Global wheat production is projected to reach 672 million tons, down 8 million from last year, but the large stock carry-in will more than offset the forecast decline, which will continue to pressure prices. This is the third expected bumper wheat crop in a row.  Global consumption is projected to expand to 668 million tons, up nearly 16 million from last year, and is mostly due to additional feed demand in Russia and the EU, plus strong EU ethanol demand. Global trade is up marginally in 2010/11. 

A key price factor for the world wheat market is the growing stocks held by traditional exporters: Australia, Canada, the EU, Argentina and the United States.  Stocks in Russia and Ukraine are expected to decline, which may provide export opportunities for Kazakhstan.  Kazakhstan is relatively uncompetitive to countries other than its neighbors due to shipping constraints.  The Government of Kazakhstan recently announced a transportation subsidy in order to assist exporters increase competitiveness vis-à-vis other exporters. 

Wheat prices have fallen dramatically since their peak in March 2008, but still remain high relative to historical prices despite rising stocks. The United States is carrying over half of traditional exporter stocks, while other exporters’ supplies are expected to be little changed.  The large U.S. carry-in is expected to dampen prices. 

The United States - The large carry-in stocks for the U.S. are the highest since 1987/88,   offsetting reduced production. The U.S. export estimate is forecast slightly higher.  The projected large U.S. stocks are available should a crop and/or quality problem develop with other suppliers. 

North African and Middle Eastern imports are generally a third of global import demand and are expected to be little changed from last year as increased import demand in Saudi Arabia and Morocco offset contracting demand in  Syria and Iran. 

PRICES:

Domestic prices trend downward: Prices of all classes of wheat dropped dramatically through August and continued easing through September.  However, Hard Red Spring (HRS) prices started to escalate as quantities of high-quality spring wheat were limited.  White Wheat (WW) prices actually fell below Soft Red Winter (SRW) prices as Australian supplies hit the market. Strong futures prices for SRW kept U.S. wheat uncompetitive in global markets.  Other than HRS, wheat prices have been relatively stable over the last three months.   

• Brazil is up 400,000 tons to 1.0 million due to an accelerated pace of feed-quality wheat exports.

• China is up 300,000 tons to 1.1 million based on Government imports under its TRQ.

• Iran is down 500,000 tons to 3.0 million based on larger expected production.    

• Morocco is up 300,000 tons to 2.1 million based on the stronger-than-expected pace of imports of French and U.S. wheat. 

• Turkey is up 300,000 tons to 3.1 million as it continues to import higher quality wheat for blending purposes.