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.