Canada’s wheat exports seen steady despite Black Sea competition

Canada’s wheat exports are expected to remain steady in the 2019-2020 marketing year (August-July) despite increased competition from Black Sea wheat in its traditional markets as the North American country is able to diversifysupplies, analysts told S&P Global Platts.

Canada is expected to export 23.6 million mt of wheat in 2019-20, down marginally by 0.4% from 2018-19 levels, latest data from the Agriculture and Agri-Food Canada shows.

Of the total wheat exports, non-durum wheat shipments are expected to account for 18.9 million mt and durum wheat the rest. Durum wheat is used in making pasta.

Canada is the world’s fourth-largest wheat exporter, according to the US Department of Agriculture.

Canada’s total wheat exports should remain steady in 2019-20 as long as North American wheat prices remain competitive, Ken Ball, senior commodity futures adviser at Canada-based PI Financial Corp. said.

But Canada has to be wary of growing competition from Black Sea wheat exporters, which are trying to make inroads into markets where North America has traditionally had an advantage over other countries, Ball said.

Indonesia, which is Canada’s largest wheat buyer and accounts for 10.8% of total exports, is seeing the share of Black Sea wheat rise.

Canada’s wheat shipments to Indonesia have increased in the last three marketing years, with exports in 2018-19 reaching 2.3 million mt, up 66.2% from 2016-17 levels, according to data from the Canadian Grain Commission.

However Black Sea wheat now has a 37% market share in Indonesia, compared to 15.6% in 2016-17.

Russia is also trying to push further afield, as Russian exporters look to move wheat into Mexico, Ball added.

Canada’s wheat exports to Mexico over the August 2018-June 2019 period reached 820,000 mt, down 7% from the year-ago period, according to CGC data.

Russia’s wheat supplies to Mexico, meanwhile, have increased in the recent years. Exports reached 994,000 mt in 2018, up 171.6% from 2017, according to UN Commodity Trade Statistics data.
DIVERSIFIED EXPORTS

However, Canadian wheat exports are highly diversified and exporters are able to shift exports to other countries if demand falls in a certain country, Stan Skrypetz, market analyst at the AAFC, told Platts, adding that this should keep Canadian exports stable.

An analysis of CGC wheat trade data covering Canada’s top 10 wheat importers shows six of them reduced purchases in 2018-19 from year-ago levels. But Canada still exported 10% more volumes in 2018-19 led by higher supplies to the other four countries including Indonesia, China, Peru and Ecuador.

While Canada’s non-durum wheat exports are expected to decline in 2019-20 by 1.6% from a year earlier, stronger durum wheat exports, led by higher exports to the EU and North Africa, will keep the overall wheat export flow steady, analysts said.

Canada will likely ship 4.7 million mt of durum wheat in 2019-20, up 4.4% from year-ago levels, according to the AAFC data.

Canadian durum wheat exports to the EU had dropped through much of 2018-19, but those volumes started to pick up later in the marketing year as European supplies began to dwindle, Canada-based LeftField Commodity Research Founder Chuck Penner said.

“With a sizable drop in the European crop and very low old-crop carryover, I would expect Canadian exports to Europe to improve somewhat. North Africa will also have increased needs in 2019/20, which will mean stronger demand for Canadian durum from a number of sources,” Penner said.
CHINA DEMAND

China purchased surprisingly larger volumes of wheat in 2018-19 from Canada despite diplomatic tensions between the two countries, as a trade dispute between the US and China impacted Chinese buyers’ purchasing decisions.

China has been a steady buyer of Canadian wheat since 2009-10, but wheat exports to the Asian nation were unusually high in 2018-19 as they did not buy a lot of wheat from the US, Skrypetz from AAFC said.

China purchased 1.9 million mt of wheat from Canada in the August 2018-June 2019 period, up 92.1% from year-ago levels, according to CGC data. The 2018-19 volume is about 180% above than the five-year average of 677,000 mt.

“I’m optimistic that China will continue to buy some Canadian wheat, but [China] will also look elsewhere as it isdoing with a number of other crops,” Penner said.

China is likely not a big market, and Australia usually has a big freight advantage, but Canada can get in there with top quality hard red spring wheat, Ball from PI Financial said.
Source: Platts