Increased production estimates create challenges for price support amid ample global supplies
The United States Department of Agriculture (USDA) has recently released its global supply and demand update, adding to the bearish tone surrounding the international wheat market. The USDA’s July 2024 World Agricultural Supply and Demand Estimates (WASDE) report projects higher production, consumption, international trade, and ending stocks for wheat in the 2024-25 marketing year. This outlook raises concerns about the need for significant additional demand to balance the market and provide price support.
The USDA’s report estimates global wheat production at 796.2 million tonnes (Mt), an increase of 5.4Mt from the June update. Combined with a 1.4Mt increase in carry-in stocks from adjustments to the 2023-24 balance sheet, the total supply has risen by 6.8Mt compared to the previous month.
Major Exporters: Varied Production Outlooks
Among major wheat exporters, the United States is projected to produce 54.7Mt, up from 51Mt in June and 49.3Mt in 2023-24. Despite this increase, the export forecast rose by only 2.7Mt to 23.3Mt due to anticipated challenges in engaging international buyers amid plentiful global supplies.
Argentina’s production forecast increased by 500,000 tonnes to 18Mt, aligning with the Buenos Aires Grain Exchange’s update but falling short of the Rosario Board of Trade’s bullish 20.5Mt outlook. Argentina’s export projection for 2024-25 remains at 11.5Mt, up from 8.5Mt in the current marketing year.
Australia’s wheat crop forecast stayed unchanged at 29Mt, 3Mt higher than the 2023-24 harvest. However, some forecasts suggest new-crop production could exceed 34Mt. Australia’s old-crop export estimate of 20Mt appears increasingly achievable, with the 2024-25 projection at 22Mt.
Canada and Europe: Mixed Projections
Canada’s wheat production received a 1Mt boost to 35Mt, reflecting improved conditions across the Prairies. This projection is 3Mt higher than the previous harvest despite a slight decrease in planted area. The export projection increased by 500,000 tonnes to 25Mt.
In the European Union, wheat production is forecasted at 130Mt, a decrease of 500,000 tonnes from June and 4.2Mt lower than the 2023 harvest. The EU’s wheat export forecast was similarly reduced by 500,000 tonnes to 34.5Mt.
Russia and Ukraine: Stability and Resilience
Russia’s wheat production forecast remains stable at 83Mt, down from 91.5Mt last year. The USDA raised Russia’s old-crop exports from 54Mt to 55.5Mt, while new-crop shipments are projected at 48Mt.
Ukraine’s wheat harvest is expected to be 19.5Mt, unchanged from June but down from 23Mt last year. The export projection of 13Mt is also unchanged from last month but significantly lower than the 18.1Mt in 2023-24.
Global Demand and Production
Pakistan’s wheat production for 2024-25 is projected at a record 31.4Mt, with domestic consumption at 31.2Mt, potentially turning the country into a net exporter. India’s production estimate remains at 114Mt, despite private forecasts suggesting lower yields. China’s wheat production is forecasted at 140Mt, with domestic consumption at 151Mt.
The USDA report also highlighted unchanged import forecasts for China, Egypt, the EU, and Algeria, while Indonesian imports were increased to 12Mt. Turkey’s import forecast was reduced from 9.5Mt to 8Mt due to a temporary import halt to protect domestic farmers.
As Northern Hemisphere production confidence grows and Southern Hemisphere producers continue adding tonnes, global wheat stocks are expected to deplete minimally in 2024-25, maintaining downward pressure on prices in the near term.
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