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Wheat Outlook Summary: February 2022

Core Content Overview

This report provides an analysis of the U.S. and global wheat markets for the 2021/22 marketing year. It includes updates on domestic and international supply, demand, and export restrictions, particularly focusing on Russia's evolving policies and their impact on global trade.

U.S. Wheat Outlook

Export Trends

• U.S. Wheat Exports: Reduced by 15 million bushels to 810 million, the lowest since 2015/16 and the second-lowest since 1971/72.
• Hard Red Winter (HRW): Exports are forecast at 325 million bushels, down 10 million, due to uncompetitive pricing and slow sales.
• White Wheat: Exports are reduced to 145 million bushels, the smallest in over a decade, due to tight supplies and high prices.
• Durum Wheat: Exports remain at 825 million bushels with no change, but supply constraints due to drought have limited export volumes.
• Export Sales: Remain slow throughout January, with only 488 million bushels exported from June to December, a 16% decline compared to the same period in the previous year.

Import Trends

• All-Wheat Imports: Remain unchanged at 100 million bushels, with 57 million bushels imported from June to December, a 12% decline compared to the previous year.
• Durum Imports: Total 22 million bushels from June to December, representing 56% of the marketing year forecast.
• HRS Imports: Total 26 million bushels from June to December, representing 58% of the marketing year projection.

Domestic Use and Prices

• Season-Average Farm Price: Raised by $0.15 to $7.30 per bushel, driven by strong farmgate prices in December.
• Seed Use: Reduced by 2 million bushels to 64 million, with specific reductions in HRS, HRW, and SRW seedings due to lower-than-expected use in the first quarter.
• Ending Stocks: Increased to 648 million bushels, still the lowest since 2013/14.

Global Wheat Outlook

Production

• Global Production: Revised down by 2.2 million metric tons to 776.4 million MT.
• Key Countries Affected:
  • Iraq: Production reduced by 1.0 million MT to 3.5 million due to drought.
  • Syria: Production reduced by 0.8 million MT to 2.0 million.
  • United Kingdom: Production reduced by 0.3 million MT to 14.0 million due to lower yields.

Consumption

• Global Wheat Consumption: Increased by 0.6 million MT to 788.1 million MT.
• Feed and Residual Use: Revised up by 1.1 million MT to 160.7 million MT.
• FSI Use: Reduced by 0.6 million MT to 625.5 million MT due to lower production in Iraq and Syria.

Trade

• Global Wheat Trade: Increased by 1.8 million MT to 208.4 million MT.
• Key Exporters:
  • India: Set a new record with 7.0 million MT of wheat exports.
  • Argentina and Brazil: Exports revised up due to strong shipments.
  • Ukraine and U.S.: Exports weak, partially offsetting the increase.
• Global Imports: Adjusted up by 2.2 million MT to 204.6 million MT, with Iraq, Syria, and the UK increasing their imports.
• Ending Stocks: Revised down by 1.7 million MT to 278.2 million MT, with China increasing its stocks and major exporters decreasing.

International Feature: Russian Wheat Export Restrictions

Background

• Russia transitioned from a major wheat importer in the 1970s to a leading exporter since the early 2000s.
• The country's production has increased by 60% since 2001/02, while domestic consumption has remained flat, leading to increased exportable supplies.

Export Policies

• Export Taxes:
  • Introduced in 2007/08 at 10% and increased to 40% in early 2008.
  • In 2015/16, a tax of 50% of the contract price minus $99 was applied.
  • In 2020/21, a fixed tax of $29.20 and $59.80 per ton was implemented.
  • In 2021/22, a floating export tax was introduced, calculated weekly as 70% of the difference between the indicative price and $200 per ton. The threshold was increased to $375 and $400 per ton in December 2021.
• Export Quotas:
  • A quota of 7.0 million MT was set in 2019/20.
  • A quota of 17.5 million MT was set in 2020/21.
  • In 2021/22, a quota of 8.0 million MT was introduced from February 15 to June 30, 2022.

Market Impacts

• Export Restrictions: Have affected global trade dynamics, potentially contributing to higher world prices and shifting demand to other suppliers.
• Competitiveness: Russian wheat has become less competitive due to higher export prices and taxes, leading to more participation in the spot market.
• Export Timing: Restrictions have shifted the timing of exports earlier in the year to avoid the quota period.

Key Takeaways

• U.S. Exports: Lower than expected due to drought and high prices.
• Global Production: Declined due to drought in key regions.
• Global Trade: Increased, driven by India and other countries, but affected by Russian export policies.
• Russian Policies: Export taxes and quotas have impacted global wheat prices and trade patterns.