In a Low Price Global Environment, US Wheat Exports Increase in Markets That Demand High QualityTue, 16 Feb 2016 05:14:20 CST
Circumstances in today’s global wheat market are generating some breathless headlines. Plentiful wheat supplies, a strong U.S. dollar and record low freight rates are making it possible for Black Sea region, Canadian and Argentine exporters to sell more of their wheat at low prices in more markets around the world. While it is accurate to say U.S. wheat export volume is down, predictions of U.S. wheat becoming a second tier source of wheat rely on old perspectives of what is now a changing and highly segmented world market.
Total world wheat use and global wheat trade is growing and has set records in two of the past three marketing years. Much of that sustained growth is happening in markets that demand diverse types of wheat to produce premium ingredients in high-quality products. Unlike other wheat exporting countries and regions, U.S. farmers do not produce "generic" wheat. They supply six distinct wheat classes with excellent functional qualities and value for specific uses in specific end-product wheat foods.
That is why even under the current conditions, U.S. wheat exports are steadily increasing in markets that demand high quality. This is especially true in Asia and Latin America. These regions imported about 10 MMT of U.S. wheat in 1985/86, about 15 MMT in 2000/01 and just under 20 MMT in 2014/15. USW is seeing long-term value in these emerging markets and is adjusting its resources to help meet customers’ needs. In addition, customers recognize the U.S. wheat supply chain as the most reliable in the world; U.S. wheat buyers know they will face no risk from export taxes or other arbitrary government interventions.
It is a market development strategy that also provides value to U.S. farmers in the form of higher prices for their wheat compared to farmers in most competing countries.
“Trade paper headlines seem to imply the world wheat market is some kind of public competition — a race to see which country can claim the largest exporter position. I do not see it that way,” said USW Vice President of Overseas Operations Vince Peterson. “Selling wheat with consistently higher quality and a greater diversity of end-use applications is more complicated than a low-price strategy, but I think it is worthwhile for our overseas customers and our farmers.”
“We believe markets tend to correct themselves,” said USW President Alan Tracy. “Given population growth in markets that cannot grow their own wheat, increasing disposable incomes and growing demand for premium flour products in the quality markets we serve best, we are optimistic about future U.S. wheat production and exports.”
source- US Wheat Associates Wheat Letter, 2/11/16
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