Key wheat supply reading to hit tightest in 11 years in 2018-19

22.01.2018

World wheat stocks outside China, a figure particularly sensitive for prices, could end 2018-19 at their tightest in 11 years, the International Grains Council said, expanding on forecasts of a fall in output ahead.

The council in a detailed report - following Thursday’s headline estimate on Thursday of the fall in world wheat production next season since 2012-13 - said that output could fall short of consumption by some 6m tonnes.

And the shortfall would be even bigger were it not for an inventory build expected in China, where stocks are seen rising for a seventh successive year, this time by 7m tonnes.

“The first stocks contraction in six years is possible, mainly in the major exporters.”

‘Lowest in 11 seasons’

Indeed, in the major exporting countries – whose stocks, being accessible to world markets, are particularly sensitive for pricing – wheat stocks will fall by 11m tonnes over 2018-19, to their lowest in five years.

Inventories were seen falling by 4m tonnes in both Russia and the US, and by 2m tonnes in the European Union.

And factoring in consumption, to form the stocks-to-use ratio particularly closely watched as a measure of pricing potential, the decline in exporter supplies will be even more marked.

“Excluding the carryover in China, the ratio would be the lowest in 11 seasons, at 21%,” the council said.

It was 11 years ago that the shortfall in world supplies proved sufficient to send Chicago wheat futures to their record high of $13.34 ½ a bushel.

Area downgrade

The forecast for lower production reflected a downgraded estimate of global wheat area in 2018-19, cut by 900,000 hectares on the IGC’s previous forecast to 218.5m hectares.

That would be the lowest since 2012-13, and down 1.4m hectares year on year, besides being 5.4m hectares below the 2015-16 peak - a loss equivalent to that of Argentine wheat area.

Area was seen falling particularly fast by 4.7% North Africa, a major importing region, where the IGC reported that weather has been “mixed”, with “recent rains in Morocco only partially alleviating earlier dryness”.

In the European Union, the top producer, area was forecast falling by some 400,000 hectares to 25.9m hectares, as “wet conditions prevented farmers from completing sowing in northern parts, including in the Baltic States and Germany”.

In Russia, the top exporter, area was seen down 300,000 hectares at 26.5m hectares, thanks to “occasionally difficult weather” which prevented some winter sowings.

But an increase of roughly 100,000 hectares to 6.7m hectares was pencilled in for neighbouring Ukraine, “with growers encouraged by favourable returns and good planting conditions”.


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