The global wheat outlook for 2021/22 is for higher supplies, greater consumption, increased trade, and higher ending stocks in the 2021/22 marketing year, according to the latest World Agricultural Supply and Demand Estimates.

On the whole, this month’s report provided very little fodder for the wheat bulls, and the futures market was sold down accordingly. Last Thursday’s Chicago Board of Trade session saw the benchmark December 2021 futures contract close down 17¾ cents per bushel (c/bu) at 773½ per bushel, equivalent to AU$396 per metric tonne.

The contract did recover almost half of that loss in Friday’s trade, going into the weekend at 782c/bu, or almost AU$401/MT, after the dust quickly settled on the WASDE report. Traders in the US returned their focus to the potential impact of extremely dry weather across the US Southern Plains on next year’s US wheat harvest.

The USDA increased global wheat production by 2.61 million metric tonne to 777.89MMT. Amongst the world’s major exporters, Canadian production was raised by 0.65MMT to 21.65MMT, in line with the latest Statistics Canada forecast. Russian production was also increased, up 1MMT to 75.5MMT. However, despite the increases, production levels for both countries remain well below that of the 2020/21 season.

The European Union wheat crop was bumped up by 0.3MMT to 138.7MMT, and production in China, the world’s biggest producer of wheat, was increased by 0.05MMT to 136.95MMT. How on earth does the USDA think they can accurately forecast Chinese wheat production to the nearest 50,000 metric tonne?

The USDA increased Australian wheat production from 31.5 million metric tonne to 34MMT. Unsurprisingly, the USDA took its lead from the most recent Australian Bureau of Agricultural and Resource Economics and Sciences crop update, which pegged output a tad higher at 34.4MMT.

The recent wet weather may have decreased production in New South Wales with losses due to flooding and reduced test weight. However, many analysts had the crop bigger than last year’s record before the recent deluge. That is now unlikely, but production of 14MMT is still on the cards, albeit of much lower quality than originally expected.

The big change to Australian wheat production this year is in Western Australia. Total receivals into the CBH bulk handling system have already surpassed that of last year, and there is still more than 25 per cent of the harvest to complete, the majority of which will be wheat. State-wide production north of 13MMT is definitely on the cards if the current yield trend continues.

Opening global wheat stocks for the current season were increased by 1.69MMT. Australia was the biggest mover, where 0.95MMT was added, but only by tinkering with the 2020/21 numbers. The USDA decreased Australian wheat exports in the 12 months to September 30 by 0.65MMT to 23.85MMT. In the same breath they also increased production by 0.3MMT to 33.3MMT, but still well shy of reality. The other significant global change was an increase of 0.89MMT to the European Union’s 2021/22 starting number to 10.93MMT.

Global wheat consumption was increased by just under 2MMT in last week’s report to a record 789.35MMT. Amongst the movers were the European Union, up 0.4MMT to 107.9MMT, Russia up 0.75MMT to 41.75MMT, China down 0.5MMT to 148.5MMT, and the Southeast Asian nations of Indonesia, Malaysia, Philippines, Thailand, and Vietnam collectively up 0.6MMT to 25.35MMT.

Australian consumption was increased from a ridiculously low 8MMT to an extremely conservative 8.5MMT, especially considering the volume of feed wheat now available on the doorstep of southern Queensland, Australia’s biggest feed wheat consumption region. With cattle on feed numbers reportedly more than 1.1 million head at the end of the September quarter and increasing, an expanding poultry industry, and solid milling industry intake, domestic wheat demand has to be at least 9MMT, but probably closer to 9.5MMT for the 2021/22 season.

The USDA is forecasting worldwide trade in wheat to increase by another 2.29MMT to a record 205.47MMT. This follows a 3.53MMT hike in global exports in the November WASDE report. On the importer front the three big movers were Iran, up 1.5MMT to 7MMT, South Korea, up 0.3MMT to 4.4MMT and China, down 0.5MMT to 9.5MMT.

From a major exporter perspective, trade out of the United States was decreased by 0.55MMT to 22.86MMT, the lowest since 2015/16 when 21.17MMT was exported. Prior to that, one must scroll back 50 years to 1971 to find a lower US wheat export number. The USDA cited a slowdown in hard red winter and hard red spring sales.

There was a slight change to European Union wheat exports, up 0.5MMT to 37MMT. This is at odds with leading analyst Strategie Grains, who recently cut its demand forecast for the EU, suggesting high prices were urging leading industrial processors to switch to maize. Ukraine exports were also adjusted 0.2MMT higher to a record 24.2MMT.

However, the gong for the biggest mover in global trade in last week’s report goes to Australia. The USDA increased Australian wheat exports by 2MMT to 25.5MMT. It is a big number but certainly more than achievable. Australian wheat export shipments in October 2020 were 0.36MMT. In October 2021, they were 1.48MMT.

In November last year, national wheat exports totalled just over 0.5MMT. Last week west coast bulk handler CBH announced an all-grain November shipping record 1.17MMt, maybe 30 per cent of which would have been wheat. While the widespread rains have severely disrupted New South Wales and Queensland logistics, the old crop shipping program has continued. Accordingly, wheat shipments for November may have also been around 1.5MMT.

That would put wheat exports at 3MMT in the first two months of the Australian marketing year, compared to 0.87MMT in 2020/21. As long as domestic wheat, regardless of quality, remains competitive into Asia in the second half of 2020 against new crop northern hemisphere exports, then wheat shipments above 26MMT are feasible in 2021/22.

Call your local Grain Brokers Australia representative on 1300 946 544 to discuss your grain marketing needs.

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