According to the USDA's first look ahead at the 2018/19 crop year, global stocks of wheat could fall for the first time in six years by the end of the crop year, as world production falls from last year's record level. Ending stocks are expected to fall by 6.13 million metric tons to 264.33 mmt, which remains above the five-year average of 236.6 mmt.
This early in the game, it is anybody's guess as to what will actually happen; last week's AMIS Market Monitor forecast a 2.3 mmt increase in stocks to a fresh record in 2018/19 of 279 mmt.
The black line on the attached graphic shows the trend in the global stocks as a percent of use (stocks/use ratio). While this ratio is expected to fall for the first time in six years to 35.1%, it remains stubbornly high above 30% for the fifth straight year and suggests that wheat supplies will leave the world well looked after for yet another year.
A couple of positive takeaways from this report: Global demand is estimated to increase by 10 mmt in 2017/18 to a record 753 mmt, while today's estimates suggest that demand will exceed production for the first time in six years. Over the past 10 years, production has exceeded demand by an average of 14 mmt annually.
Another supportive feature in today's data is where the forecast stocks are located. The stocks held by the top eight exports -- Argentina, Australia, Canada, European Union, United States, Russia, Ukraine and Kazakhstan, are expected to fall to 55.7 mmt in 2018/19, the lowest volume held by this group in six years. As a percentage of total stocks, this represents just 21.1%, which is by far the lowest seen in data viewed over the past 10 years. Over the last 10 years, an average of 32% of global stocks were held by this group of exporters, while the current estimate suggests that 25.2% of estimated 2017/18 stocks will remain in the hands of this group. As recently as eight to 10 years ago, these eight countries held close to 40% of global stocks.
It is also interesting to note that China's wheat stocks are expected to grow by almost 12 mmt in the crop year ahead to 138.62 mmt, representing 52.4% of the total global estimate. The stocks available to the rest of the world are far lower than current estimates would suggest.
Canada's all wheat stocks are expected to fall by just 100,000 metric tons from the 2017/18 to 2018/19 crop year to 5.24 mmt according to USDA estimates, which would suggest a carbon copy of the current 2017/18 crop year.
Cliff Jamieson can be reached at email@example.com
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