, up 0.5 million tons to 4.0 million due to higher wheat feed use (see previous section on wheat use), and reduced for Syria, down 0.3 million tons to 1.0 million reflecting slow import demand, as demonstrated by recent tender cancellations. A very small increase is made for India, with some wheat import activity recently reported.

Export prospects are boosted for Australia, up 2.5 million tons to a record of 21.5 million (the second year in a row a new record has been set). This reflects higher demand for Australian wheat in Asian countries, both traditional high-quality milling wheat, and feed-quality wheat that is increasingly used as an alternative to higher priced corn. Australia has an unusually high volume of lower quality wheat, from both last year’s record wet weather and this year’s harvest time rains in the east of the country.

Argentina’s projected exports increased 1.2 million tons to 9.2 million, due to increased production prospects and large export registrations. As Argentina is a Southern Hemisphere producer, harvesting wheat in November-January, both the 2010/11 and 2011/12 crops compete with U.S. exports during 2011/12. Argentine wheat is becoming increasingly competitive, beating out Black Sea wheat in the Mideastern and North African markets.

Wheat exports for Turkey are up 0.2 million tons to 3.7 million, due to the registered pace of flour and pasta shipments. A small upward increase is also made for Morocco.

Exports are projected down for Ukraine by 1.0 million tons to 7.0 million. Five months into the current marketing year, and operating without any official export restrictions since the end of October, Ukraine has not showed much vigor in exporting wheat. Increased competition from Australia in Asian markets, as well as the quality issue (certain importing countries like Egypt have strict quality requirements concerning protein content and the level of debris allowed) have contributed to the slow pace of exports. Producer price expectations are also affecting Ukrainian export prospects. Big operators with modern storage facilities are trying to weather out this year’s low prices. Prices started falling in 2010/11, a year when grain exports were restricted, and have kept declining in the current 2011/12 marketing year because of a bumper harvest.

Given unfavorable winter wheat conditions (an absolute majority of wheat in Ukraine is of winter variety) for next year’s crop, and wide expectations of low wheat harvest next year, domestic prices are expected to rebound next season.

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