By Karen Braun
FORT COLLINS, Colo. (Reuters) – Global wheat production is expected to peak this year, but stocks for major exporters will be far from secure, possibly falling to all-time lows.
The global maize harvest is also expected to reach new highs which, unlike wheat, are expected to build stocks, although relative tension may persist in the maize market as well and it is not certain that the sigh of relief full will arrive in 2022 or later.
Chicago wheat futures this week hit new nine-year highs and pushed more than $ 2.50 a bushel above Chicago corn futures, the highest wheat-corn premium. high for the most actively negotiated contracts for more than eight years.
Corn futures are below highs set earlier in the year, but are trading at nine-year highs to date, and these high grain prices are causing a big spread. The wheat-to-corn price ratio of 1.43 is a bit more normal in a historical context and has been observed a few times in recent years.
However, the wheat-to-corn futures ratio is higher than recent averages, and is what should be expected given world stocks of the two grains and especially when comparing their production and consumption trends.
WHEAT VS. BUT
The US Department of Agriculture’s projections for MY 2021-22 suggest that stocks of wheat for use among major exporters, including Russia and the United States, will fall to 12.1%, the lowest of USDA records for six decades. That’s down from 14.8% the year before and a five-year average of just over 17%.
This is despite total world wheat stocks pegged at historically high levels, in large part thanks to China’s intentional reserve which will represent a record 51% of the wheat supply this year. China’s figures have often been excluded from global grain analyzes, although its recent surge in imports brings this process under scrutiny.
Globally, stocks of corn to be used are lower than recent averages, but slightly above last year’s levels. The 8.7% ratio excluding China is among the lowest on record, although 22% with China is closer to the long-term average.
Most of the world’s exportable wheat for 2021-2022 has already been harvested while much of the corn supply is still in its infancy in South America. But current forecasts suggest that wheat and corn are on different paths when it comes to production versus consumption.
The 2021-22 global maize harvest is expected to increase by almost 8% over the year to reach a new record, and this increase is a bit steeper if we exclude China. This comes after two years of fractional declines in annual production despite a continued increase in consumption, and it would be the first year in five that the crop will too meet demand.
On the other hand, wheat production is forecast almost stable for the year, and this is the second consecutive season that demand growth is expected to exceed the harvest. In fact, global consumption has grown 6% over the past two years with an increase of just 2% in production, the biggest disparity in nearly a decade.
LOOKING TO 2023
Relief from the dwindling wheat supply should be on its way and North America could lead that effort. U.S. and Canadian farmers are expected to increase plantings for 2022-2023, which will greatly contribute to the global wheat outlook through 2023, assuming a catastrophic second drought is averted.
These supplies would come on-line in mid-2022, just before the first 2022-23 maize is available and simultaneously with South American 2021-22 maize supplies, so grain deficits could be short-term given strong or even normal production levels over the next year. .
The 2022-2023 corn situation is already the subject of heated debate with regard to American plantations. High fertilizer prices have spurred the idea that acres of corn could be drastically declining at the top producer and exporter, which could keep global stocks relatively tight.
The views expressed above are those of the author, Market Analyst for Reuters.
(Edited by Matthew Lewis)