Latest USDA Forecast Accounts for Increased U.S. Wheat Export Demand

By Steve Mercer, USW Vice President of Communications

USDA market analysts cited Iraq’s major purchase of hard red winter (HRW) wheat as the specific basis for a significant drop in U.S. ending stocks in the November World Agricultural Supply and Demand Estimates (WASDE) report. The report correspondingly put its total U.S. export forecast for 2017/18 up 0.7 million metric tons (MMT) to reach 27.2 MMT. This would be down 5 percent from 2016/17 but 2 percent above the 5-year average, if realized.

The ending stocks forecast continues to be the primary plot of the 2017/18 global wheat market story. The WASDE report noted that even with slightly lower supplies and higher use, ending stocks are still expected to hit a record level.

USW Market Analyst Stephanie Bryant-Erdmann, who is currently on an international assignment, shows in USW’s latest Supply and Demand Report that global ending stocks are projected to reach a record level: 268 MMT, or 5 percent higher than 2016/17, if realized. Estimated Chinese ending stocks of 127 MMT account for 48 percent of global ending stocks, which is 58 percent greater than the 5-year average.

Bryant-Erdmann provides a more nuanced analysis of global stocks by charting the current global stocks-to-use ratio with and without China’s stocks, which are not likely to move to export. She shows that the 2017/18 ratio drops about 64 percent from 36 percent to 22 percent without Chinese stocks. More significant, though, is the historical look, showing that exportable stocks are on a three-year downward trend. In fact, Bryant-Erdmann shows that exporter ending stocks are expected to fall 5 percent year over year to 74.3 MMT, and ending stocks in importing countries are forecast to fall to 66.0 MMT, 5 percent below the 5-year average of 70.5 MMT.