January 23, 2024
Stefan Florescu, a wheat trading expert with CHS, provides a 2024 wheat supply and demand outlook.
Will international sales of U.S. wheat rebound this year? Stefan Florescu, a wheat trading expert with CHS, says demand is likely to pick up. U.S. wheat supplies this year could increase with normalized crop conditions for winter wheat and mild weather expected for spring planting season. However, the multi-year trend of decreasing market share for U.S. exports creates some uncertainty for growers.
Global Competition Increases
Lower production and less competitive prices over the past few years have cost U.S. wheat producers market share in traditional export destinations like Central America, West Africa and Asia, says Florescu. Although the U.S. could see a larger exportable surplus this year due to improved crop conditions, he says marketers will have to make a strong effort to compete with Black Sea region wheat moving into Central America, Baltic States wheat going to West Africa and Canadian wheat heading to Asia.
“China recently bought a significant amount of U.S. wheat, which should boost export activity for the coming months,” he says. “However, the U.S. cannot afford to lose traditional wheat destinations. That’s why being part of a cooperative system with strong marketing capabilities and expanding market access could make a critical difference for growers in 2024.”
Wheat Acres Declining
Over the last 20 years, U.S. wheat production shrank by more than 15 million acres after many growers transitioned to corn and soybeans. The shift was supported by renewable fuel policies that helped increase demand for corn and soybeans. Weather also impacted the loss in wheat acres.
Although U.S. growers have access to ag technology, products and agronomic practices that give them a production advantage over other growers on the global stage, Florescu says weather challenges, global trends and ag policies can affect revenues and planting decisions.
“Years ago, we had a serve drought that impacted the Northern and Southern Plains, culminating in November 2022 with the lowest winter wheat crop rating on record,” Florescu explains. “Only 34% of the crop was in good or excellent condition after that year. Although wheat crops have recovered, the drought pushed many growers to change their crop plans.”
Geopolitics Impact Markets
As U.S. growers build their marketing plans for 2024, Florescu suggests watching crop reports and conflicts in key international wheat import and export destinations, particularly in Russia and Ukraine and Israel and Gaza as this region accounts for more than 15% of global wheat imports.
“After the winter dormancy period, growers should watch crop condition reports in the U.S. and worldwide,” he says, “particularly export performance of the Black Sea region, which typically counts for about one-third of global wheat exports.”
He urges growers to keep on an eye on the capacity of key export corridors to move wheat shipments to meet demand.
“Another conflict escalation to watch is in the Red Sea, which could change the route of seagoing trade from the Suez Canal toward the Cape of Good Hope,” Florescu says. “This could cause weeks of delay and additional costs for consumers around the globe. Any slowdown or faster pace in monthly shipments could send signals about the price.”