Global wheat markets continue to struggle to get a break when it comes to the bearish data released in government forecasts. Tuesday's USDA report included a first look at 2016/17 data in the monthly WASDE report, shedding light on a further build in global ending stocks to yet a new record level.
Global stocks of wheat for 2015/16 were increased to a fresh record level of 242.91 million metric tons, up from 239.26 mmt reported in the April report and above pre-report expectations. Canada will buck the trend in the current crop year, with the USDA estimating Canada's all wheat stocks at 3.86 mmt, which will includes up to 1 mmt of durum and a historic low.
While 2016 global production is expected to drop from the 2015 record production by 7 mmt or 1% to 727 mmt, the first year-over-year drop in four years, global demand is expected to grow to 712.56 mmt, the fourth consecutive increase. Global production is expected to outstrip demand for the fourth consecutive year by 14.4 mmt, while exceeding global demand by a total of 80.2 mmt over the past four years.
The largest year-over-year cuts in production by the major producers are expected in the EU (3.5 mmt) and Ukraine (3.27 mmt). Canada's 2016/17 all-wheat production is projected at 28.5 mmt, up 900,000 mt from 2015.
This leads to an expected increase in global ending stocks of 14.4 mmt in the 2016/17 crop year to 257.34 mmt, a fresh record carryout and the fourth consecutive increase as noted by the yellow bar on the attached graphic. Ending stocks as a percentage of annual use (black line on the attached chart) is expected to also increase for the fourth consecutive year to 36.1%, the highest level seen since 1997/98. Canada's projected ending stocks are pegged at 4.05 mmt, up only slightly from the previous year and still near historic lows.
Global trade is estimated at 163.92 mmt in 2016/17, down close to 3 mmt from the previous year and a further signal that there will be increased supplies vying for a piece of a slightly smaller pie, which will be bearish for prices.
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