US wheat has come down to its buyers, and Asia has answered
US exporters reported their biggest week of the marketing year after a fall that outran Australia and Argentina, with most of it going to Asian buyers. The sales book is still light, but the USDA's programme is back within reach.
US wheat has been coming down faster than its competitors since early September, and in the third week of October the buyers answered. Exporters reported 849,800 t of net sales for 16 to 22 October, the biggest week of the marketing year and twice the usual for the date, with close to two thirds of it going to the Philippines, South Korea, Indonesia and Vietnam.
The price had to move first
US wheat went into the autumn too expensive to sell at the pace its programme needed. It had to become competitive again, and the futures have done the work: they have lost almost a quarter since their early September peak, including more than 6% between 15 and 22 October alone.
This is not simply wheat falling everywhere. Gulf HRW has dropped 52 $/t on the FOB since the end of August, while Australia, the rival US wheat meets in Asia, has given up 10.5 $/t and Argentina 7 $/t.
Delivered into Asia, US wheat is still the dearest of the three, and by more than it usually is. But the gap has narrowed sharply, and the October sales show it no longer has to close completely for buyers to come.
The book is still behind, but no longer out of reach
Sales now stand at 11.52 Mt, or 56.4% of the USDA's export programme, against 57 to 66% at this date in recent seasons. Even after its biggest week, the book remains light.
The programme has moved towards it, though. On 9 October the USDA cut US exports from 21.09 to 20.41 Mt, and sales usually finish a little short of the USDA's line, at 90 to 97% in recent seasons. On that basis the book needs another 6.8 to 8.3 Mt before the end of May. Exporters have sold 6.8 to 7.9 Mt from this point in recent seasons.
Our reading: the export line has stopped being the problem
In September the question was whether US wheat could reach its programme at all. It now takes 0.21 to 0.26 Mt a week, less than the 0.33 Mt a week exporters averaged in the four weeks before the big one. The harder question is whether the price stays low enough, with Australian and Argentine new-crop wheat about to compete for the same buyers. Three signals in our data will show how that plays out:
- Weekly sales. Weeks this big have tended to be followed by 0.2 to 0.6 Mt, so a smaller print next week would mean little. Sales holding above the required pace through November would start to make the October cut look premature.
- HRW against Australian wheat. The FOB premium has fallen from about 69 to 27.5 $/t. If it widens again as the southern harvests arrive, Asian buyers have somewhere else to go.
- The USDA's next export line. Any return towards 21 Mt would mean the USDA is counting on this demand lasting.
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