Monday, March 07, 2011
Global Wheat Fundamentals Can Impact Many Other Grain Markets
The 2010 US grain crop was growing just fine early last summer, thank you, when sudden the commodity markets rocketed upward and are still burning fuel. What launched the latest bull market was a report from the grain officials in Russia and the Ukraine that their 2010 wheat crop was diminished by the weather and there would be insufficient amounts to serve both their domestic and export customers. So they were halting exports to protect their consumers. That not only shocked the wheat and small grains markets, but corn also, and impacted soybean acres among other factors. Wheat is a global staple, and if you are growing wheat or any commodity that has an interlocking market with wheat, it pays to know who the players are and what cards they are holding. Here is a sneak peak.
Wheat is a critical element in international diets, says Kansas State University economist Dan O’Brien, whose latest market newsletter says world wheat demand will grow along with the population. He analyzes production, import, export, and consumption trends and says the numbers show the primary sources of risk and uncertainty in world wheat markets.
For the current marketing year, global wheat acreage is estimated at 549 million acres, compared to the average of 539 million since 1987/88. 80% of the global wheat acreage is found in the 10 largest producing countries, lead by India, Russia, European Union, China, and the US. While Australia and Canada are number 6 and 8 respectively in production, they will have the largest variability in their harvest area from year to year.
The global average yield is about 43 bu. per acre, up from 40 bu. in 1987/88. The yield leaders are the EU with 76 bu., and China at 65 bu. The US average is 42 bu. Russia and the Ukraine have the largest annual yield variations. Interestingly, Kazakhstan which is #7 in annual acreage has minimal variation in acreage, but substantial variation in yield, along with Russian and the Ukraine.
Global production this marketing year is estimated at 645 million metric tons, compared to the average of 589 million metric tons per year since the 1987/88 marketing year. The 10 largest producing countries produced 84% of global production since 1987.
Global consumption, other than feed, for the current marketing year is estimated at 539 million metric tons, an increase of 35 million more per year since the 1987 marketing year. The 10 largest consuming nations consume 71% of global supplies per year, with the top 5 being China, India, The EU, US, and Russia. India and Egypt have the largest variability of consumption from year to year. Feed use is estimated at 123 million metric tons for the current year, up from 109 million in 1987, with the largest 10 wheat feeders consuming 92% of wheat going into feed. Wheat fed in the EU practically equals the amount feed throughout the rest of the world at 48%. O’Brien says wheat feeding has been extremely variable in a number of countries.
Global wheat exports for the current marketing year are estimated at 125 million metric tons, compared to the average of 117 million per year for the past 24 years since 1987. The largest exporters ship 92% of the total export trade, lead by the US, the EU, Canada, Australia, and Russia. The 10 biggest wheat customers account for 95% of the imports, and include Egypt, Brazil, the EU, Algeria, and Indonesia.
Ending stocks for the current marketing year are estimated at 178 million metric tons, about 4 million above the annual average since 1987. About 81% of the total ending stocks can be found in 10 nations lead by China with 29% of global stocks, and the US with 12% of global stocks. The EU has 9%, India has 8% and Russia has 5%. Chinese wheat stocks have diminished from an average of 47% of the global carryout about 10-13 years ago. O’Brien says, “It is not unprecedented for the Chinese to accumulate even larger proportions of the World’s wheat ending stocks than they currently have.” For the current marketing year, the stocks to use ratio is about 23%, which is slightly below the annual average.
Summary:
O’Brien says, “Because of the availability of natural agricultural farmland resources and the likelihood of continued population growth in the future, the roles of various countries or regions in determination of World wheat market supply-demand balances is unlikely to change appreciably in the foreseeable future. However, wheat acreage in the United States has been declining since 1981 due to the profitability of other competitive crops and other factors. Wheat yield trends in the United States have been relatively flat or only rising slowly over this same time period. The possibility of future declines in U.S. wheat acreage and production, and of declining U.S. wheat exports as well, are among the factors likely to impact how competitive a role the United States will play in World wheat export markets in the future.”
Posted by Stu Ellis on 03/07 at 12:00 AM | Permalink