Spend Matters welcomes another guest post from Sam Parry of Mintec.
Earlier in July, we wrote about the good wheat prospects in key exporter Australia. Now we take a look at the situation closer to home as the market watches the harvest progress.
US wheat production is forecast to reach 57.5m tons in the 2013/14 season, down 7% year-on-year, despite a 1% increase in the area planted to 56.5m acres. This makes the US the fourth largest wheat producer in the world, behind the EU, China, and India. Despite the forecast drop in US production, wheat prices have fallen consistently since last summer due to expectations of a new record level of global production.
Only 75% of fields planted are expected to be harvested this season (the cold spring caused problems to the crops), down from 84% last season. Wheat yields are expected to be pretty similar to last year, and so the drop in harvested area is chiefly responsible for the drop in US production.
Globally, wheat production in 2013/14 is forecast at 697.8m tons, up 6% year-on-year, and will be a new record if achieved. Forecasts were raised recently for Australia and the EU. Crops have generally benefitted from favorable weather conditions in the run up to the harvest this season, in stark contrast to the droughts experienced in 2012. This is especially true in the Black Sea region, where Russian production is forecast to increase by 43% year-on-year to 54.0m tons and Ukrainian production expected to rise by 24% year-on-year to 19.5m tons.
This month the USDA revised its forecast for global wheat consumption up to 699.9m tons (also a new record and up 3% year-on-year). This is a result of strong demand from China, where wheat imports are expected to reach 8.5m tons, the highest level in 18 years. Wheat consumption will outpace production for the second consecutive year.
So with new records likely to be set for both global production and consumption this year, a significant drop in US production, and a sharp rise in Chinese imports, the wheat market could be set for an exciting summer.