This week’s cross-USA winter storm will likely replenish soil moisture levels in the dry Southern Plains, eroding upward price potential for the wheat complex.
Markets also appeared to be stabilizing after digesting a smaller Russian wheat quota in the second half of the 2020/21 marketing year.
A stronger dollar added to the losses as the Dollar Index edged 0.02% higher.
Russia’s looming wheat export tax drove top Russian ag consultancy Soviet AG to downgrade their estimates on the February 15 – June 30 wheat export quota.
The agency expects an 11% cut, or 165.3 million bushels, to the current quota, shrinking Russia’s exportable supplies to 1.3 billion bushels for the 2020/21 marketing year.
Declining crop conditions are also shrinking yield estimates for the 2021 crop as dry weather in key growing regions hinders winter wheat development.
Warm and dry conditions over the next two weeks will continue to keep growth stunted. Rain and snow early in 2021 will be necessary to salvage the crop.
But despite shrinking supply prospects and rising world wheat prices, Russian farmers remain slow to sell their wheat, due to a large part to potential losses incurred by the new export tax to be implemented in mid-February 2021.
The quota and tax are both measures the Russian government has pursued in an effort to stabilize domestic food prices.
Soviet Ag expects many farmers to delay sales until the export tax expires in July 2021.
“A significant number of farmers may decide to postpone sales until the 2021/22 season starts, hoping for a rapid strengthening of prices after the tax is lifted,” Soviet Ag said in a report released this morning.
“We feel that the risk of a poor 2021 crop in Russia’s south and quite likely southern Black Earth is getting bigger.”
Ukrainian grain exports have dropped 16.9% lower than the same time a year ago, according to economy ministry data released overnight.
Ukraine has already exported 454.8 million bushels of its 643.0-million-bushel wheat quota for 2020/21, or 71% of allowed exportable supplies.
A smaller crop due to dry growing conditions this spring tightened Ukraine’s exportable wheat stocks this year.
USA Wheat export prices have risen over $0.08/bushel over the past week to $7.16 as international buyers turn to dwindling Ukrainian wheat stocks in the face of Russia’s anticipated wheat export tax and quota.
USA Loading paces for wheat were largely smaller due to fewer sales shipped to China for the week ending December 24. U.S. wheat volumes inspected for export fell 3.2 million bushels, or 22.5%, to 11.2 million bushels for the week.
It was a slow week for U.S. wheat buyers, as shipments to China dipped to 2.5 million bushels.
The Philippines were the top destination for U.S. wheat, with 3.9 million bushels shipped to the Southeast Asian country between December 18 – 24.
Mexico followed close behind, with 3.0 million bushels of U.S. wheat destined for our neighbours to the South last week.
But despite the downturn in weekly export loading volumes, the future of U.S. wheat exports remains optimistic.
Loading paces are currently in line with US Ag updated 2020/21 export projection of 985 million bushels as marketing year to date wheat exports soar 8.3% higher than the five-year average.
Plus, a looming export quota and tax on Russian wheat exports will likely push out smaller buyers that rely on the Black Sea for affordable feedstocks. U.S. wheat exports usually gain seasonal momentum by late January but dwindling Russian supplies could entice international buyers to America’s shores for wheat sooner, especially if the dollar remains at multi-year lows.
EUROPE
Wheat prices on Euronext retreated slightly yesterday in the wake of Chicago’s evolution.
However, in this period of the year, the business is subdued.
Algeria announced a wheat tender for two periods of shipment (1-15 Feb and 16-28 Feb).
Until now, Algerian purchases have not been very dynamic compared to previous years.
Taiwan is also seeking 82 000 t of milling wheat sourced from the USA.
