Canada Markets

While today's USDA supply and demand report is a mere snapshot in time and will be subject to countless revisions, today's data for global wheat markets (all-wheat, including durum) suggests a same old situation for wheat, or in other words, the well-supplied global market that we have become accustomed to is expected to continue through 2015/16.

Global wheat production is expected to fall by 1% to 718.93 million metric tons, the second highest on record next to last year's 726.45 mmt, while global consumption is estimated to increase by .2% to 716.59 mmt. Ending stocks are forecast to grow by 11.2% to 203.32 mmt. This is the third consecutive annual increase in ending stocks and would reach the highest level held since 2000/01 when global ending stocks reached 204.29 mmt. The five-year average is 192.64 mmt while the 10-year average is 173.089 mmt, according to USDA data.

The pie representing global trade is estimated to shrink in the upcoming year, with global trade expected to fall by 6.75 mmt, or 4%, to 156.95 mmt -- a three-year low and just slightly higher than the three-year average. Current data shows a divergence between North America's exporters, with the U.S. forecast to grow year/year exports by 1.76 mmt or 7.5% to 25.17 mmt, while Canada's exports are expected to fall by 3 mmt or 12.8% to 20.5 mmt, below the current AAFC estimate of 22.4 mmt. The USDA suggests Canada's ending stocks will fall to 4.56 mmt, which would reflect the lowest carryout seen since July 2008.

The attached chart shows global ending stocks (black line) increasing for the third consecutive year in 2015/16. The green line with markers represents the global stocks held by the top eight exporters -- Argentina, Australia, Canada, European Union, Kazakhstan, Russia, Ukraine and the U.S., with both lines measured against the primary vertical axis. Stocks held by this group of exporters have increased over the past two years to reach a three-year high of 64.01 mmt in 2014/15; it is expected to fall slightly to 62.13 mmt in the upcoming crop year. This reflects a two-year low and is slightly higher than the 10-year average for this volume, which speaks to the ongoing competitive nature of the global wheat trade.

The blue bars on the chart represent the trend in the stocks held by major exporters as a percentage of total stocks, as measured against the right vertical axis. The current 2015/16 estimates suggests this number will reach 30.6%, also a two-year low, while below both the five- and 10-year averages.

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

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