Black Sea Wheat Competition Up

November 29, 2011 04:04 PM
Black Sea Wheat Competition Up

The rebound in production and exports from the Black Sea region, primarily Russia, has been a factor in wheat export competition.

"I can’t remember the last time an Egyptian tender came our way," says Brian Hoops, president of Midwest Market Solutions in Yankton, S.D. "Demand probably will be hurting for several months."

USDA projects that total U.S. wheat exports will fall in 2011/12 to 26 million tons, after spiking to nearly 36 million this past year.

The forecast for Russian exports is up to 18 million tons, in line with volume before drought slashed Russia’s exports this past year to just under 4 million tons. Kazakhstan and Ukraine are also headed toward big export recoveries, while EU-27 shipments are falling.

"The biggest impact for now in wheat is the return of Russia and Ukraine to the market," says Steve Mercer, communications director for U.S. Wheat Associates. "This year, their crops were quite good. They have wheat to sell, and they’re selling it."

Sales are at lower prices than U.S. exporters can meet, and the Black Sea countries have a freight advantage compared with the Middle East.

Middle Eastern demand has held up well this year despite political turmoil. Upheaval in Egypt earlier this year especially worried wheat traders. But many Middle Eastern countries continued to provide subsidized bread for their people, Mercer notes.

USDA says Egyptian wheat imports increased from 7.7 million tons in 2007/08 to 10.6 million in 2010/11. USDA projects 10.5 million tons this year.

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