The June 11 USDA World Agricultural Supply and Demand Estimates (WASDE) report painted an increasingly bearish picture for global wheat markets for the 2020-21 crop year, although we must remember it is early days with a great deal of growing season ahead of us.
The May report included an ending stocks estimate for global wheat at a record 310.12 million metric tons, while the average of pre-report estimates points to an expected drop this month to 307.5 mmt. Instead, the June forecast included an upward revision in 2020-21 stocks to 316.09 mmt, up 6.8% from 2018-19 and 15.5% higher than the five-year average. This represents roughly 42% of annual global use, according to USDA data, up from 39.5% in 2019-20. This is the largest stocks/use ratio seen in USDA data going back to 1960-61.
For a second consecutive year, global production is forecast to outstrip consumption, with 2020-21 production exceeding consumption by 20.2 mmt, up from 16 mmt for the 2019-20 crop year.
As seen on the attached chart, the largest global increase in production year-over-year is seen in Australia, where a recovery from the 2019 drought is forecast to result in a 10.8 mmt increase in production to 26 mmt. At the same time, the European Union is forecast to see production drop by 13.8 mmt to 141 mmt, the largest year-over-year decrease.
Of the 9-mmt increase in production forecast, production in China and India are forecast to rise by 2.41 mmt and 3.58 mmt, respectively, two countries that are unlikely to export significant volumes.
Of the eight major global exporters (Argentina, Australia, Canada, EU, Kazakhstan, Russia, Ukraine and U.S.), total production is forecast to rise only by a modest 1.8 mmt, while the global forecast for exports are to rise by 3 mmt. It would not take much of an adjustment during the crop year to tighten supplies across the exporting nations.
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