Agricultural News
Customers Saving Boatloads on U.S. Wheat Compared to Last Year
Thu, 07 Jun 2012 16:47:29 CDT
With the new marketing year just getting underway, Casey Chumrau of U.S. Wheat Associates takes a look at what that means for wheat buyers. Her article appeared in the USWA Wheat Letter.
Retail outlets routinely institute sales at the end of the year to make way for the new year's items. In the U.S. wheat industry, June 1 marked the start of the new marketing year, reflecting the time when the new crop harvest is normally just getting started. While there cannot be a new year's sale on wheat, our overseas customers are now seeing excellent opportunities to purchase high-quality U.S. wheat at relatively bargain prices particularly when compared to prices at this stage last year.
That difference is largest with hard red spring (HRS) wheat. The price of 13.5 percent protein (12% moisture) HRS for August delivery, sold from both the Gulf of Mexico and the Pacific Northwest (PNW), is down about $85 per metric ton (MT), or more than 20 percent lower than last year.* As of June 1, August delivery HRS in the PNW was $320/MT and in the Gulf was $338/MT.
Hard red winter (HRW) wheat is also showing price savings for customers. At about this point in last year's harvest, the price for 11.5 percent protein HRW from the Gulf for August delivery was $275/MT. That was $38/MT or 12 percent more than current prices. Customers buying HRW from the PNW are currently paying $266/MT, or $47/MT less than last year.
The relative value for soft wheat is also higher than last year at this time. The current soft white (SW) price at $257 is $22/MT or 8 percent lower than last year's price. Soft red winter (SRW) is down $15/MT to $250/MT.
Other than a temporary price spike during the week of May 18, SRW has been less expensive than Russian wheat since January. That price relationship may have been hard to imagine at the beginning of marketing year 2011/12 when Russian wheat was more than $40/MT cheaper than U.S. SRW. On July 15, 2011, Russian wheat was selling for an average of $240/MT while U.S. SRW, the next competitor up in price, was selling at $281/MT.
Russian traders used price aggressively to regain the market share lost after the country banned wheat exports in August 2010. As a result, traders sold all the wheat stored or produced close to ports and the added cost of transporting inland wheat quickly increased the export price. At the same time, wheat prices from other major producers started to fall. Bearish market factors such as high world wheat stocks and global economic stress helped push U.S. wheat prices lower and increased competitiveness. On June 6, the Chicago Board of Trade (CBOT) started a Black Sea wheat futures contract. It closed the first day at $255/MT, $26/MT higher than the CBOT SRW futures contract.
With adequate carryover stocks and the new crop generally pushing prices lower, market conditions seem right to continue this opportunity for several weeks, making this an excellent time to lock in supplies of high-quality U.S. wheat.
*Free on Board (FOB), August delivery
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