Significantly greater Chinese demand for U.S. agricultural products limited export elevation availability, causing an increase in wheat export basis values for October 2020 through February 2021 deliveries.
However, the anticipation of seasonally reduced Chinese demand for U.S. agricultural goods could pressure U.S. wheat export basis levels for March 2021 and forward delivery periods.
The United States has sold historic levels of soybeans, corn and wheat to China for delivery in 2020/21 following the Phase 1 Trade agreement between both countries. As of Nov. 26, soybean sales to China at 29.7 million metric tons (MMT) are more than three times greater than this time last year and are nearly double the 5-year average. Corn sales to China at 11.2 MMT are magnitudes greater than late November last year and the 5-year average. Total wheat sales to China at 2.06 MMT are more than ten times greater than this time last year and are nearly five times greater than the 5-year average.
January, February and the beginning of March are at capacity.
It seems impossible to add a lot new business for those months.
If anyone were to sell anything for those delivery periods, it would raise elevation costs substantially more.
Though wheat export basis levels are projected to remain high through early March 2021 as traders work to execute the large volume of existing commodity sales, industry contacts currently predict a sizeable decrease in U.S. wheat forward export basis values if China’s demand for U.S. corn subsides and if Chinese buyers shift to importing Brazilian soybeans.
According to Expert Ag, most Chinese soybean imports usually come from the United States between October and February and from Brazil between March and September.
Traders anticipate this seasonal trend will continue in 2021, which could increase U.S. wheat export elevation availability in the Pacific Northwest (PNW) and Gulf and could decrease wheat export basis levels from those regions.
The latest Price Report indicates the trade has assumed Chinese demand will slow in the first three months of 2021.
April forward is when export basis really lightens up and we become more competitive and there’s strong interest in U.S. spring wheat for that period.
We does not have a crystal ball, but we do expect downward pressure on most U.S. wheat export basis values between February and April 2021.
Source:
- US Ag; U.S.W. Ass.
