January 7 – International Demand for High Protein Wheat

With a glut of wheat in the global marketplace, and with the Black Sea changing some trade winds, it can be a bit confusing to understand who is buying the really good wheat these days.

With a glut of wheat in the global marketplace, and with the Black Sea changing some trade winds, it can be a bit confusing to understand who is buying the really good wheat these days.

We know that practically the entire Russian wheat crop is under 12% protein quality.

This means that there are just some markets that they won’t be able to make it into.

For example, this year, Russia has started to export some of it to Venezuela. It was estimated that of the 1.2 million tonnes the Latin American country was expected to import in 2017/18, 300,000 to 600,000 tonnes could come from the Black Sea (mainly because it was so cheap.)

This is concerning considering that Venezuela usually imports roughly 100,000 MT from Canada and the U.S. each month.

Each month.

However, it’s been made known that Venezuela isn’t happy with the quality of the Russian wheat. All they could make was crackers with the product, not the bread or pasta that the food-makers needs.

Another example would be Indonesia, who is expected to import 10.5 million tonnes of wheat in 2017/18.

Last year, the country imported 10.3 million tonnes.  Canada shipped 17% of this total, while the U.S. was responsible for 11%. The other primary players include Australia (48%) and Ukraine (16%).

Indonesia uses a lot of Australian Standard White Wheat for noodle production, hence their large market share. However, given the smaller wheat crop size in Australia this year, it could open the door for more North American exports, with Canada owning a slight price advantage today.

Further, with less Aussie wheat to go around, it’s potentially opening the door to bigger shipments to the likes of Japan, Sri Lanka, Bangladesh, and even China (we can never count China out when it comes to grain imports.).

The bearish component here though is that international buyers are getting a lot better at blending high-quality wheat with the aforementioned low-quality stuff.

It’s not hard to find the savings when you are buying 50% of your needs of high quality and 50% from a cheaper option like Russia who is at least $50 USD/metric tonne cheaper.

This is especially the case in smaller developing countries. As a breakdown, other than Venezuela, here are some places where this is likely happening and how much total wheat they’re expecting to import in 2017/18:

• Nigeria: 5 million tonnes
• Columbia: 2.15 million tonnes
• Peru: 2.15 million tonnes
• United Arab Emirates: 1.7 million tonnes
• Chile: 1.35 million tonnes
• Ecuador: 1.125 million tonnes

Overall, there is some competition to North American spring wheat on the international export market. Canadian and American exporters will have to do a continuous good job of maintaining relationships with these players.

Keep in mind that U.S. Wheat Associates pulled their office out of Cairo, Egypt. They’re looking to apply resources to markets in North Africa and South America as indicated by a recent job posting.

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.