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10 Dec 2020 | 19:08 UTC — New York
Highlights
Australia in an optimal position to expand exports
China, Pakistan wheat purchases seen at multi-year highs
Ukraine, Argentina output, trade estimates unchanged
Global ending stocks decline from Nov, but still hits record
The US Department of Agriculture Dec. 10 bumped up Australia's both 2020-21 wheat production and export estimates 5.3% from November projections, and signaled competitive prices are expected to open up new market opportunities for the country.
Australia, which went through three straight seasons of weak production from prolonged dry conditions, is expected to produce 30 million mt of wheat in 2020-21 (October-September), up from 28.5 million mt estimated previously, and 97.4% up from last year's output levels, according to the agency's World Agricultural Supply and Demand Estimates report.
Australian wheat exports are also expected to more than double to 20 million mt in 2020-21 from 8.5 million mt in 2019-20.
Analysts believe Australia will make a huge comeback in its traditionally top market, Southeast Asia, after losing its dominant exporter position to Black Sea suppliers in 2016-17.
Australian wheat export prices also have dropped sharply since late October, in contrast with other competitors, as larger crop expectations and searing trade tensions with China pressure prices, USDA said in a separate World Markets and Trade report released Dec. 10.
"With competitive prices for the first time in years, Australia is in an optimal position to expand exports," the agency said.
"Currently, Australia's export prices are competitive in Africa and the Middle East on a delivered basis compared to EU and Black Sea origins, but they will need to remain low to overcome competitors' freight advantage," the USDA added.
The USDA continued to boost China's 2020-21 wheat import estimates for the second straight month, to 8.5 million mt, up 6.3% from the previous estimate.
China's domestic spot prices have been soaring for quite a few weeks, with prices up 10% in November, compared with the same period a year ago.
China's rate of sales from auctions of China's stocks is also accelerating, indicating higher wheat demand in the country.
The country has been seen building up its grain reserves to meet its burgeoning domestic demand, while the rebuilding of pig herd stocks is also supporting the large wheat inflow into the country, according to analysts.
If realized, China's wheat imports in 2020-21 will be the highest since 1995-96.
One of the other highlights of the WASDE report is "unexpected strong demand" seen from Pakistan, which is likely to import 2.5 million mt of wheat in 2020-21, the highest in 12 years, the USDA said.
The driving factors for the surge in imports are robust demand and favorable import policies after the country removed 60% of import duties in June, leading to increased demand from public and private players.
Pakistan has already purchased more than 1.7 million mt of wheat in the first six months of the 2020-21 marketing season (May-April), according to the USDA.
The USDA cut production estimates at major wheat player EU for the 2020-21 season (July-June) by 750,000 mt from November estimates, to 135.80 million mt.
Canada, another key player in the global wheat market, is expected to ship 26 million mt in 2020-21 (July-June), the highest in at least the last five years, according to the agency.
Canada was already the largest wheat supplier to China in the first four months of 2020-21, the agency added.
Production and trade estimates for other big producers Argentina and Ukraine were unchanged from November levels.
Meanwhile, US wheat production for 2020-21 was also maintained at November levels, at 49.70 million mt.
However, the forecast for US wheat exports in the 2020-21 marketing season (June-May) rose slightly to 26.80 million mt from a previous estimate of 26.53 million mt.
The USDA lowered the US ending stock estimates by 1.7% from November to 23.46 million mt, slightly below trade expectations of 23.79 million mt.
Overall, global ending stocks are expected to decline to 316.50 million mt in 2020-21 from 320.45 million mt estimated in November, but will still remain at record highs, the agency said, with China and India holding 51% and 10%, respectively, of total inventories.
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