THE headlines from the June United States Department of Agriculture report were not friendly for wheat.
A 4.9 million tonne (mt) increase in global wheat production has seen supplies for 2020/21 increase by 5.7mt on the May estimate, after allowing for a lift in opening stocks.
The lift in production is driven by a 4.2mt increase for India (already in the bin) and a 2mt increase for Australia.
The Chinese and Turkish crops each increased by 1mt as well.
So, the global balance sheet now looks bloated even after allowing for declining production estimates for Ukraine (down 1.5mt) and the European Union (down 2.0mt).
So, we have global ending stocks up by 5.97mt on last month, to 316.09mt.
This is a year-on-year increase of 20.25mt.
This is a serious lift in global wheat ending stocks.
Even when we remove China from the data, global ending stocks will lift by 4.47mt since May and 9.24mt year-on-year.
There is a further catch though.
Stocks within India are forecast to lift 6.71mt year-on-year.
As long as India does not export, we can take India out of the equation as well.
That pulls the "effective" lift in global stocks back to 2.53mt.
Suddenly there is not a lot of margin to play with.
There remains uncertainty about the EU, Russian and Ukrainian crops.
Who knows which way each will go?
Then we have our own situation.
Everyone tends to be optimistic at this time of year regardless of how much rain has fallen, as long as the crop is in the ground.
However, we could easily lose tonnage from the 26mt the USDA is projecting.
In the US itself there is a projection for a drop in carryout stocks of 1.58mt year-on-year.
Any reduction in US stocks tends to be supportive for CBOT futures prices, but it does still leave stocks at a high 25.17mt.
So, the lazy headline reads "Global Wheat Glut" as production and stocks surge to new record levels.
The reality is much more subdued, with a modest lift in the wheat stocks that count (those excluding China and India) and with a degree of uncertainty about final output from the US, EU, Black Sea and Australia.
The reality we do have to confront though is that the A$ value of new season CBOT futures peaked at $355 per tonne in March, and has now dropped to just above $275/t.
That is an $80/t decline which is unlikely to be recouped.
More Information: contact Malcolm Bartholomaeus on 0411 430 609 or email@example.com