Tuesday, December 13, 2011

Global Wheat Stocks are at their Highest Level in Twelve Years

All three categories have increased: global wheat production, global wheat consumption, and global wheat supply or stocks.

graph: usda

Global wheat production and consumption in 2011/12 are both projected at a record and stocks are forecast at the highest level in 12 years. In just 1 year, the market supply situation has completely reversed from one of extreme tightness to a surplus, particularly in exporting countries. Black Sea countries’ supplies have recovered from last year’s drought and Australia is expecting back-to-back bumper crops. The leap in global consumption is largely a function of abundant global wheat supplies, tight U.S. corn supplies, and the concurrent price inversion between the two grains.

graph: usda

Global wheat trade is forecast nearly 6 million tons higher than last year, driven in large part by greater demand for wheat feeding. While U.S. corn export prices remain elevated, wheat import demand is rising in many markets due to abundant global supplies and lower relative prices. South Korea, Thailand, and Vietnam recently purchased feed wheat, and Japan, which usually imports 300,000 tons of feed wheat per year, is expected to increase purchases. In addition, northwest Mexico is suffering from a drought, and imported U.S. wheat is more economical than either sorghum or corn.

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