There's perhaps good news and bad news for the global wheat market in today's International Grains Council's market report.
First, here's the good news.
Thursday's release of the International Grain's Council's monthly Grain Market Report indicated a small glimmer of hope for global wheat markets in its "tentative" estimate of 2016/17 production, which is 3% below its current year estimate for total production at 706 million metric tons. This is reflected by the yellow bar on the attached chart, which reflects the first year-over-year drop in four years.
As seen in the attached chart, the USDA has estimated consecutive record global production of 715.354 mmt in 2013/14, 725.911 mmt in 2014/15 and 735.388 mmt for 2015/16. To show how rare such an increase in global output is, the chosen years indicated on the chart shows the last time production grew over a span of years such as this was seen between 1979 and 1984, when USDA data shows continuous growth in production from 417.5 mmt to 508.9 mmt.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT T
The ICG cites only a small drop in expected global acres combined with average yields being behind this move.
The bad news is that the ICG suggests while some reduction in global stocks is possible in 2016/17, an expected modest drop in global demand could leave ending stocks at the second highest ever and still close to this year's record levels. The ICG is estimating global ending stocks at the end of 2015/16 at 213 mmt or 29.6% of estimated use, while the USDA is estimated ending stocks higher at 232.04 mmt or 32.4% of annual use. Global competition could remain fierce for yet another crop year.
Wheat futures continue to trade sideways, with the most active Chicago soft red winter wheat contract trading within a 30-cent range over the past four weeks, while holding above Jan. 7 lows. Noncommercial short-covering remains a supportive feature in this market.
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