Miller Magazine Issue: 134 February 2021

80 MARKET ANALYSIS MILLER / february 2021 India wheat exports resume amid high global prices Lower crop pressures Argentina wheat exports As major exporter prices rise, India wheat exports are returning to the global market in a sizeable way for the first time in several years. India’s ample supplies are poi- sed to reach additional markets as stocks tighten among many of the top exporters. India’s domestic support programs have a history of perio- dically expanding wheat production and burgeoning govern- ment-held stocks. In addition to supporting production, India also subsidizes domestic consumption, supplying most of its population with heavily discounted grain rations. This year, wheat consumption has risen sharply with additional allocati- ons of wheat through programs intended to address the eco- nomic challenges stemming from the COVID-19 pandemic. Yet even with record consumption, stocks remain at record levels, primarily held in government grain reserves. Several years ago, when stocks in India reached burden- some levels, relatively high Russian export prices opened op- portunities for India to supply not only Asian but also Middle East markets. However, since 2016/17, the high domestic support prices have been reflected in high export prices, limi- ting India exports to primarily neighboring countries. In recent months, Indian export prices have eased while pri- ces for major suppliers have risen. Russia’s announcement of both a grain export quota and a 50 euro/ton wheat export tax sent quotes for that top exporter and other suppliers rising. This will afford India the opportunity to seize greater market share in Bangladesh and expand to additional markets. Howe- ver, the scale of exports from India is not likely to match that of several years ago, since a larger Australian crop will provide formidable competition in Southeast Asian markets. Argentina has been plagued by dry and cold conditions th- roughout the 2020/21 growing season, shrinking production estimates to 17.2 million tons, a 5-year low. The diminished wheat crop has significantly lowered exportable supplies, and wheat exports in the 2020/21 season are projected to reach their lowest level in 5 years. Along with lower production, a crucial factor constraining exports is continued unrest at Argentine ports. Towards the end of 2020, various union strikes severely limited shipments of grain and other agricultural products. Argentina’s wheat harvest be- gins in November and exports typically peak shortly afterwards. Argentina ships its largest wheat volumes between December and February, with approximately 20 percent of annual exports shipped during January alone. However, due to labor disputes affecting shipping capacity, Argentina only exported 900,000 tons of wheat in December, down 60 percent year-over-year. By the first week of 2021, agreements were reached with the striking unions after nearly 1 month of unrest. Traders were hopeful that these resolutions would end port disrup- tions and allow for strong wheat exports in January to make up for a disappointing December. However, on January 15, a trucker’s union began blockading roads surrounding key Ar- gentine ports, further disrupting grain exports. Port loading data suggests that strikes continue to limit wheat shipments. The country loaded 1.7 million tons of wheat for shipment in January, only half of last year’s volume. With the labor dis- putes also affecting soybean and corn exports in December, competition for shipping capacity at the ports will intensify over the next few months, further challenging wheat exports. Argentina wheat must also compete with Australia wheat in foreign markets. With Australia’s larger supplies and price advantage in 2020/21, Argentina faces renewed competition for market share in Southeast Asia. Last year, Argentina loa- ded 1.4 million tons of wheat for Indonesia in the month of January, compared to 100,000 tons this year. Given these challenges, USDA lowered 2020/21 trade year exports (Jul-Jun) to 11.0 million tons, while local marketing year exports (Dec-Nov) are reduced to 11.5 million tons. To achieve these forecasts, Argentina must export wheat during its typically slower months between March and November. ArgentIna Wheat ProductIon and Exports