Waiting for an Argentine wheat export record, commercial stocks reach their highest level in history
More planted area and more yields, in addition to increasing demand, boost wheat stocks in the hands of commercial establishments. Wheat exports in the United States fall.
As of December 9th, 56% of the wheat-sown area has already been harvested, a rate similar to that of the 2020/21 season. However, this campaign added more than 100,000 additional hectares to the crop, so that the harvest of the cereal already exceeds the previous commercial year. Optimism for the 2021/22 business cycle grows on a weekly basis. The latest GEA-BCR report estimates the best wheat harvest in history: 22.1 Mil MT. Good soil moisture has been pushing up the production per hectare of cereal.
This favorable production outlook is already reflected by the influx of new season wheat to stores, industries, and export ports throughout November and early December. Meanwhile, the arrival of trucks with wheat to Upriver ports is accelerating and it is expected to close above last year’s mark for December.
With improved yields and expanded planted, by the beginning of this month we were already seeing the largest commercial wheat stock on record. It is worth noting that this is not the final stock of the 2020/21 campaign, since these stocks include the 2021/22 wheat harvested mainly in northern Argentina, and entered into the commercial pipeline before the start of the current commercial campaign.
While 2021/22 wheat export permits have remained stable for weeks just above 9 Mil MT, local prices grew around 2.5% in the last few days. After falling below 228 USD/MT at the beginning of December, in the last days prices have bounced back, taking prices above 240 USD/MT in full harvest, considering the price of the Rosario Cereal Arbitration Chamber.
With good demand levels and optimistic commercial prospects, the range of open buying positions in the local market ranged between 230-235 USD/MT for nearby positions, and up to 255 USD/MT for cargos with a deferred delivery, in June of next year. This way, domestic wheat purchases already total 11.4 Mil MT, a number comfortably above the 6.5 Mil MT of wheat that was traded this time last year.
For its part, the 2020/21 season closed with wheat exports around 10.5 Mil MT, a fall of almost 12% compared to the previous season and the lowest level of exports in tons since the 2015/16 commercial year. However, the improvement in international prices brought the exported values to a total of USD 2.6 billion, an increase of 11.9% between campaigns.
Wheat exports fall in the United States
The tight global wheat balance has been driving up cereal prices. World wheat consumption continued to grow for the third consecutive year, with an expected rise of 1.6% this year. With that in mind, world final stocks are projected to decline by 4% this season. However, the Report on World Supply and Demand for Agricultural Products (WASDE) published by the USDA this Thursday reflected a slight rise in stocks compared to the previous estimate, which contributed to a drop in prices that was observed yesterday.
Six months after the start of the 2021/22 season in the United States, cereal exports are at the lowest level on record in a scenario of a sharp drop in production. This way, the 10 Mil MT of wheat exported by the US is below the fateful 2018/19 season, which was plagued by a series of commercial tensions and a discouraging production outlook.
The current season found US spring wheat in its worst crop condition in 30 years, leading to lower yields. USDA estimates place 2021/22 as the business year with the lowest production since 2002/03. With the winter wheat already practically fully emerged and close to the start of its harvest, the state of the crop is at levels similar to those of last season. Consequently, such a variety of grain would support the total production of the season and could push wheat exports to a higher level in the coming months, as the harvest progresses.
Argentina and the Southern Hemisphere increase their bet on wheat
Argentina is racing towards the best harvest in its history in 2021/22. This achievement would not be an isolated event, since in the last decade wheat has been steadily gaining participation in local planting plans. When comparing the variation in the harvested area in the average of the 3 seasons 1999/00- 2001/02 with the expected average for the last cycles 2019/20- 2021/22, we can see that the country has increased by more than 400,000 hectares its planting surface.
Likewise, other major producers in the southern hemisphere have raised their stakes on wheat in the last decade. Brazil, which is among the 10 largest wheat importers globally, increased its area by almost 880,000 ha, and Australia, which is the fifth largest exporter in the world, added 21,000 hectares to the cereal. Thus, in the last decade, the consolidated production of Australia, Argentina, and Brazil went from representing 7% of global production to consolidate 8%, even though it increased by more than 30%.
The global wheat market dynamics observed increased exports, which grew at an average rate of 4% per year in the last decade. This way, the Southern hemisphere has remained stable in its relative importance for the world wheat trade. A decade ago, Argentina and Australia exported 27 Mil MT in a world market of 133 Mil MT, while this season it is expected to export 39 Mil MT on a world trade of 205 Mil MT. Hence, their participation is consistently around 20% of the world exports.
Lastly, if we consider the sowing area of wheat-producing countries in the Northern hemisphere, the harvested area increased only by 195,260 ha. However, trends vary depending on the region and country. Russia, Kazakhstan, Ukraine, and India increased their area in the last decade. In contrast, the countries of the European Union, the United States, Canada, and Turkey have cut back their planting area during the same period.
Source: https://bcr.com.ar/
Photo: REUTERS/Stringer
For more info visit
https://www.linkedin.com/company/wbl-shipping-agency/