Miller Magazine Issue: 155 November 2022

26 MILLER / NOVEMBER 2022 NEWS Although wheat prices have fallen from the peak earlier this year, global wheat prices remain elevated, reflective of both uncertainty in the market based on disrupted trade flows in the Black Sea region and the continued decline in the stocks of several major exporters. Exporter stocks are often evaluated as a measure of supplies available to the global market and are closely correlated with export prices. For 2022/23, exporter stocks are forecast to decline to the lowest level since 2012/13. The United States has relatively more storage capacity com- pared to other export-oriented countries, resulting in it being a residual supplier. While the United States is forecast to hold the largest volume of stocks among major exporters, its stocks are forecast to decline to the lowest level since 2007/08. U.S. stocks as reported in the September 2022 Grain Stocks report were in line with industry expectations, but the Small Grains Summa- ry indicated that this year’s U.S. wheat harvest was smaller than previously expected, essentially on par with the prior year. With dry conditions in the Southern Plains, Hard Red Winter wheat pro- duction was sharply lower, while spring wheat harvests improved significantly from the prior year’s severe drought. The tighter U.S. supply situation is reflected in the elevated prices for the United States compared to other major suppliers. The U.S. season-av- erage farm price is forecast at a record $9.20 per bushel, com- pared to the current record of $7.77 established in 2012/13. Combined European Union and United Kingdom wheat stocks are forecast to decline. The region has a smaller crop as a whole, while consumption is forecast higher. In particular, wheat feed and residual demand is robust amid a decimated corn crop. Meanwhile, EU exports are set to rise to offset low- er available supplies from Ukraine. Ukraine stocks soared in 2021/22 due to the naval blockade at the time. The grain corri- dor has enabled some wheat exports via sea ports, with around 2 million tons exported in September. With reduced production, Ukrainian stocks are forecast to be lower, but still above histor- ical levels. Among the major exporters, stocks are forecast higher for only two countries. Canada is forecast to rebound, given its improved crop this year compared to last year’s drought-af- flicted crop; however, the situation remains quite tight. With an increase in exports projected for 2022/23, the moderate increase in stocks results in a further reduction of the stocks- to-use ratio. RUSSIA SET TO BE TOP GLOBAL WHEAT EXPORTER Russia is the other major exporter forecast to have an in- crease in stocks. The country began the marketing year with exceptionally high stocks due to its export restrictions, includ- ing an export tax and export quota in place from mid-February through the end of June. The export tax continues to be up- dated on a weekly basis, albeit at a much lower rate than the prior year. With large beginning stocks and a massive harvest, Russia will continue to be the top global wheat exporter. The initial pace of Russia exports has been relatively weak, but the monthly volumes are expected to increase as its prices remain competitive. Even so, Russia is expected to have its largest ending stocks in 30 years. Wheat prices remain high as major wheat exporter stocks contract MARKET FEATURES Wheat Prices Remain High as Major Wheat Exporter Stocks Contract Although wheat prices have fallen from the peak earlier this year, global wheat prices remain elevated, reflective of both uncertainty in the market based on disrupted trade flows in th Black Sea r gion and the con nued d line in the stocks of several major expor ers. Exporter stocks are often evaluated as a measure of supplies available to the global market and are closely correlated with export prices. For 2022/23, exporter stocks are forecast to decline to the lowest level since 2012/13. The United States has relatively more storag capacity compared to other export-oriented countries, resulting in it being a res dual supplier. While the United St t s is forecast to old the largest volume of 0 10 20 30 40 50 60 70 80 90 Million Metric Tons Major Wheat Exporter Stocks United States Russia European Union Ukraine Canada Australia Kazakhstan Argentina 0 50 100 150 200 250 300 350 400 450 500 Sep-07 Apr-08 Nov-08 Jun-09 Jan-10 Aug-10 Mar-11 Oct-11 May-12 Dec-12 Jul-13 Feb-14 Sep-14 Apr-15 Nov-15 Jun-16 Jan-17 Aug-17 Mar-18 Oct-18 May-19 Dec-19 Jul-20 Feb-21 Sep-21 Apr-22 USD/MT Wheat Export Prices Russia Milling EU (Fra ce) Grade 1 U.S. SRW Source: Trade Data Monitor, LLC Source: International Grains Council Foreign Agricultural Service/USDA 5 October 2022 Global Market Analysis Source: USDA