Shrinking Global Wheat Production Could Be Bullish for Farmers
By Stephanie Bryant-Erdmann, USW Market Analyst
USDA updated its monthly World Agricultural Supply and Demand Estimates (WASDE) on August 10 and expects the global wheat supply and demand situation to be more favorable for U.S. farmers this year due to shrinking global wheat production. USDA lowered its global wheat production estimate by 6.63 million metric tons (MMT) to 730 MMT, down 4 percent year over year and the lowest level since 2014/15, if realized.
Widespread drought across Germany and northern Europe is one reason why USDA dropped its production forecast. USDA expects European Union total wheat production to fall to 138 MMT, 9 percent below both the 5-year average and 2017/18 production. With smaller EU wheat production, USDA lowered marketing year 2018/19 (June 1 to May 31) EU wheat exports to 23.0 MMT. If realized, that would be 2 percent below the year prior, and 25 percent below the 5-year average.
At the same time, USDA also expects Russian wheat production to fall 20 percent year over year to 68.0 MMT due to unfavorable winter wheat planting and growing conditions. With Russian wheat supplies shrinking, the 2018/19 Russian wheat export forecast is down 7.00 MMT from 2017/18 to 35.0 MMT.
With lower exportable wheat supplies (production plus beginning stocks minus domestic consumption) in Russia and the EU, USDA expects the United States to have the largest exportable supply of wheat in the world in 2018/19 at 49.7 MMT.
Consequently, USDA expects 2018/19 U.S. wheat exports to reach 27.9 MMT, up 14 percent from 2017/18 and 7 percent above the 5-year average, if realized. Still, U.S. wheat export sales pace will need to increase to meet this goal, as year-to-date U.S. wheat export sales total just 7.53 MMT or 27 percent of USDA’s anticipated total.
The shrinking global wheat supply, increasing global wheat consumption and large U.S. wheat supply have all lead to U.S. wheat futures rallies over the past month. Since the last WASDE update on July 12, U.S. HRW futures are up 72 cents per bushel ($26 per MT), SRW futures grew 54 cents per bushel ($20 per MT) and HRS climbed 67 cents per bushel ($25 per MT).
Each month, U.S. Wheat Associates (USW) updates a graphic summary of USDA’s WASDE (World Agricultural Supply and Demand Estimates) report. View the August summary here.
