Wheat outlook suggests tight global supplies to continue

Wheat futures prices have been trading near lofty levels this spring due to a combination of low United States supplies and low global supplies, exasperated by the war in Ukraine.

The July 2022 Chicago wheat futures reached near the $12.75 a bushel price level, while July 2022 Kansas wheat futures recently traded above $13.50 a bushel. The July 2022 Minneapolis wheat futures reached the $14 a bushel price point as supply threats continue to keep prices supported for the short term. Will these towering prices continue in the months ahead? Much of that answer depends on Mother Nature. But for now, supplies are tight here in the U.S. and around the world.

Looking specifically at the U.S., current 2022-23 carryout levels for “all wheat” are at a low 619 million bushels, down from 1.028 billion bushels just two years ago. From a global perspective, projected 2022-23 world ending stocks of wheat are down to 267 million metric tons, down from 296.83 million metric tons just two years ago. Overall, global ending stocks are at the lowest level in six years.

U.S. wheat production

U.S. wheat production and ending stocks are on a hefty decline as weather woes have shrunk production for the past year. Winter wheat production has been slashed due to drought conditions across the southern Plains. Winter wheat ending stocks are pegged at a low 361 million bushels.

Spring wheat production was also affected by drought last summer, and now production is off to a slow start with planting way behind schedule because of too much rain this spring. As of the May 22 Crop Progress report, the U.S. spring wheat crop was only 49% planted, well behind the 5-year average pace of 83%. Ending stocks for spring wheat are pegged at 112 million bushels.

Soft red winter wheat ending stocks for the 2021-22 season are placed at a very low 107 million bushels.

Global wheat production

Wheat is grown all around the world, and for many years global production was robust, keeping prices lower for many years due to ample supplies. However, in the last year there were just enough weather issues around the world, that production was reduced in multiple countries while demand remained strong. The war in Ukraine has only exemplified the lower global supply story that had already begun a year ago.

Current global wheat production is forecast at 774.8 million tons, 4.5 million lower than in 2021-22. Over the coming months, traders will scrutinize weather around the world to gauge if any further production issues might decline the size of the global crop, which would only add to global food woes and likely increase prices further.

Here are the global wheat producing nations to be watching this summer for potential weather issues, in order of expected production for the 2022-23 crop year. The European Union (primarily France and Germany) is the largest producing region of the world coming in at 136.5 million metric tons, next is China at 135 million metric tons, then India at 108.5 million metric tons, Russia at 80 million metric tons, and finally the U.S. at 47.05 million metric tons.

Other important countries to monitor include Ukraine, where production is forecast at 21.5 million tons in 2022-23, 11.5 million tons lower than 2021-22 due to the ongoing war. Canada’s production is forecast to rebound to 33 million tons in 2022-23, up significantly from last year’s drought-affected crop.

Global use

Two countries that are of great curiosity for weather watchers will be China and India. Of the 135 million metric tons of wheat that China is expected to grow, they will use144 million metric tons. In other words, they will use everything they grow, and will need to rely on imports to fulfill the rest of their needs. Most likely Russia will fill this void, along with the U.S. and South America.

India wheat production has been picked up in the news as of late. India is projected to grow 108.5 million metric tons of wheat, and their projected domestic use is 105 million metric tons. So they, too, use every bit they grow.

With global use still strong, and supplies tight, expect to see historically firm wheat prices for the short term. However, at some point more acres will be planted, double cropping encouraged globally where it is feasible, and, at some point, supplies will begin to increase again. As history has shown us, high prices will cure high prices.

Editor’s note: Naomi Blohm is a marketing advisor with Total Farm Marketing by Stewart-Marketing and she is a regular contributor to the Iowa PBS series “Market to Market.” She can be reached at [email protected].