As stated by DTN Analyst Todd Hultman in Friday's DTN Webinar, for the first time in years, Friday's August USDA WASDE report paints a more optimistic picture for global wheat markets, although it will take more time for this story to play out.
Friday's report saw estimates for global wheat production fall for the third straight month, with total production estimated at 729.6 million metric tons, down 3.7% from the estimated 758 mmt produced in 2017/18. The upcoming crop year marks the first year-over-year drop in global production seen since the 2012/13 crop year.
As is seen on the attached chart, the largest year-over-year declines are seen in the European Union and Russia. The EU's estimated production is pegged at 137.5 mmt this month, down 9.3% from the 151.68 mmt estimated for 2017/18. Production in Russia is pegged at 68 mmt, down 20% from the 84.99 mmt estimated for 2017/18.
Will there be more supportive cuts to follow? The International Grains Council revised their global wheat estimate to 721 mmt at the end of July, 8.6 mmt lower than Friday's estimates. While USDA left Canada's all-wheat production unchanged at 32.5 mmt this month, this is 1.9 mmt higher than AAFC's July estimate, while many areas of the prairies have received no rain since this report and could potentially see the hottest temperatures on record this week. Australia's production was also left unchanged this week despite reports that some areas are facing the driest conditions in over 50 years.
One more interesting point to make is that expected stocks in the hands of these eight major exporters is expected to tighten from 69 mmt or 25% of the total estimated carryout in 2017/18 to 52 mmt or 20% of the estimated global carryout in 2018/19, based on Friday's numbers. It does appear that the pendulum is swinging in favour of the sellers down the road, although as mentioned in Friday's webinar, it could be 2019/20 before the effects of this are fully realized.
Until then, USDA continues to see Russia as the largest exporter for a second year, moving an expected 35 mmt this crop year, down from 42 mmt shipped last year.
Cliff Jamieson can be reached at firstname.lastname@example.org
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