China's massive imports of U.S. soft red winter wheat (SRW) earlier this month pushed U.S. soft red winter wheat exports to a 10-year high in this marketing year.
On the other hand, U.S. exports of hard red winter wheat (HRW) in 2023-24 hit a 40-year low, although HRW wheat is more abundant than SRW wheat and generally dominates in terms of U.S. exports.
USDA, net wheat exports in 2023-24 were 1.49 million mt in the week ended Dec. 7. This is the largest weekly sales volume of the current marketing year since September 2007.
About 1.12 million tonnes of this is solid waste sold to China, which is expected based on sales announced that week. China currently accounts for 46% of total U.S. SRW sales, while SRW accounts for 29% of total U.S. wheat sales.
According to the U.S. Wheat Association, an export market development organization, U.S. SRW wheat is the closest to China-grown wheat. Low-protein SRW wheat is commonly used to make biscuits and biscuits, while high-protein HRW wheat is used to make bread.
In the last five years, HRWs have accounted for an average of 36% of annual U.S. wheat exports, while SRWs account for only 12%. However, the SRW and HRW for 2023-2024 are 24% and 20%, respectively, which is the first role reversal in 40-year data history.
Hard red spring wheat (HRS), which typically accounts for around 28% of annual exports, is the most-exported U.S. wheat variety in 2023-24 for the first time in eight years.
The last time China bought U.S. wheat in large quantities was in 2020-21, when it favored HRW and soft white winter wheat (SWW), which are commonly used to make Asian-style noodles. Throughout 2020, the premium for Kansas City wheat** vs. Chicago wheat was the lowest ever.
But K. on behalf of HRWc.In 2023, margin for SRW-related Chicago wheat** transactions set a record. However, on the most active basis, the KCC-Chicago premium on Thursday fell to its lowest level since March 2022.
Inventory and exports
Despite their smaller size, US SRW wheat ending stocks are expected to be relatively abundant in the 2023-24 season ending as of May 31. USDA's SRW ending inventory cap is 1At 1.8 billion bushels, the highest level in five years, an increase of 31% from the same period last year.
HRW ending inventories for 2023-24 are expected to be 2800 million bushels, up 20% from last year's 15-year low, but 32% below the five-year average.
The USDA expects U.S. wheat ending stocks in 2023-24 to increase by 13% from the previous season's 15-year low, but remain well below most years in recent years. However, U.S. wheat exports remain at 52-year lows in 2023-24 as the Black Sea** continues to dominate global markets.
U.S. exporters are moving toward this goal due to recent economic activity in China. Export sales as of Dec. 7 accounted for 74% of USDA's 2023-24**, up from the five-year average of about 66% on that date.