Global wheat production and trade are down this month mainly from reduced crops in Australia and Russia. Imports are lowered for Azerbaijan, Bangladesh, and Nigeria. Exports are forecast down for Australia, while Russia is unchanged this month. The U.S. season-average farm price is unchanged at $5.10 per bushel.

U.S. wheat prices were down in September on a slow pace of exports, plentiful supplies, and favorable weather conditions ahead of winter plantings. Hard Red Winter (HRW) declined $10/ton to $237, Soft Red Winter (SRW) was down $11/ton to $213, and Soft White Winter (SWW) weakened $4/ton to $231. Hard Red Spring (HRS) was down $15/ton to $249.

Exporter prices were mixed in September. Argentine, Canadian, EU, and U.S. prices were down, while Australian and Black Sea quotes rose. Australia’s drought has resulted in a smaller crop, leaving Australian wheat increasingly uncompetitive for exports, and therefore keeping supplies for domestic use. The price spread between U.S. and Black Sea narrowed as the United States has plentiful supplies, making it more competitive on the international wheat market.

Russia is off to a fast start in 2018/19 with exports to date already 30 percent more in the first 3 months than last year. Russian wheat exports are forecast at 35.0 million tons based on adequate supplies and strong global demand. Despite having lower production compared to last year’s record-setting crop, Russia’s wheat crop is still the third largest on record. Additionally, Russia has sufficient carryover supplies, resulting in the most competitively priced wheat for export.

Due to poor weather conditions, many of the global wheat exporters have smaller crops and are expected to export less this year. Currently Australia is experiencing a drought which has led to more wheat being kept for domestic consumption instead of the export market. The European Union has a small crop due to dry conditions in northern growing regions during the key growing season. This has allowed Russia to gain more market share in Asia and Africa, which are traditionally supplied by these two exporters. With the supplies and prices to attract international buyers, Russia is poised to fill this international demand vacated by other wheat exporters. In addition to Russia’s ample supplies and ability to export large quantities of grain (similar to last year), it also renewed an export transportation subsidy for the new crop year. This would signal that Russia is prepared to continue supplying the global wheat market in the near future.

As the year progresses, Russian exports are likely to slow based on winter weather conditions, which often make grain transportation challenging. This is expected to boost exports for other competitors (notably the United States and the European Union).

With the supplies and prices to attract international buyers, Russia is poised to fill this international demand vacated by other wheat exporters. In addition to Russia’s ample supplies and ability to export large quantities of grain (similar to last year), it also renewed an export transportation subsidy for the new crop year. This would signal that Russia is prepared to continue supplying the global wheat market in the near future. As the year progresses, Russian exports are likely to slow based on winter weather conditions, which often make grain transportation challenging. This is expected to boost exports for other competitors (notably the United States and the European Union).

U.S. exports are expected to recover from a slow start at the beginning of the year as competitor supplies become tighter. Total commitments (accumulated exports plus outstanding sales) as of September 27 are down 19 percent from last year. This is primarily lower shipments of Hard Red Winter wheat, although Hard Red Spring and White are also down. Nevertheless, total U.S. exports are still forecast up with the expectation that a larger share of global demand will shift to U.S. wheat later in the year.

The unrelenting pace of Russia’s exports has made U.S. wheat less competitive in recent months, but those exports are likely to slow in the next few months. Russian exports are normally front-loaded in the first half of the marketing year, which is likely to be the case in 2018/19. Russia is likely to keep a grip on nearby markets such as Egypt and Turkey, but its export competitiveness to Latin America and Africa could diminish later in the year.

Similar to the U.S. wheat situation, exports for the European Union are also off to a slow start. The EU wheat crop is down significantly from last year and its prices have not been competitive with Black Sea wheat. Later in the year, however, the slowing Russian shipments should put the European Union in a better position to regain market share in Africa and the Middle East.

Canada is the only major U.S. competitor expected to export more wheat this year. With protein in high supply in North America, Canadian wheat has been competitively priced and has won a larger share in some Latin American markets, particularly Brazil and Mexico. Going forward, this competition is likely to continue.

In light of China’s retaliatory tariffs on U.S. wheat, Canada’s share of exports to China will likely continue to be strong. However, this could create opportunities for U.S. wheat elsewhere as more Canadian wheat is diverted to this destination.

Australia is expected to have the lowest exports in about a decade as a result of widespread drought. Australia is largely priced out of international markets as some wheat is being diverted from export channels for domestic use. This could be a major opportunity for U.S. wheat to fill demand in Asian markets

Argentina is expecting another bumper crop and is expected to have very competitively priced wheat as a depreciated currency largely offsets the impact of the recently imposed export tax. Once its harvest arrives later this year, Argentina is likely to continue as the dominant supplier of wheat to Brazil. However, recent U.S. sales to Brazil could indicate a window to supply that market for a month or two before the Argentine crop reaches the market. Depending on the quality of Argentine wheat, U.S. and Canadian suppliers may also have an opportunity to supply higher protein wheat for blending. During peak export months (December through March), Argentina will likely seek out additional markets in Africa and Asia, partially filling in for reduced Australian exports.