Canada Markets

US Wheat Imports may be Poised to Grow

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The June USDA report shows an upward revision in the United States expected wheat imports to 3.5 million metric tons for 2017/18, which would be a three-year high. This would exceed the previous 10-year average (2006/07 through 2015/16) which is indicated by the horizontal black line at 3.4 mmt. (DTN graphic by Scott Kemper)

A media report of the United States Secretary of Agriculture Sonny Perdue's visit to Canada this week pointed to wheat grading as one of the three main agriculture trade grievances that will be voiced by the U.S. in upcoming NAFTA negotiations, which also includes the long-standing dairy issue.

The wheat issue is tied to Canada's grading system that discriminates against wheat deliveries from U.S. producers. One reason why this should be sorted out sooner rather than later is perhaps seen in today's monthly World Agricultural Supply and Demand Estimates report released by the USDA.

While all forecasts need to be treated with a grain of salt, concerns have already been expressed that this month's estimates for the winter wheat crop fail to take into account weather challenges faced last month. It is impossible for today's report to take into account the growing drought conditions in the northern U.S.

One thing that is signaled in recent reports is the expectation of growing imports of wheat into the U.S. As seen on the attached chart, USDA data shows 3.1 million metric tons imported in 2015/16 (blue bar) and 3.2 mmt estimated for 2016/17 (red bar). Their first look at 2017/18 data in May resulted in a 3.4 mmt projection (gold bar) while today's June report bumped this further to 3.5 mmt. This is higher than the 10-year average (2006/07 to 2015/16) which is calculated at 3.4 mmt, which was pulled higher by large volumes imported in 2013/14 and 2014/15.

North American trade could present an opportunity given that the global fundamental situation is viewed as growing increasingly bearish, according to current USDA data. While global production is set to drop by 14.6 mmt from the record crop produced in 2016, huge global stocks carried into the 2017/18 crop year are projected to contribute to global ending stocks that are set to grow by 1.9% or 4.8 mmt to 261.19 mmt. This represents 35.5% of global demand, which is the highest stocks/use ratio seen in 18 years.

DTN 360 Poll

This week's poll asks if you think that Canada should take steps to harmonize wheat grades with the U.S. in order to accommodate a two-way flow of wheat. DTN Canada Edition subscribers can weigh in with your thoughts on this week's poll, which is found at the lower right of the Canada Edition Home Page. We thank you and welcome your input.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

(TN)

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