Global Markets: Wheat – Production Down from Last Year’s Record

Global production is forecast at 748 million tons, down 11 million from the record set last year, and the third-largest on record.

Production among the top exporting countries is projected down a combined total of 6 million tons as smaller crops, particularly in the European Union and Russia, more than offset larger crops in Argentina, Australia, Canada, and the United States.

The European Union is down 1 million tons to 150 million with lower area more than offsetting rebounding yields. Russia is down 13 million tons to 72 million (still the third-largest on record) based on lower area and yield.

U.S. wheat production is forecast up at 50 million tons as a larger spring wheat crop is expected to more than offset reduced winter wheat output. Wheat area is seen expanding in Argentina and Canada, driving production higher.

Australia wheat area is projected down slightly, but average yield is expected to be better than the drought-affected 2017/18 crop. Kazakhstan’s wheat output is projected lower on reduced area. Ukraine is forecast down slightly on lower expected yields.

Outside of the major exporting countries, production is also projected lower. China is slightly lower at 129 million tons. India is down 4 million tons to 95 million on reduced area. Pakistan is projected 1 million tons lower at 26 million. Turkey’s crop is down 1 million tons to 20 million, but would still be its second-largest. Brazil’s production is seen rebounding slightly after hitting a 10-year low in 2017/18.

Favorable weather in North Africa has led to expectations of larger crops in Algeria, Morocco, and Tunisia. Wheat production in Egypt and Ethiopia is expected the same as last year, while South Africa’s crop is expected to rebound after being affected by drought last year.

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Global consumption is projected at a record in 2018/19, driven mainly by rising food demand. Consumption is forecast to exceed production for the first time in 6 years.

Food, Seed, and Industrial (FSI) consumption makes up the bulk of wheat use and exhibits a steady trend upwards over time. In 2018/19, FSI is forecast to rise to a record level with growth seen across nearly all regions of the world. Growth is particularly significant in Southeast Asia and Sub-Saharan Africa.

In these regions, food consumption of wheat continues to surge with population growth and changing tastes and preferences. Consumers continue to move toward a more wheat-based diet as incomes rise and populations become more urban. In most other regions of the world, wheat consumption is more established and is rising mainly due to population growth.

Feed and residual use, on the other hand, is generally more variable and depends on price relationships with other grains. In 2018/19, feed and residual use is forecast nearly unchanged.

Feed and residual is projected up in Canada and the United States with larger crops, but lower for the European Union and Russia, where output is seen down from 2017/18.

In the European Union, wheat feeding is expected lower on a rebound in barley supplies. Further, 2017/18 EU wheat feeding was unusually high based on problems with crop quality in some Member States, as well as tight competition in export markets.

Global ending stocks for 2018/19 are projected down 6 million tons from the previous year to 264 million. Stocks in the major exporting countries collectively are projected to decrease again in 2018/19 after reaching a 6-year high in 2016/17. With a smaller crop and strong export demand, U.S. ending stocks are forecast down once again this year.

Stocks in Australia and Canada are also forecast lower based on strong demand for high quality wheat. Stocks in the European Union are forecast lower with larger exports.

Black Sea stocks are forecast lower with smaller crops in all three countries: Russia, Kazakhstan, and Ukraine. Stocks in Argentina are forecast to remain tight despite a larger crop as higher export demand drives use.

China remains the largest holder of global wheat stocks, accounting for over half of global stocks. China’s wheat stocks are forecast up almost 12 million tons.

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