What is in this article?:
- Brazil, China behind surge in U.S. wheat sales
- Didn't see China coming
• Despite a pessimistic outlook just four months ago, U.S. commercial wheat sales-to-date have soared, thanks to a perfect combination of several factors.
When the 2013/14 marketing year began on June 1, the USDA projected total U.S. exports would fall nearly 10 percent from the previous year.
The agency forecast exports at 25.2 million metric tons (MMT).
Despite this pessimistic outlook just four months ago, U.S. commercial sales-to-date have soared, thanks to a perfect combination of several factors.
First, Brazil and China, two intermittent and traditionally low-volume U.S. customers, started purchasing high volumes of U.S. wheat.
According to USDA, total outstanding sales and accumulated exports of all U.S. wheat classes through Sept. 19 were 17.7 MMT, up 38 percent from the 2012/13 year-to-date total and 25 percent greater than the five-year average.
Excluding Brazil and China, however, wheat sales to the rest of the world lag behind the five-year average by 18 percent. Without the help of these two countries, only soft red winter (SRW) sales are outpacing average sales on the strength of a bumper crop and competitive export prices.
In the last five years, combined sales to Brazil and China never exceeded 4 percent of total U.S. exports. This year, sales to these two countries alone are responsible for 36 percent of total sales to date.
Signs for increased U.S. wheat purchases by Brazil emerged in February when its government announced that in April it would temporarily eliminate a 10 percent import duty normally applied to wheat imports from outside the Mercosur trading block. Severe supply shortages and export barriers in Brazil’s main supplier, Argentina, limited the country’s sources for large volumes of quality wheat.
In the initial announcement, Brazil authorized 1.0 MMT of non-Mercosur wheat to enter the country duty free between April 1 and July 31. The government has extended those parameters several times, currently allowing up to 2.74 MMT through the end of November.
With the duty lifted and armed with trade and technical information from U.S. Wheat Associates (USW), Brazilian millers have already purchased 2.5 MMT of mostly hard red winter (HRW) in 2013/14 on top of nearly 400,000 metric tons imported during April and May of the 2012/13 marketing year.