Estimates of 2011/12 total world wheat stocks inched higher again this month, reinforcing the market’s bearish wheat outlook.
In its monthly update of the World Agricultural Supply and Demand Estimates (WASDE), the U.S. Department of Agriculture (USDA) increased the estimate of total global wheat supplies for the seventh month in a row.
Although the large numbers came as no surprise, the abundance of wheat in the world continues to be an unfriendly factor for markets that weighs on prices.
USDA increased its 2011/12 projected global wheat supplies by 2.14 million metric tons (MMT) to a record 894 MMT.
An increase in world production estimates accounted for 1.38 MMT of the change and a rise in Kazakhstan’s beginning stocks accounted for the remaining 760,000 metric tons. World production is now estimated at 693 MMT, 6 percent greater than last year and an all time high.
The higher production estimate combined with a 1.0 MMT decrease in total consumption resulted in a 3.0 MMT increase in global ending stocks. Estimated carryover stocks are 213 MMT, 28 percent higher than the five-year average and the highest ending stock level on record.
After weeks of speculation regarding export limitations, the Russian government announced this month that its grain stocks are sufficient to meet domestic demand and will now allow up to 27.0 MMT in all grain exports, up from a previously stated limit of 25.0 MMT.
USDA responded with a 1.0 MMT increase in projected Russian wheat exports of 20.5 MMT, which Russia is on pace to meet.
Increased export estimates in Russia, the United States, Argentina and Brazil more than offset export reductions for Ukraine, Canada and India. The total 2011/12 world export estimate increased by 850,000 metric tons to 140 MMT.
U.S. commercial sales have benefitted from declining prices with dramatically higher sales numbers the past month, spurring USDA this month to increase its projected U.S. exports from 25.9 MMT to 26.5 MMT.
Estimated white wheat and soft red winter (SRW) exports each increased 440,000 metric tons due to competitive prices and strong demand from South Korea and Mexico, where severe drought significantly reduced grain production.
Projected hard red winter (HRW) exports increased 150,000 metric tons and hard red spring (HRS) estimates decreased 240,000 metric tons based on sales and shipments to date.
Because of the increased sales, projected U.S. ending stocks decreased by 680,000 metric tons to 23.0 MMT, still well above the five-year average of 17.7 MMT.
U.S. futures markets declined sharply in the two days following the WASDE release, keeping with a bigger downward trend in the seven consecutive months of bearish world forecasts.
The record volume of world stocks will continue to have bearish effects on wheat markets. However, lower prices make U.S. wheat a relative bargain to customers.