Global wheat stocks have sharply rebounded from 2007/08’s record low, and are forecast to climb even higher by the end of 2009/10, as illustrated above. Virtually every wheat producing or consuming country holds some working stocks or pipeline supplies throughout their distribution system and some carryover until the next crop is harvested. Many countries hold strategic government stocks for public distribution, for food security against domestic crop shortfalls, or to diminish reliance on international suppliers. Whatever the reason, stocks held by most of these countries, like China, are generally not available to the world market, and therefore have little impact on global price stability.

A few key exporting countries (the United States, EU, Canada, and Australia) are surplus producers which consistently supply the world and hold carryover stocks available to the market. History has demonstrated that there is a strong inverse relationship between global prices and the reserves held by these countries. For example, one reason for last year’s wheat price surge was the unprecedented, multi-year drop in these countries’ stocks.

In contrast, Russia has not only built large reserves, both private and government, but also has become a significant exporter. However, the continued and consistent availability of those additional stocks is presently uncertain, and uncertainty often exacerbates global market and price instability, particularly if the disposition of those potential exportable supplies are policy, not market, driven.