It has been reported that the Ukraine government and grain traders have agreed to only export 1.7mmt of wheat until June. Only about 100kt of wheat has been shipped this month. This should limit 11/12 wheat (July – June) exports to 4.8mmt, the USDA currently has wheat exports pegged at 6mmt. Analysts have pegged 26% of the winter wheat crop as "good" compared to 56% this time last year. In lieu of this, much wheat will be replanted with corn (5m ha) in the spring. This would be an increase of 43% on 2011.
Corn has been the dominant export from the Ukraine this year (making up 58% of exports at 5mmt), as stocks swelled to a record 22.5mmt. More expensive US corn and a strong sales program after 2010 drought helped Ukraine to export an expected 12mmt this marketing year. Strong sales from these countries has seen the US market share for global corn trade dip below 50% for the first time. US corn exports will ease to 43.2mmt (46% of world trade) from 52% last season as emerging rival countries muscle in on traditional US markets.
Thoughts that the market has bottomed out, which has resulted in a plethora of international tenders helped to support the bounce snapping a two day losing streak late last week. The US has won its second Egyptian wheat tender in a week, with 180kt sold at $259 FOB. Even with higher shipping costs ($27/t) it was more then $6 cheaper then French origin wheat. There was no Argentinean or Black Sea wheat offered for the first time, as winter woes continue to cause headaches for logistics. Iran bought 500kt of wheat (1.1mmt so far in Feb), along with Taiwan, Saudi Arabia, Libya, Israel. Highlighting consumer’s preference to lock in tonnage before ‘potential’ production concerns occur in Nth Hemisphere.
Russia will be back in the export game soon as weather conditions improve. However Russian origin offers were absent from the latest Egyptian (GASC) tender, and that was for April shipment! India is also making some noise on future wheat exports, after USDA pegged wheat crop at record 86.87mmt.
News of further strong sales to China plus production uncertainties for southern Brazil helped to support the gains. Even the most bearish of soybean analyst, may have had second thoughts when the Chinese Vice President was seen riding shotgun on a tractor in a US Midwest soybean farm! China had just purchased 13.4mmt of beans during the week. Last year, China imported 56.5mmt, this compares to only 10.3mmt ten years ago. Southern Brazil would have all been priced in, and it would take a surprising yield cut to rally this market further.
Welcome rain throughout southern Argentinian (40 – 100mm) and Brazilian (2-40mm) growing regions over the last three days will be an added boost to not only maintain crop potential but also enhance crop prospects. An abundance of rain in most of Argentina and Brazil over the next couple of weeks will help to assure there are few problems threatening production going forward. Some dryness concerns will remain in northeastern Brazil and subsoil moisture will still be a little low in northern Argentina, far southwestern Argentina, Paraguay and southernmost Brazil. But as long as timely rainfall occurs as advertised there should not be nearly the stress on crops that there has been in recent weeks.