World Wheat Stocks Climb Higher
February is usually a pretty boring time of year as far as USDA reports are concerned. We are far enough removed from the U.S. harvest to have all of the supply side numbers pretty well pinned down and we are also far enough into the marketing year to have a pretty decent handle on at least the broad contours of the demand side of the market. Add to that the fact that the late-February USDA outlook conference gets most of the attention and February reports can be kind of hard to get excited about.
With that said, the February World Agricultural Supply and Demand Estimates (WASDE) report was not without its points of interest. The world wheat demand estimates were perhaps the most striking figures in the report. USDA dropped their estimate of 2014/15 wheat use by around 2.0 million metric tons (MMT) and also dropped their estimate of 2015/16 use by over 4.5 MMT. Almost all of the demand changes in both years were due to revisions in use estimates for—surprise!—China.
The decline in use estimates with little change in production figures has resulted in substantial upward revision in wheat carryover estimates. Figure 1 provides an updated version of a picture that I have shown several times over the past few months: the world wheat stocks-to-use ratio.
Data Source: USDA Foreign Agricultural Service, PSD online
Figure 1. World Wheat Stocks-to-Use Ratio: 1996/97 to 2015/16 (forecast)
At the end of the 2012/13 marketing year, wheat stocks were a bit below their 10-year average. However, that year has been followed by three consecutive record world crops: 715 MMT in 2013/14, 726 MMT in 2014/15 and 736 MMT in 2015/16. With only modest growth in demand,
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