Canada Markets

When the very first projections for the 2013/14 crop year were released by the USDA in May this year, global ending stocks were pegged at 186.38 million metric tonnes, which would represent a 3.3% increase over the 180.17 mmt that was the forecast for the 2012/13 crop year at that time. The eight major wheat exporters' stocks, which include the United States, Argentina, Australia, Canada, the European Union, Kazakhstan, Russia and the Ukraine, were forecast to total 57.09 mmt of year-end stocks at the end of 2013/14, which represented 30.63% of the total global stocks. At the time, global demand was pegged at 694.89 mmt.

Flash forward to today's USDA release. While global wheat ending stocks were increased slightly in today's report from the previous July report, from 172.38 mmt to 172.99 mmt, stocks remain substantially below the earlier May forecast for the upcoming year and 1.43 mmt below the 2012/13 forecast. 2013/14 ending stocks in the hands of the eight major suppliers forecasts are now reduced to 46.86 mmt, which reflects 27.1% of the total global ending stocks, which would reflect a fall for the fourth consecutive year. In fact, with 27.1% of the global stocks forecast to be held by the major exporters at the end of 2013/14, this would be the lowest level of stocks held by the major exporters, as a percentage of total global stocks, since 2000/2001, when the percentage was also 27.1%.

So what changed? Despite a sharp jump in global production of 50.11 mmt or 7.65% from 2012/13 to the current 2013/14 estimate, demand has also increased. Given the forecast for record global disappearance of 706.81 mmt, which is 26 mmt higher than 2012/13 demand, what seemed like a burdensome supply of wheat could now act to support the markets while any crop issues in the Northern Hemisphere in the coming months could possibly push prices to higher levels.

Cliff Jamieson can be reached at cliff.jamieson@telventdtn.com

(ES)

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