Global Markets: Wheat – Increased Trade Despite Reduced Production, Consumption

    Wheat Heads. Photo: Oklahoma State University

    Global wheat production is forecast lower than last year’s record. The United States, Australia, Russia, and Canada have sizeable production cuts, which are only partially offset by larger expected crops in India, EU, Morocco, and China. Global consumption is projected down slightly as lower wheat feeding more than offsets steady growth in food use. Global trade is projected above last year’s record due to large carryin supplies. The EU is forecast to return as the world’s largest exporter after last year’s weather-stricken crop. Global stocks are projected at an all-time high, driven primarily by China.

    Global wheat production is projected at 738 million tons, down 15 million from the 2016/17 record, but still the second highest on record. Production among the major exporting countries is down a net 29 million tons. Projected gains in Argentina and the EU are not enough to offset declines in Australia, Canada, Kazakhstan, Russia, Ukraine and the United States.

    In the EU, production is expected to be up about 4 percent from last year’s low crop. Farmers in Argentina are projected to produce more wheat as area planted is expected to expand once again. Production in Canada is forecast lower with a reduced yield more than offsetting slightly higher area. Russia’s wheat crop is expected to be down from last year, but still the second highest on record.

    Production in Ukraine is expected down about 7 percent on lower yields. U.S. production is projected well below last year with the lowest area harvested on record. China’s wheat production is projected up for 2017/18, rebounding from lower yields and crop quality issues in the previous year.

    India’s crop is forecast at a record, rebounding substantially from the prior two years. Morocco’s production is forecast twice as large as last year’s drought-reduced crop. Brazil’s crop is forecast down 17 percent, mainly on lower expected yields. Production in Ethiopia is forecast slightly higher, while South Africa is projected nearly unchanged.

    Global consumption is forecast down marginally as reduced feed (and residual) use is expected to more than offset rising food use. Wheat used as a component in animal feed rations is projected to decline slightly due to greater utilization of coarse grains, particularly in China, the EU, Indonesia, and Thailand. Food use of wheat, however, continues to be on the rise in most regions. Surging consumption in South and Southeast Asia is driven by population growth, urbanization, and rising incomes.

    Global ending stocks for 2017/18 are projected to reach a new record of 258 million tons, up almost 3 million from last year. China’s burgeoning stocks are expected up 17 million tons from the previous year, accounting for nearly half of global wheat stocks. Projected ending stocks, excluding China, are actually down year-to-year.

    Ending stocks in the eight major exporting countries collectively are projected to drop in 2017/18 after reaching a six-year high in 2016/17. With a smaller crop and continued export demand, U.S. ending stocks are forecast down from the highest level in nearly 30 years. Stocks in Australia and Canada are also forecast lower with smaller crops.

    Stocks in the EU are forecast to tighten with larger exports. Black Sea stocks are forecast lower with smaller crops in all three countries. Stocks in Argentina are forecast to remain tight in spite of a larger crop as export demand is expected to continue to absorb most of its supplies.

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