The global wheat stocks-to-use ratio is anticipated to decline in 2020/21 despite record production, with consumption up more than 10 percent from the prior year on more use in China and India, the U.S. Department of Agriculture said in its latest monthly update.
Global stocks are up only marginally from 2019/20. Approximately half of stocks are held by China, where the government has encouraged sustained large production by guaranteeing a high minimum purchase price, it said in its March World Agriculture Supply and Demand Estimate (WASDE) report.
In turn, the government has purchased large volumes of wheat over the past several years, leading to temporary reserves in excess of a year’s supply. However, high domestic corn prices over the past year have induced the sale of substantial quantities of old-crop wheat stocks at government auctions, which is expected to be used for feed, the report pointed out.
Thus, China’s stocks are forecast to decline for the first time in 8 years as consumption rises by more than 15 percent.
Similarly, ending stocks among the top 8 exporters — Russia, United States, European Union, Canada, Australia, Ukraine, Argentina, and Kazakhstan — are projected to collectively decline.
The largest reductions, according to the USDA, are forecast for the United States and the European Union, which both had smaller crops.
Major exporter stocks are usually an indicator of the overall supplies available to the world. However, Russia, the largest exporter, has set both an export quota and an export tax to encourage more wheat to remain within the country to quell high consumer prices.
While Russia’s food use is forecast slightly higher, its stocks are forecast to expand, the largest increase in stocks among major exporters.
Stocks in India are also forecast to expand. Similar to the situation in China, the government has been supporting producers with high prices for many years which has in turn resulted in high stocks. This year, stocks are expected to grow, despite higher consumption, as the government distributes subsidised wheat to mitigate the economic impact of the pandemic, the USDA said.
Ample stocks also allow India to become a significant exporter once again, with 2020/21 exports forecast at 2.5 million tons, more than triple the amount of the previous trade year.
The USDA raised global production estimates to a new record this month with a record crop in Australia. Global consumption is higher mainly on more feed and residual use in China.
Global trade was lifted to a record with higher imports for China, Pakistan, and Nigeria. Exports are raised for Australia and Canada. The projected U.S. season-average farm price remains at $5.00 per bushel.