China's Growing Wheat Stocks
The USDA's December World Agricultural Supply and Demand Estimates (WASDE) report saw an upward revision in global wheat stocks to a record 289.5 million metric tons, when the average of pre-report estimates was looking for a drop to 286.3 mmt. This month's forecast was higher than the highest pre-report estimate as reported by Dow Jones, while also the fourth consecutive month that the USDA has revised this estimate higher, averaging a 1.025 mmt increase over this period.
The USDA noted a 1.6 mmt upward revision in China's wheat production estimate, as reported by the National Bureau of Statistics Data.
As seen on the attached chart, China's estimated stocks have grown for seven consecutive years to an estimated 147.46 mmt for 2019-20, while representing 51% of global stocks.
It is interesting to note that on Dec. 12, a USDA attache report indicated that China will leave its minimum support price for wheat for 2020 at a value that reflects $320/metric ton USD for the six major wheat producing provinces, the lowest price paid to producers should the market move lower and a price unchanged from 2019. This information was made available to producers one month earlier than last year, with winter wheat planting currently taking place.
The USDA notes that China did announce a cap of 37 mmt that government will buy under the program in 2020, the first time such a cap has been reported, although the government purchased only 20 mmt or 29% of total wheat purchased in 2019 under the program.
The first observation is that current estimates of record global stocks are not viewed as troubling by all involved, and policy can result in the burden of stocks becoming an even greater problem.
Also of interest, as stocks within China have grown, the volume of stocks held by the largest global exporters continues to tighten. Estimates of stocks held by Argentina, Australia, Canada, European Union, U.S., Russia, Ukraine and Kazakhstan are estimated at 61.37 mmt for 2019-20, representing 21.2% of global stocks and down for a third straight year. In 2009-10, or 10 years ago, this same group of exporters held 39.4% of global stocks.
Cliff Jamieson can be reached at email@example.com
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