Total Wheat Supplies Up but Milling Quality Tightening

Total global wheat supplies may be higher for 2021-22, but the squeeze is on for high protein, milling quality supplies.

The USDA is currently projecting total worldwide wheat production for this year at 775.87 million tonnes, up from 774.84 million in 2020-21. However, speaking in a webinar last week, Jade Delafraye, Global Editorial Manager, Agriculture, Argus Media, pointed out the supply held by the largest exporters is nevertheless tightening, particularly as it pertains to milling quality.

Amongst the world’s eight largest exporters (Canada, the US, Australia, the EU, Ukraine, Russia, Kazakhstan and Argentina) the USDA now pegs the total combined 2021/22 wheat supply at 374.19 million tonnes. That is up slightly from the August estimate, but down sharply from 394.2 million in July and way down the marketing year’s opening projection of 398.2 million in June.

“That is one of the sharpest drops we’ve seen this early on in the season,” Delafraye said. “It’s kind of a once-in-a-decade type of situation in terms of how much the wheat outlook has been cut.”

Meanwhile, the milling wheat supply looks even tighter.

Although production estimates for the EU and countries like Australia and Ukraine have ticked higher in 2021/22, they are not typically large producers of high-protein wheat.

On the other hand, the production trend is down for the historically larger producers of milling wheat. For example, estimated 2021/22 Russian wheat production has fallen to 72.5 million tonnes from 85 million back in June, while US output has dropped to 44.79 million from 50.95 million. Here in Canada, projected wheat production has fallen 11 million tonnes from June, to the current estimate of just 21 million.

The drought that impacted much of the Canadian Prairies and US northern Plains is one of the obvious culprits in the smaller milling wheat supply, while hot, dry weather this summer also affected parts of Russia. Meanwhile, the unusually wet weather that impacted large portions of western Europe (and especially France) during the summer months will likely mean that only about 30% of the EU’s crop will be of milling quality, Delafraye said.

At around US$9.48/bu, the December Minneapolis spring wheat contract is currently trading more than $2 above the Chicago and Kansas City winter wheat markets.