Last week's monthly United States department of Agriculture World Agricultural Supply and Demand Estimates Report breathed a little more life back into the wheat market. The data shows that global wheat supplies remain tight, particularly within the major exporters, with significant pressure on supplies of higher protein milling wheats because of the drought in US spring wheat areas and Canada, and the rain damage suffered by crops in the European Union.
Problems with major crops have seen the USDA pull 20 million tonnes from global production estimates since June. Most of the reduction has been within the key exporting countries of Canada, the US and Russia.
The net result is that the stocks to use ratio for the major exporters has tightened up to levels last seen in 2007/08, when wheat prices surged to record levels, above $A400 a tonne.
So far nearby Chicago Board of Trade wheat futures have peaked at $A381.93/t but remain at a very healthy level above $A360/t for the start of this week.
Supportive for CBOT futures was a further downgrade in supplies of wheat within the US. As expected, US production estimates were lowered, in line with the reported lower than expected US wheat stocks as of September 1. That rippled through the numbers to see ending stock estimates come in 940,000t lower than the September estimate.
US wheat ending stocks are now projected to be at their lowest since 2007/08, putting to bed the period of high US stocks that has hung over the Chicago market for a number of years.
Globally production estimates were pulled back by 4.41mt, with reductions for Canada, Iran and the US. This combined with corrections down in opening stocks as data was revised for countries like Iran.
Drought, and low stocks of wheat in Iran, has seen them announce that they will probably need to import as much as 8mt of wheat this year. This is adding to the demand side of the international trade equation, just at the time that supplies from major exporters are tightening.
Global stocks outside of China are down to their lowest since 2013/14, and the stocks to use ratio that matches that measure is down to its lowest since 2007/08. Year on year, global stocks outside of China are now forecast to be down 8.08mt.
In September the annual decline in wheat stocks out of China was only 2.04mt, so the new data released last week shows a dramatic shift in the global balance sheet.
Wheat has become the market leader in the grains complex, with prices stabilising for the time being, against corn and soybean markets which have been trying to move lower on an upward revision on supplies, particularly within the US.
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