Canada Markets

A USDA Reminder That Not All Stocks Are Equal

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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This chart shows India's wheat fundamentals, with USDA estimates for production, use and ending stocks measured against the primary vertical axis while imports, the black line with markers, is measured against the secondary vertical axis. The 2016/17 imports are estimated to be the highest volume in 10 years. (DTN graphic by Nick Scalise)

Thursday's USDA report boosted India's 2016/17 wheat imports from 3.7 million metric tons in February to 5.5 mmt. This is up sharply from the USDA's 2015/16 estimate of 470,000 mmt, while the 10-year average imports (2006/07 through 2015/16) is 977,000.

As seen on the attached graphic, 2016/17 imports are the highest seen since 2006/07 when an estimated 6.72 mmt was imported. There was substantial variability in imports over this period, with an average volume of 88,600 metric tons imported/year in the seven years ranging from 2008/09 to 2014/15.

The yellow bars on the attached chart represent ending stocks, which are forecast to fall for a fourth straight year to 8.5 mmt in 2016/17, down from a recent high of 24.2 mmt estimated for 2012/13.

Earlier this week, the USDA's Foreign Agricultural Service released the India Grain and Feed Annual 2017 report, forecasting a near-record crop of 95 mmt for 2017/18 with ending stocks stabilizing at 8.8 mmt, yet imports are expected to remain high at 5 mmt barring a change in import taxes. As reported by Dow Jones, the No. 3 (global) producer after the EU and China has large stockpiles of wheat, but not all of it is of high quality -- necessitating imports to cater to business such as bakeries. The USDA states shipments are needed "to sustain consumption demand and enable government to augment depleting wheat stocks."

Just another reminder that all stocks are not equal and continued growth in global demand will be the sunshine needed to shed light on the true value of the inventories reported on the books.

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

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