The Aug. 12 USDA World Agricultural Supply and Demand Estimates (WASDE) report for August could be viewed as largely neutral for the global wheat market, with a 3.4 million metric ton cut to global production for 2019-20 from the previous month, with an upward revision in United States production offset by lower estimates for the European Union, Russia and Kazakhstan.
The estimate for total use was also lowered by 2 mmt, while global ending stocks were estimated at 285.4 mmt, down 1.06 mmt from the July estimate and 9.91 mmt or 3.6% higher than estimated for 2018-19. This would represent the sixth increase in global ending stocks in seven years, while global ending stocks as a percentage of use remains at a bearish 37.6%, up marginally from the 37.4% calculated for 2018-19.
While the world will remain well-supplied when it comes to wheat in the 2019-20 crop year, data for the world's eight largest exporters does not appear as bleak as global data as a whole. This group includes Argentina, Australia, Canada, European Union, Kazakhstan, Russia, Ukraine and the U.S.
Of the 37.52 mmt year-over-year increase in the global production estimate reported by the USDA this month, 26.44 mmt or 70.5% is a result of increases within this group of eight. As seen in the blue bars of the attached chart, by far the largest recovery is seen in a 13.14 mmt increase in the E.U. for 2019. Seven of the eight countries are forecast to increase production year-over-year, with Kazakhstan forecast to see production fall by 1 mmt in 2019.
Global exports are forecast to increase by 8.5 mmt in 2019-20, with 95% of this increase seen in the estimates for the eight major players, with five of the eight expected to see an increase in exports in 2019-20. The largest year-over-year increase is forecast for Australia (3.5 mmt) and Ukraine (3.3 mmt), while Canada's exports are forecast at 24 mmt, down 500,000 from the 2018-19 crop year. This is close to the current AAFC estimate of 23.6 mmt for Canada's all-wheat exports.
What is interesting is that while global stocks are forecast to rise by 9.91 mmt year-over-year, stocks held by the eight major exporters are forecast to grow only 180,000 metric tons, from 60.65 mmt to 60.83 mmt. The year-over-year increase in the estimated stocks of five of the eight countries barely offsets the year-over-year decline seen in three of the eight countries, with the largest drop forecast for the U.S. of 1.58 mmt. While not shown, China's stocks are forecast to rise by 6.2 mmt year-over-year, accounting for 63% of the global increase in stocks.
Perhaps another favorable measure is the stocks of the eight major exporters as a percentage of annual global exports. This calculation has fallen from a high of 58.8% in 2009-10 to a low of 33.3% as calculated using the most recent August data.
While global stocks for 2019-20 remain estimated at record-high levels, trends remain favorable in a sense that the major exporters are seen carrying lesser volume as global trade grows.
Cliff Jamieson can be reached at email@example.com
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