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.
Didn't see China coming
China’s buying spree may have been even more difficult to foresee. The country is mostly self-sufficient in wheat production and has averaged just 1.7 MMT of total imports from all origins the last five years. Nevertheless, poor weather led to a disappointing domestic crop, which forced the government to secure supplies from outside the country.
In May, USDA predicted China would double that average and import 3.5 MMT. However, USDA currently projects total Chinese imports to reach 9.5 MMT, which would be the most since 1995/96. U.S. sales (of mostly SRW) to China have already exceeded 3.9 MMT.
Another contributing factor to better-than-expected U.S. commercial sales is a less severe reaction to a potential market disrupter.
Many feared the discovery of unapproved genetically modified (GM) wheat plants in a single Oregon wheat field in April would significantly hurt 2013/14 wheat sales. In reality, the event has had a meaningful, but limited impact. Several Asian markets temporarily suspended new sales of white wheat following the GM event, but did not cancel any existing purchases.
South Korea resumed regular purchases on July 9 and Japan followed a month later.
As of Aug. 1, white wheat sales to the North Asia region were 44 percent lower than the same date a year earlier and total world sales were behind 2012/13 by 20 percent.
With all customers back to regularly purchasing white wheat, the gap has narrowed. White wheat sales to North Asia were 30 percent lower than 2012/13 and world sales were 8 percent behind on Sept. 19.
Overall, analysts have predicted U.S. weekly sales to slow for more than a month, but each week’s sales met or exceeded expectations.
As the U.S. wheat harvest season concludes, supply is strong and high protein wheat is an excellent relative value.
Analysts might not see the opportunity, but customers certainly have. The United States will continue to sell high quality wheat to whoever comes knocking, including friends who may not knock often.
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