The USDA stunned market watchers on Aug. 12 with a significant drop in Canada's 2021 production estimate of 7.5 million metric tons and a further 12.5-mmt drop in the estimate for Russia's 2021 production. These two countries represent two of the top global exporters. Global production is estimated at 776.91 mmt, down 15.5 mmt from the July record estimate of 792.40 mmt, while this estimate reached as high as 794.44 mmt in June.
Over this period, the USDA has also dropped its forecast for global demand, reaching a high of 791.12 mmt in June, or 3.32 mmt below estimated production, to 786.67 mmt in August, or 9.76 mmt above estimated production for 2021-22. This represents the third time in four years that global demand has exceeded production, while by the largest amount seen since the 2012-13 crop year, or nine years. USDA tables show that the last time such a cluster of years where demand exceeded supply was experienced was in the 2000-01 through 2003-04, when demand exceeded supply for four consecutive years.
The attached chart shows global ending stocks falling for a second year to 279.06 mmt, which would be the lowest ending stocks seen in five years. Following downward revisions in both production and demand, stocks as a percentage of use have fallen to 35.5%, or the lowest seen in six years, as seen with the black line on the attached chart.
The green line on the attached chart shows an interesting trend in the percentage of stocks held by the eight major exporters. The August data shows this percentage falling by 2 percentage points from the current 2020-21 level to 18%, down for a fifth year. As seen on the chart, this group of eight exporters (Argentina, Australia, Canada, European Union, Kazakhstan, Russia, Ukraine and U.S.) held to 48.2% of global stocks in the 2005-06 crop year, according to USDA data.
It is interesting to note that USDA estimates point to declining exports across the eight major exporters of 5.8 mmt. Exports for Canada are revised 5.5 mmt lower, 5 mmt lower for Russia and 300,000 metric tons lower for Kazakhstan. These sharp revisions failed to result in a significant increase in estimates for competing countries within the group of eight, with Australia's exports revised 1.5 mmt higher, EU exports revised 1 mmt higher and Ukraine's exports revised 2.5 mmt higher.
Despite the tightening global supply, four of the eight major exporters saw 2021-22 ending stocks either left unchanged this month or revised slightly higher. Both Australia and Ukraine stocks estimates were left unchanged, while Argentina's estimate was revised 20,000 mt higher and Ukraine's estimate was revised 100,000 mt higher.
Another interesting point is the significance of China's wheat stocks in the overall supply-demand balance. China's stocks were revised 1 mmt lower this month to 141.62 mmt, which would be the lowest stocks in three years. At the same time, this volume represents a growing share of total world stocks. This month's calculations shows China's stocks accounting for 50.7% of global stocks, which is up from 50.1% in 2020-21 estimates and the highest ever. The significance of this is that China's stocks are the most difficult to assess, in both volume and quality, and may or may not exist.
Cliff Jamieson can be reached at firstname.lastname@example.org
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