Today's USDA supply and demand report shows the estimate for global ending wheat stocks reduced by 4.68 million metric tons from last month, a surprise move given that the average of analysts' pre-report expectations pointing to a slight increase in global stocks this month. This month's estimates included a reduction in the size of India's crop, as well as in Kazakhstan, combined with a small rise in estimated global feed demand. The stocks estimate still remains at a record level of 248.61 mmt, although if realized, the rate of growth seen from year-to-year over time will have slowed substantially.
Global wheat stocks are expected to grow by 7.84 mmt in 2016/17, a 3.3% increase, while in 2013/14 global ending stocks increased by 18.2 mmt, in 2014/15 they increased by 23.7 mmt and in 2015/16 they increased by 23.6 mmt.
Also of interest is where the wheat stocks are held, according to USDA research. The green line on the attached chart represents the stocks held by the eight major global exporters, which includes Argentina, Australia, Canada, European Union, Kazakhstan, Russia, Ukraine and the United States. As seen on the chart, this volume has grown since 2012/13, but at a much slower pace than is held in the rest of the world as seen in the dark line with markers. Between 2012/13 and 2016/17, current estimates would suggest that the wheat stocks of major exporters will increase by approximately 20 mmt or 39.7% while total global stocks increased by 73 mmt or 41.6%.
While it may be too early for optimism, today's revisions that included lower wheat production and higher use was a good sign. Estimated global 2016/17 stocks as a percentage of use remains a bearish 33.6%, although this is the lowest reported since August of this crop year. One of the first to stick their neck out to provide estimates for 2017/18 is the International Grains Council that suggested 2017/18 seeded acres will fall, while combined with a return to average yields, is expected to lead to a decrease in next crop year's global wheat production and stocks.
We may be in the process of slowly turning the corner in the world wheat market. The most active Chicago soft red winter wheat contract gained 13 1/4 cent on Thursday (March contract), with the continuous chart showing the highest level traded since last August.
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