Wheat market and supply
After back-to-back record production years in 2008 and 2009, world wheat output is forecast to drop this year by 5.3% from last year, to 646 MMT. Likewise, ending stocks are forecast to drop 10.2% to 176 MMT, after surging to near-record highs just a year ago. Usage, however, is expected to increase 2% to 666 MMT.
The sudden production drop is largely attributed to the severe drought that ravaged the Black Sea region this past summer. Russian wheat production dropped to just 41.5 MMT, 33% lower than last year; and their exports will be just 4 MMT, down 78%. Both are their lowest levels in seven years. The Black Sea region had become the world’s largest wheat exporter, led by Russia. However, this year total Black Sea production is down 27%, exports are down 54%, and Russia will be forced to import an estimated 4 MMT of grain just to meet domestic needs.
While on paper it looks like world wheat stocks may still be adequate, it’s actually a much different story when you separate the feed wheat from milling wheat. For feed wheat the supplies are plentiful, a stark contrast to just four months ago following the Black Sea embargo. The poor-quality harvests in the U.S., Europe, Canada, and now Australia have filled that feed wheat void.
Wheat Countries Stumble
The U.S. had its second year in a row of near-ideal growing conditions in the Northern Plains, giving another year of large yields but low protein in much of spring wheat country and some winter wheat regions.
Europe was on track for great production but ran into heavy rains at harvest in the key regions of Germany and France, resulting in significant quality downgrades.
Canada struggled all season long with too much rain across wide swaths of the prairies. Plantings were severely delayed or prevented and then a wet harvest rendered much of Canada’s spring wheat as feed grade, something they rarely have to consider.
Australia also had a difficult summer with drought in the key western growing region and too much rain in the east. The abundant rains in the east were welcome through the early stages of the growing season, as yields looked great and production estimates soared to record levels. But the rains never stopped as the wheat ripened, and harvest became delayed by as much as five weeks, resulting in major flooding and sprout problems. What started as a beautiful, high-quality record crop was reduced to feed wheat with some fields even being abandoned.