Without China, world wheat stocks near ‘tight’ supply Russia may increase wheat-exporting capacity

Total world wheat carryovers were a record for the fourth year in a row, said Mike Krueger, marketing consultant in Salem, Oregon. It’s one of two things that the market watches the most, he said during Wheat U in Spokane, Washington. 

But world stocks would be smaller and “more interesting” when taking China’s projected numbers out of the equation, he said. 

There’s enough wheat to feed the world for about 132 days worth of usage. About 80 days worth of usage is considered tight, Krueger said. Any tighter and the market tends to react. 

China holds about 45 percent of the world’s wheat carryovers, he said, according to the U.S. Department of Agriculture and the Chinese government, although Krueger said many industry members doubt those numbers. 

China may experience a shift in its wheat production, Krueger said. The country pays its wheat farmers more than $10 per bushel. China wants to be selfsufficient on wheat and corn production, but is having water availability problems, Krueger said. About 50 percent of China’s production is dryland, he said. 

“It may really be quite a crisis for them, particularly if they have a dry year,” he said. 

Taking China out of projections means a wheat market that’s more sensitive to surprise, Krueger said. 

“This is quite a tweak that could help us out,” he said. “Give us some kind of production problem, we could come out of this a lot quicker and faster than you’d think just by looking at the world numbers.” 

Without China, the world carryover is the smallest it’s been in four years, at 82 days of usage, he said. 

Russian production originally looked like 63 million to 64 million tons, but is now 84 million tons and climbing, he said. That 20 million increase is close to four Pacific Northwest white wheat crops, Krueger said. 

Russia’s previous record for export was 28 million tons, so the country will have more wheat than its shipping capacity, Krueger said. Russia has been investing in wheat exports and may jump by 30 million tons capacity by 2022. 

“They’re adding capacity, it’s just kind of when it comes online,” Krueger said. “When the cheapest seller in the world pops out 20 more million tons of production, it hurts.” 

A production problem in Russia would also have an impact on the global marketplace, Krueger said. 

Global usage and world demand growth is also increasing, which is more positive, Krueger said. 

Australia’s white wheat crop, another competitor on the global market, may see some problems in the midst of their harvest. 

“That may give us some more opportunity, at a minimum,” Krueger said. “If it’s a significant problem, that may be very supportive of white wheat the next year.” 

U.S. wheat production declined by 246 million bushels this year, but ending stocks are still the third highest on record, at 935 million bushels. Tight U.S supplies are considered 600 million bushels or lower. The tightest season on record was the 2007-2008 year, when stocks were about 306 million bushels, Krueger said