Last year at this time, wheat prices had just begun their summer-long rocket ride as severe production problems threatened in Canada, Australia and the United States.
This year, production prospects are more comfortable in the traditional exporting countries and prices reflect that.
And yet global wheat output in the new crop year could be smaller than last year and the stocks-to-use ratio is expected to be the tightest since 1974-75.
The United States Department of Agriculture last week slashed its world wheat production forecast by eight million tonnes to 561.45 million, compared to 564 million last year.
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Improved production in Canada, the U.S., Australia and Argentina was more than offset by lower production in Ukraine, Russia, India and China – the spoilers who brought wheat prices back to earth late last fall.
The global total is now the smallest since 538 million tonnes were produced in 1995-96.
That production, added to the carry-in of 160 million tonnes, made 698 million tonnes available in 1995-96.
This year, the production and carry-in total forecast is 726 million tonnes, so there is more wheat around.
But demand has climbed since the mid-1990s. Back then, the world consumed 545.5 million tonnes. In the new crop year it should consume 590 million.
If we subtract 590 million from 726 million, we get an ending stocks number of 136 million, or a stocks-to-use ratio of 23 percent.
The last time it was that tight was 1974-75 when the Canadian Wheat Board final payment was $164 per tonne at port. Accounting for inflation, that would be worth $671 today.
But as we know, the world wheat market today is a different place than it was 29 years ago.
However, it is not so much different from 2002-03.
Although production is up in the traditional exporting countries, exports should also climb and by the end of the new crop year, their stocks are expected to be only a little higher than at the end of 2002-03.
So while the market seems at peace with production prospects now, there actually is little room for comfort.
With Ukraine and the rest of the Black Sea exporters out of the market, importers will have to turn to the traditional exporters. Any threat to those crops, or unexpected demand, could push new crop wheat prices higher.
