Stronger demand keeps global wheat ending stocks at same level despite higher production estimates in several countries
The U.S. Department of Agriculture ratcheted up wheat production estimates for several countries in its August supply and demand report, but 2022-23 world ending stocks remained unchanged.
“They found more production but they also recognize that maybe demand is pretty strong as well,” said MarketsFarm analyst Bruce Burnett.
The biggest adjustment was Russia’s new wheat production estimate of 88 million tonnes, up from the July forecast of 81.5 million tonnes.
Private analysts like SovEcon have long been forecasting a much bigger crop than where the USDA was at. SovEcon is estimating 90.9 million tonnes, while others are as high as 94.1 million tonnes.
Read Also
Russian pulse trouble reports denied
Russia’s pulse crop will be larger than last year, which won’t help prices rally from their doldrums.
Burnett thinks the USDA may raise its Russia forecast in subsequent reports depending on how the spring wheat crop turns out in Siberia and the Urals.
The USDA also added three million tonnes to its Australia forecast, bringing it to 33 million tonnes, and one million tonnes to its Canadian estimate, which is now 35 million tonnes.
Burnett thinks the Canadian number is way off. He believes the all-wheat number will be closer to 31 million tones due in a large part to a disappointing durum crop.
“Whenever I read a Saskatchewan crop report saying they’re cleaning grasshoppers out of the combine I get a bit of a Spidey sense,” he said.
Despite all the increases in production estimates, total world ending stocks for 2022-23 remained unchanged at 267 million tonnes.
However, DTN lead analyst Todd Hultman noted that world ending supplies, excluding China, fell to 122.98 million tonnes, down from the July estimate of 126 million tonnes.
“This is a very tight global wheat situation,” he said in a webinar.
In fact, that would be the tightest ending stocks, excluding China, in 15 years.
Burnett said the reason that world ending stocks, including China, did not budge is strong global demand for the commodity.
For instance, China’s domestic use estimate increased by 4.4 million tonnes since the July report, which is substantial.
China’s wheat production is estimated at a record 138 million tonnes, but there was an interesting footnote in another USDA report about that number.
“This year’s crop productivity was favourable but more likely to have overall poor grain quality, specifically low protein, broken kernels and higher toxin rates due to localized rainfall during late stages of advanced maturity and harvest,” stated the USDA.
Burnett said that is good news for exporters of high-quality milling wheat like Australia, Canada and the United States.
He noted that there are also quality problems with Russia’s winter crop, which could limit how much wheat China sources from the Black Sea region this year.
Another bullish factor in the report is that U.S. hard red winter wheat production was dropped by nine million bushels.
“The tightness in the hard milling wheat markets is going to continue,” said Burnett.
Another factor he is going to keep a close eye on is Europe’s grain crops. The USDA dropped EU wheat production by two million tonnes and corn production by eight million tonnes due to hot and dry conditions in that region of the world.
“That’s something to watch out for in the coming months,” he said.
