Articles of Interest- Tuesday, November 12, 2019
November 12, 2019
Brazilian Wheat TRQ Set to Open
Agri-Pulse – 11/11/2019
An agreement 24 years in the making is set to come to fruition as the Brazilian government prepares to implement a tariff rate quota to allow an increase in duty-free wheat imports. The TRQ will green light 750,000 metric tons of wheat to be imported duty-free from countries outside the Mercosur trade agreement (Brazil, Argentina, Paraguay and Uruguay). According to the U.S. Wheat Associates, the export promotion arm of the wheat sector, Brazil first agreed to the TRQ when it joined the World Trade Organization in 1995. In a statement, USW President Vince Peterson said the move could mean big things for American wheat growers. “Brazil is a quality-focused wheat market and its flour millers recognize that U.S. wheat can help them better meet their customers’ needs,” said USW President Vince Peterson. “Opening the TRQ will give those millers more consistent access to our wheat classes while still having the option to source from other countries. That is how the market should work and we welcome this opportunity.”
USDA Boosts Russia, EU, Ukraine Wheat Output Estimates for 2019-20
S&P Global – 11/08/2019
The US Department of Agriculture raised its estimate for Russia wheat production for 2019-20 (October-September) by 1.5 million mt to 74 million mt and that of the European Union by 1 million mt to 153 million mt on “updated harvest results.” The department also raised the wheat output estimate for Ukraine by 300,000 mt to 29 million mt in its monthly World Agricultural Supply and Demands Estimates report released Friday. The latest estimate for Russian wheat production is lower than the S&P Global Platts Analytics estimate of 75.3 million mt for the same period. On the other hand, EU’s production estimate by USDA is higher than Platts Analytics estimate of 151.7 million mt. The increase in estimates in the three regions has offset fall in projections for US, Australia and Argentina, which are battling unfavorable weather conditions. Australia’s wheat production estimate for 2019-20 (October-September) has been lowered to 17.2 million mt from 18 million mt. This is the third straight month when the USDA has cut Australia’s production estimate owing to further damage from the country’s severe drought condition.
EU Wheat Weakens as Russia Export Competition Intensifies
Reuters – 11/11/2019
Euronext wheat futures fell on Monday as increased competition in export markets from Russia and a modest rebound in the euro helped put the market on the defensive. December milling wheat, the most active position on the Paris-based Euronext exchange, was down 0.75 euro, or 0.4%, at 177.75 euros ($195.88) per tonne at 1634 GMT. “European markets have a weaker feel today. There is concern about falling Russian export prices which along with the stronger euro could put the breaks on new EU export sales in coming weeks,” one European trader said. Russian wheat export prices fell for the second week in a row last week, making them more competitive on the global market, industry analysts said. The U.S. Department of Agriculture on Friday raised its forecast for 2019/20 Russian wheat exports to 34.5 million tonnes from a previous forecast of 34 million reflecting higher than previously expected production.
Is Russia Losing Wheat Market Power?
FarmProgress – 11/11/2019
Romania, France, and Ukraine have underbid Russia on recent wheat sales to Egypt. For the first time in six months, Russian wheat prices declined and Russia still missed out on selling wheat to Egypt. Could Russia be losing control of the export market price? In past years, relatively high debt, a shortage of storage, and a shortage of cash forced Russian farmers to sell most of their wheat at harvest. This meant that Russian wheat had to be sold on the export market. This outcome drove harvest prices down, and Russia appeared to control the export market and pricing. In addition, Russia exported most of its wheat during the September through February time period. But this scenario appears to have changed. The average Russian wheat total cost of production is reported to be $3.40 per bushel. The variable cost is estimated to be $3.27.
Strategies Have Changed on International Trade, NDSU’s Olson Says
Frayne Olson understands that agriculturalists often have trouble keeping track of trade issues and new developments involving them. Olson, North Dakota State University Extension farm management specialist/marketing specialist, says he has the same problem. Olson spoke Oct. 28 in Grand Forks at the annual Outlook Conference for Agricultural Lenders. About 90 ag bankers from northeast North Dakota and northwest Minnesota attended the event, at which Olson and other NDSU Extension specialists gave their insights on a number of issues. Under the Trump administration, U.S. trade policy strategy has shifted from multilateral agreements (ones between many countries) to bilateral agreements (ones between the United States and a single country, most notably China), Olson said. “We can debate the effectiveness of this, but the Trump administration firmly believes philosophically that a bilateral agreement can negotiate better terms than a multilateral agreement,” Olson said. “The idea is, we can hopefully get better terms for the U.S. doing it that way. Whether that’s true or not, we’ll find out.”
Source: U.S. Wheat Associates