U.S. wheat exports are slated to decline by 8% year-over-year to hit 26.5 million metric tonnes.
Part of that story is told through the decline in domestic acreage and production and the increase of competition abroad (i.e. Russia).
However, another key factor is shaping up to the detriment of wheat producers.
In the past five years, the U.S. has been responsible for about 45% of Japan’s wheat imports.
But the tide appears to be changing.
Japan will soon implement its own free-trade agreement with the European Union while it engages with additional partners in the Transpacific Partnership (TPP). Other wheat exporters are expected to capture U.S. market share even as Japanese demand increases over the next few years.
To give further perspective, nearly half of Japan’s imported wheat is hard wheat (US Dark Northern Spring or Canadian Hard Red Spring) and is used for making bread.
Last calendar year, Japan imported 2.5 million tonnes of food wheat from the US and 1.7 million tonnes of Canadian food wheat. This accounted for 49% and 34% of all food wheat imports by the country.
With the trade policy changes and a weaker Canadian Loonie, and Canada has been able to increase its ownership of Japanese wheat imports.
Meanwhile, the U.S. is stalled in renegotiations with Mexico and Canada over the North American Free Trade Agreement (NAFTA). Mexico was the largest consumer of U.S. wheat last year.
However, recent resentment toward President Trump’s administration has fueled speculation that Mexican wheat buyers will seek product from other alternative sources.
Potential markets include Canada, Argentina, and even Black Sea producers if the price is right. Even though that a significant change to NAFTA is highly unlikely given the negative economic impacts expected, the longer this stalemate extends, the more Mexican buyers may seek to bolster relations with new suppliers.
Coming back to the U.S., 2017/18 hard red winter wheat, exports are expected to decline from 12.4 MMT to 11.0 MMT. Soft red winter wheat exports are also expected to decline 8% year-over-year to 2.31 million tonnes.
In the American white wheat market (which is made up predominantly of hard and soft winter white wheat), US exports are expected to hit 5.72 million tonnes. That would be up 29% from last year’s 4.44 million tonnes.
Thus far, US HRW wheat exports sailed are tracking 13% year-over-year to 5.6 million tonnes. SRW wheat exports are only 1% lower at 1.2 million tonnes. However, white wheat shipments are tracking 27% at 3.11 million tonnes through the end of December.
More specifically, white wheat is saving US winter wheat exports as total American winter wheat shipments are at 9.9 million tonnes, down just 2% from this time a year ago.