March 1st US wheat stocks are estimated at 1,465 Mil Bu, nearly 200 Mil below last year but still historically large. Total Dec-Feb consumption is pegged at 444 Mil, down very slightly from a year ago, and it’s the lack of exports in the Mar-May quarter – and possibly beyond – that will keep US wheat inventories more than comfortable. US wheat stocks/use on March 1st is estimated at 93%, vs. 97% a year ago but vs. 90% in 2015.
Shipments have been lagging and new sales have been rather lackluster since late 2017 as the US market priced itself well above competing origins. ARC notes that domestic use in the final quarter of the year is rather flat (feed use is negligible and food use will be a consistent 238-240 Mil Bu), and so only exports can alter the annual balance sheet moving forward. Outstanding export sales as of March 8th totaled 166 Mil Bu, down 63 Mil (27%) from last year, and this gap is likely to widen in the next few weeks. Gulf HRW this evening is offered at $217/MT, vs. German at $207 and Russian at $206. New crop US offers hold an even larger premium, and so there’s no incentive for major importers to seek US origin supply.
And without an improvement in the pace of physical US wheat shipments, it’s possible will lower final 17/18 exports another 5-15 Mil Bu. The graphic below shows weekly export inspections along with the pace needed to meet the USDA’s forecast. Shipments in the last five weeks have failed to meet this target (18 Mil Bu), and the risk is that exports are lowered a bit, not raised, by the final count.
The entirety of the N Hemisphere wheat growing season lies ahead, and so we advise against chasing breaks. But rallies in wheat, more than corn & beans, need to be used to extend old and new crop cash sales. ARC’s contacts suggest Russian prices are profitable enough to maintain acreage there, while N African crops seem to be in good shape via updated vegetation health maps.
