By Stu Ellis, University of Illinois
Where is the global wheat market going, and will U.S. farmers be participants? Our production continues to decline, leading many to wonder if the U.S. wheat farmer will be a player in years to come.
Wheat plays a critical role in meeting the world's needs for food, feed, and fuel, said Kansas State University Marketing Specialist Dan O'Brien. His recent outlook newsletter says the global demand for wheat will grow along with the population. He examines the global supply and demand dynamics for the past 22 wheat crops.
Most recently the global harvested area is estimated at more than 225 million hectares, compared to 220 million for the 1987-88 crop. In the past three years, the production leaders have been India at 28 million hectares, the EU at 25 million, Russia at 29 million, China at 24 million and the U.S. at 20 million hectares. Interestingly, two nations that are considered significant producers are not on that list of top producers, but they top the list of having the most variability in wheat acreage from year to year. Those are Australia and Canada. O'Brien said, "From a market analysis perspective, these results indicate that the largest wheat acreage shifts over time have occurred in Australia and Canada, and that aggregate relative World variability in harvested wheat acreage is less than most in the countries that produce wheat."
Globally, the average yield is about 45 bushels per acre today, compared to just less than 40 bushels in 1987. The top yield producers include the EU at 77 bu. and China at 65 bu., which compare to the U.S. yield of 41.6 bushels per acre. The EU and Chinese wheat yields have upward trends, the Ukrainian yield has a downward trend, and the rest of the nations have a generally flat yield trend.
Global production for the current marketing year is estimated at 678 million metric tons, compared to 586 million metric tons back in 1987. The 10 largest producing nations grew 84 percent of the world's wheat between 1987 and 2009. Of the wheat produced, exports are projected at 126 million metric tons, up from the 109 million in 1987. The 10 largest exporting companies shipped an average of 94.5 percent of global exports in the past 22 years. The U.S. leads that group at 28.5 mmt., compared to the EU at 19 million, followed by Canada, Russia and Australia.
Ending stocks for the global wheat market are projected at 196 million, versus 167 million in 1987. More than 81 percent of the world's ending stocks were held by 10 nations, lead by China at 49 mmt, and the U.S. at 17 mmt.
O'Brien says in the past 23 years, global wheat markets have been strongly influenced by a small number of nations that either produce or export a large amount of wheat. Eighty-four percent of global production is held by 10 nations, including the U.S., and with the U.S. being the world's top wheat exporter. Wheat buyers are not as concentrated as the producers and exporters. Because of the need for quantities of farmland for wheat production, O'Brien contends the big players will not be likely to change. But he says, "However, wheat acreage in the United States has been declining since 1981 due to the profitability of competitive crops and other factors. Wheat yield trends in the United States have been relatively flat or only rising slowly over this same time period. The possibility of future declines in U.S. wheat acreage and production, and of declining U.S. wheat exports as well, are among the factors most likely to affect future World wheat supply-demand balances."
The downward trend in U.S. wheat production and exports is counter to many other nations that are large producers and shippers of wheat. Globally, there are just a few nations that are large producers, large exporters, and hold substantial shares of the world wheat ending stocks. Consuming nations are more scattered and are not as dominant players. While U.S. acreage and production have been declining regularly, the domestic trends will have a significant impact on the foreign trends.