THE USDA World Agricultural Supply and Demand Estimates (WASDE) report for July 2018, released overnight, forecasts the smallest wheat crop in three years for the next production year 2018/19.

The agency cut 9.3 million tonnes (Mt) from its previous month forecast of world wheat production, 736 million tonnes (Mt) compared with 745Mt in the June estimate.

The reduction in available supplies in the European Union (EU), down 4.4Mt, arose mostly as the EU experienced lower production resulting from dryness in the north.

Australia’s availability was down 2Mt, Russia down 1.5 and Ukraine down 1Mt.

While the smaller crop would significantly reduce 2018/19 wheat export trade from the EU, Russia, Ukraine and Australia, at the same time export opportunity would be boosted for Canada, US and Kazakhstan, resulting in a record global wheat trade forecast.

USDA’s 2018/19 wheat trade year forecast of world imports and exports is a record 185.7Mt and compares with 182.9Mt, 182.1Mt, 172Mt and 161.9Mt traded in the current and three prior years.

Exporters’ wheat stocks set to shrink

The higher trade estimate was driven by strong demand resulting from rising incomes and shifting diets largely in Asia and Africa.

To satisfy growing demand through the current period of smaller crops, inevitably stocks in exporting countries would shrink (Table 1).

After several years of record production and large carry-in supplies, major exporter ending stocks are forecast to decline about 25 per cent from last year’s level.

Table 1: Major exporter wheat stocks, million tonnes. US (dark blue), Black Sea region (brown with white spots), EU (light blue), Canada (light green), Australia (yellow) and Argentina (mauve). Source USDA.

Russia is forecast again to be the top exporter despite its small crop, supplementing that number from a draw-down of carry-in stock.  In contrast the US is still expected to hold large stocks due to strong competition of low-priced wheat from the EU and the Black Sea region.

Trade quantity changes

Between the July forecast and the previous month June forecast USDA made changes to its current crop 2017/18 world trade estimates.

USDA cut 2017/18 individual country wheat import estimates of significance to Australia such as Indonesia by 1.5Mt to 10.5Mt and Yemen by 200,000t to 2.9Mt, though imports by some of Australia’s other key markets such as Vietnam, Thailand and Iraq were increased by 800,000t, 300,000t and 200,000t respectively.

USDA 2018/19 wheat import/export predictions for selected countries are shown in Table 2.

Table 2: Explanation of the reason for previous month to current month changes in USDA projection of 2018/19 wheat export/import, selected countries. Thousand tonnes. Source USDA.

Source: USDA

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