The United States stands to gain a good share of the wheat export market that Russia is forfeiting due to the Russian government’s decision to halt grain exports until the end of the year, according to John Anderson, an economist with the American Farm Bureau Federation.
The Agriculture Department released its August World Agricultural Supply and Demand estimates or WASDE report last week. In the report, USDA projected a huge drop in Russian wheat exports for the 2010-2011 marketing year: 3 million metric tons, compared to 18.5 million metric tons, in the 2009-2010 marketing year. Russia decided to exit the grain export market this year because of a serious drought that is reducing crop prospects.
“This is a jaw dropping reduction in exports for Russia,” Anderson said. “And because the United States is expecting a good wheat crop with good stock levels, our farmers stand to take up a big share of wheat exports that would have gone to Russia.”
U.S. all wheat production is estimated at 2.26 billion bushels, up 2 percent from the July forecast and up 2 percent from 2009, according to the latest WASDE report. USDA is also projecting the highest U.S. wheat yield ever at 46.9 bushels per acre, up 1 bushel per acre from July and up 2.5 bushels per acre from last year.
The U.S. stands to pick up export business because of expectations for a good crop and large wheat stocks, at just under 1 billion bushels.
“The United States should pick up almost half of the wheat exports that would have gone to Russia,” Anderson said. “We have wheat when the other major exporters don’t have as much wheat.”
Anderson said it is important to note that global wheat stocks are still strong.
“We don’t have to worry about a global shortage of wheat right now, despite the difficulties in the Russian wheat market,” he said. “Overall, global wheat stocks aren’t all that tight, and the winter wheat crops in Argentina and Australia, who are big producers and exporters in the Southern Hemisphere, are looking pretty good so far. Futures have already retreated quite a bit from the highs set on the day of the Russian export ban announcement. Markets will begin to calm down over the next few days as everyone comes to terms with these adjustments.”
In addition to the import news impacting the wheat crop, Anderson said the August WASDE report is important for the corn crop, and it is being closely studied by the market.
“The big news is USDA is forecasting a record corn crop, a record yield and record use,” Anderson said.
In addition to more corn going into ethanol production, USDA is forecasting more corn to go in the export market, to make up for the lost Russian grain exports.
“Wheat is used as a feedstock for livestock in many countries, and because not as much wheat will be available for export, many countries will turn to corn to meet the needs,” Anderson said.