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Global wheat prices rise despite record stocks

16 December 20203 min reading
Global wheat

Wheat prices for major consuming and exporting countries surged from last year despite record global production and ending stocks, United States Department of Agriculture (USDA) reports. Prices found support, in part, from record global imports and consumption in 2020/21.

Unexpectedly strong import demand in China and Pakistan helped bolster global trade to a record in November due to unprecedented demand from both countries and other major importers, driving stocks in exporting countries lower and strengthening global prices, USDA says in its “Grain: World Markets and Trade” report released on 10th December.

Global wheat prices have also been pulled higher in recent months on strength in global oilseed and feed grain prices.

Despite record 2020/21 supplies in China, domestic spot prices in the world’s largest consuming country were more than 10 percent higher this November compared with the previous year and the highest in 5 years.

Strong domestic prices for corn and wheat led to the largest forecast of wheat imports in 25 years; FOB prices for major exporters were more than $100/ton less than domestic spot prices for either corn or wheat in November.

Ironically, global wheat prices have risen in recent months despite record global stocks, the report underlines. “Growth in global stocks has mostly been supported by higher domestic support prices and government stockholding in China and India. China holds more than half of global stocks, representing more than one year’s worth of its wheat consumption. Over the past few months, the rate of sales from auctions of China’s stocks is accelerating, leading to more availability of old-crop wheat in the domestic market. Nevertheless, China has increasingly relied upon the global market to satisfy its wheat demand. This, in turn, has tightened exporter stocks.”

According to USDA report, for the first quarter of the 2020/21 July/June trade year, Canada and the United States were the largest supplying countries to China with record exports of 26.0 million tons, Canada’s stocks are forecast nearly unchanged from the previous year despite a record crop, partly owed to unfettered early-season demand from China.

Canada was the largest supplier in the first 4 months of the trade year. Stocks in the United States are projected to fall more than 4 million tons from the previous year, also partly due to exports projected at their highest level in 4 years aided by strong China import demand.

Both China and Pakistan have had the largest upward revisions to their respective imports since theinitial May 2020 forecasts for the 2020/21 crop year in the USDA WASDE.

Pakistan imports are forecast at their highest level in 12 years, and up more than 2.4 million compared with the USDA May 2020 forecast.

Both public and private demand have bolstered domestic supplies with Pakistan reported to have purchased more than 1.7 million tons in the first 6 months of 2020/21.

Tight stocks have spurred greater import demand due to robust domestic prices (wholesale and retail), which have edged domestic inflation higher. Ukraine and Russia have been the primary suppliers despite Black Sea export prices being at their highest in 5 years.

Strengthening global prices for other major commodities and drier early-season winter wheat planting conditions in Russia and the United States have also supported strengthening wheat prices.

Robust import demand from China, Pakistan, and other major importers is expected to further support global prices amidst record 2020/21 global trade.

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