U.S. wheat exports fell to the lowest in 25 years, underscoring the blow to farmers who are struggling to compete with foreign growers as the strengthening dollar makes American goods more expensive.
Their troubles are compounded by a world awash in wheat after two consecutive record global harvests, leaving exporters to undercut each other’s prices in a bid to unload supplies at a time when domestic production costs are already relatively high. American exports in the week ended March 19 fell to the lowest for this time of year since 1990, government data showed Thursday.
“The strong dollar will continue to squeeze U.S. exports, and most farmers are looking already looking at losses,” Sterling Liddel, a vice president of Rabobank International’s food and agribusiness research advisory in St. Louis, said in a telephone interview.
The European Union overtook the U.S. as the biggest wheat shipper in 2014. The gap is set to widen because Europe’s record crop and sliding currency make it the world’s most competitive supplier, according the U.S. Department of Agriculture. Farmers aren’t the only commodity producers suffering from the dollar’s rally, with American steelmakers getting undermined in their own backyards by cheaper imports.
The euro reached a 12-year low against the dollar this month amid a diverging outlook for global interest rates. The Bloomberg Commodity Index dropped 25 percent in the past 12 months. Most raw materials are priced in the U.S. currency.
U.S. wheat exports dropped 74 percent from a year earlier to 102,341 metric tons in the week ended March 19, Department of Agriculture data show. That was the third straight decline and lowest since the season started in June. Cumulative sales for delivery before May 31 are trailing last year by 24 percent.
“Without serious weather problems, wheat revenue will be below breakeven for the median U.S. farmer,” Liddel said. “The drop in exports will be very challenging.”
Global production jumped to a record in the past season after prices more than doubled in the decade through 2012. Swelling supplies are now driving futures lower, eroding farmers’ income. The grain is the fourth-biggest U.S. crop, valued at $11.92 billion in 2014, USDA data show.
Wheat slumped 3.8 percent to $4.9925 a bushel in Chicago on Thursday, after the export data was released. Futures traded at $5.005 by 2:22 p.m. Singapore time on Friday, tumbling 30 percent in the past 12 months.
“Export sales were dismal,” Shawn McCambridge, the senior grain analyst for Jefferies LLC in Chicago, said in a telephone interview. Wheat prices have “struggled with disappointing export demand the entire crop year, with few prospects for improvement unless quality or supply issues develop overseas,” he said.
The U.S. shipped 31.497 million tons of wheat, flour and wheat products in the 12 months ended May 31, 2014, according to the USDA. The EU exported 31.925 million tons. For 2015, the USDA pegs U.S. sales at 25 million tons and the EU’s at 31.5 million.