European Wheat Sales to US Disappointing Due to Unusual Purchase Patterns

US: US flour mills have resorted to importing wheat from Europe due to lower prices, making it more cost-effective to bring it across the Atlantic instead of sourcing it from the US plains. However, this move has raised concerns and frustrations among US wheat stakeholders. The practice of importing European wheat to produce domestic flour is considered "highly unusual" and is a disappointment to an organization that advocates for exports on behalf of US wheat farmers.

It is important to state that there is more than enough high-quality US Wheat available to produce all the flour need in this country, and the 2023 harvest is already underway.

Poland has shipped a whopping 79,000 tonnes of wheat to the United States during the 2022-23 season. Moreover, there have been reports of sales of German wheat as well. According to the US Department of Agriculture (USDA), total US wheat imports are expected to witness a surge of 10 million bushels, reaching an all-time high of 135 million in 2023-24. This comes after a three-year drought that has drastically reduced US crops and increased exportable volume from Eastern Europe.

Furthermore, the increasing rail tariffs and fuel costs in the US have made European wheat more than $100 cheaper per tonne than US hard red winter (HRW) Gulf FOB export price, creating a perfect storm of events leading to this situation. The exportable wheat supplies in Eastern Europe have seen a remarkable increase this year, adding fuel to the fire. With Russia’s invasion of Ukraine in February 2022, exports from the Black Sea were limited, which sent Wheat and other commodities into Eastern European nations.

The decrease in wheat prices in local markets of several countries due to surplus production has led to the banning of Ukrainian grain imports by five EU nations. Furthermore, Russia's exceptional 45 million tonnes wheat crop in 2023 has resulted in increased pressure on regional prices.

The United States is facing a major shortage of Wheat supplies, particularly hard red winter (HRW) Wheat. This is largely due to the drought that has ravaged the country's Wheat-producing regions in both 2021-22 and 2022-23, with HRW production estimated to be at its lowest since 1957-58. To make matters worse, US rail tariffs and fuel charges are almost twice the ocean freight cost per tonne, making it difficult to transport Wheat across the country.

Imported European Wheat will likely be transported to coastal US flour mills, as high rail rates make it expensive to move it to interior facilities. The supply challenges are expected to continue at least until the 2023 harvest, adding further strain to the already-tight market.

The conflict in Ukraine has further exacerbated the situation. It believes that "absent the illegal and highly disruptive invasion of Ukraine, the price spread incentivizing US imports would be much closer." Unfortunately, the conflict shows no signs of abating, leaving the US Wheat industry in a precarious position.