World Wheat: Thinking Outside The Box
The world is awash with wheat and stocks are forecast to get even higher next season. That's what everybody is telling us.
Our chums at the USDA say that global wheat stocks will have recovered from a low 120 MMT in 2007/08 to 168 MMT this season and 183 MMT by the end of 2009/10. (The IGC peg next season's ending stocks somewhat lower at 168 MMT, but let's run with the USDA numbers for now).
Who is holding these stocks is an interesting question. Dig a little deeper and the stocks figures aren't as bearish as it might appear at first glance.
A few key exporting countries (like the United States, EU, Canada, and Australia) are surplus producers who consistently supply the world and hold carryover stocks available to the market. History has demonstrated that there is a strong inverse relationship between global prices and the reserves held by these countries, say the USDA themselves.
Meanwhile reserves held by countries like China and India rarely come onto the export market.
Global Wheat Ending Stocks (in MMT):
You will note that much of the increased stocks in 2009/10 come from traditionally non-exporting nations such as China, India and Iran. If we reproduce the table without those three we get this:
Add to that the possibility that the IGC are correct and that the USDA estimates for 2009/10 are 14-15 MMT overstated, and that maybe throws a different complexion on things.
Note that the world's top six exporting nations will account for around 82% of all global wheat trade in 2008/09, according to the USDA. Production in these is:
So the world’s top six exporters are set to produce around 47 MMT, or 13%, less wheat in 2009/10. Meanwhile, the world’s seventh top exporter in 2008/09, Argentina, is set to produce so little wheat and with negligible carry-in stocks after back-to-back droughts that it probably won’t have anything to export at all.
These are the countries that count, China can hold all the wheat it likes without it affecting the global market one jot if it's neither a buyer or a seller. If you want to buy wheat this is where you go to shop, and stocks and production amongst the main players isn't rising in 2009/10, it's falling.
Our chums at the USDA say that global wheat stocks will have recovered from a low 120 MMT in 2007/08 to 168 MMT this season and 183 MMT by the end of 2009/10. (The IGC peg next season's ending stocks somewhat lower at 168 MMT, but let's run with the USDA numbers for now).
Who is holding these stocks is an interesting question. Dig a little deeper and the stocks figures aren't as bearish as it might appear at first glance.
A few key exporting countries (like the United States, EU, Canada, and Australia) are surplus producers who consistently supply the world and hold carryover stocks available to the market. History has demonstrated that there is a strong inverse relationship between global prices and the reserves held by these countries, say the USDA themselves.
Meanwhile reserves held by countries like China and India rarely come onto the export market.
Global Wheat Ending Stocks (in MMT):
2007/08 2008/09 2009/10
Australia 4.687 5.462 5.987
Canada 4.561 7.531 6.531
China 38.963 48.413 59.713
EU-27 12.414 20.482 17.443
India 5.800 13.910 16.910
Iran 3.157 4.507 6.057
Russia 1.819 8.969 10.269
US 8.323 18.217 17.610
Others 40.241 40.906 42.130
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Total 119.965 168.397 182.650
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You will note that much of the increased stocks in 2009/10 come from traditionally non-exporting nations such as China, India and Iran. If we reproduce the table without those three we get this:
2007/08 2008/09 2009/10
Australia 4.687 5.462 5.987
Canada 4.561 7.531 6.531
EU-27 12.414 20.482 17.443
Russia 1.819 8.969 10.269
US 8.323 18.217 17.610
Others 40.241 40.906 42.130
---------------------------------------------------
Total 72.045 101.567 99.97
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Add to that the possibility that the IGC are correct and that the USDA estimates for 2009/10 are 14-15 MMT overstated, and that maybe throws a different complexion on things.
Note that the world's top six exporting nations will account for around 82% of all global wheat trade in 2008/09, according to the USDA. Production in these is:
2008/09 2009/10
EU-27 151.7 132.6
US 68.0 57.0
Russia 63.7 59.0
Canada 28.6 23.6
Australia 21.5 22.0
Ukraine 25.9 18.0
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Total 359.4 312.2
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So the world’s top six exporters are set to produce around 47 MMT, or 13%, less wheat in 2009/10. Meanwhile, the world’s seventh top exporter in 2008/09, Argentina, is set to produce so little wheat and with negligible carry-in stocks after back-to-back droughts that it probably won’t have anything to export at all.
These are the countries that count, China can hold all the wheat it likes without it affecting the global market one jot if it's neither a buyer or a seller. If you want to buy wheat this is where you go to shop, and stocks and production amongst the main players isn't rising in 2009/10, it's falling.
