Fundamentally Speaking

Since the end of September, wheat futures have rallied anywhere from 50 to 95 cents while the U.S. dollar has appreciated about 12% since the middle of May.

Higher flat prices of wheat in the midst of an appreciating currency in the foreign exchange markets is hardly the prescription for improving our wheat export sales performance.

The USDA is already projecting our 2014/15 total U.S. wheat overseas sales at 925 million bushels according to the November 2014 WASDE report and that is down 21.4% from the year ago 1.176 billion bushels exported.

However, through the first week of November total wheat export sales are 581 million bushels; down 25.4% from the year ago level with current shipments of 400 million down 32.2% from the total shipped by the first week of November a year ago.

Given the lagged sales and shipping pace along with the recent rally in both wheat prices and the dollars they are denominated in, there are ideas that subsequent WASDE reports will show a lower projected wheat export figure.

The accompanying graphic show U.S. wheat exports as of the first week in November as a percent of the November WASDE export projection and plots that against the change in million bushels from the November WASDE export estimate to the final export projection.

The 581 million sold is 62.8% of the 925 million bushel projection and beside last year is the highest percent sold this time of year since the 2008/09 season though it is slightly below the ten year average of 64.2%.

As expected, years where a high percent of the November WASDE export projection has already been sold by early November often leads to upward revisions in the wheat export estimate and vice-versa.

Running a simple regression indicates that with this sales pace, the final wheat export figure could actually be adjusted higher by 27 million bushels.

We suspect that our wheat sales going forward will be dictated by our cost vis-à-vis other supplies, the outlook for U.S. and global wheat production this coming year and other macro factors including exchange rates along with other economic and geo-political considerations.

(KA)

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