Wheat’s Dilemma: Bumper Harvests Meet Waning Demand

February 09, 2015

 

According to the WASDE report, in the year 2014/2015, global wheat production is forecast to hit a record of 723 million metric tons (“MMT”). This follows a record year in 2013-14, when production hit 715 MMT. Global supplies are projected to reach a record 909 MMT, up 19.4 MMT from 2013-14. On the other side of the coin, consumption is projected to set a new record of 713 MMT.

 

Global Wheat Production, Use and Trade

Source: U.S. Wheat Associates (from USDA data)

 

Over the 2014-15 period, not only did U.S. production fall an estimated 5 percent to 55.1 MMT., U.S. exports were also expected to decline some 21 percent to 25.2 MMT. Export numbers have declined not least because the last two years have seen large production numbers from other wheat-growing countries.

 

US Wheat Area and Production

Source: U.S. Wheat Associates (from USDA data)

 

Some Exogenous Factors

On the production side, there is always, above all, the weather; in the short term, arguably, not under human control. According to U.S. Wheat Associates, extreme weather issues in the Northern Hemisphere adversely affected this season’s crop quality.

While on the one hand, in the U.S., acres harvested for hard and soft red winter wheat were reduced because of severe drought conditions, on the other hand, hard red spring wheat and northern durum were affected by wet weather, which not only slowed early planting and harvest, but affected durum color and limited protein.

Excessive rains late season in Canada resulted in the same low protein levels in spring wheat and “poor durum color,” and, over harvest time, lead to poor-quality crops from France and Ukraine.

 

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