Final USDA Predictions Show 2011/12 to Be a Record Year.

Early indications in marketing year 2011/12 did not foresee breaking many records, but the marketing year will end May 31 setting new highs in world wheat production, total supplies and global demand. The U.S. Department of Agriculture (USDA) released its first projections for 2011/12 in May 2011 and adjusted projections each month in its World Agricultural Supply and Demand Estimates (WASDE). USDA released the most recent WASDE report on May 10, providing a good snapshot of how final numbers will look at the end of the marketing year.

USDA initially projected a 3 percent increase in world wheat production, compared to 2010/11, to 670 million metric tons (MMT). However, production in the Black Sea region and Australia greatly exceeded expectations and world production soared to a record 695 MMT, 7 percent greater than the previous year. USDA projected a rebound in Black Sea production following severe drought in 2010/11, but upped its estimates from an initial 87.0 MMT to a final 101 MMT. Additionally, Australian production of 29.5 MMT surprised many by setting a record for the second straight year.

The increased production significantly added to world supplies. As a result, USDA upped its world supply projections by 39.6 MMT from its initial estimates to a record 891 MMT by the end of 2011/12. USDA predicted a decrease in world beginning stocks, but the final reduction of 3.32 MMT from 2010/11 was far less than the 17.9 MMT decrease USDA originally expected.

World wheat demand set a record in 2011/12 for the fourth consecutive year, reaching 695 MMT of total consumption. USDA projected consumption would set another record, but the initial estimate was conservative. Tight world corn supplies and an increasingly narrow price spread between corn and wheat resulted in record wheat feed use, driving demand higher throughout the year. Last May, USDA estimated 2011/12 food use to increase 8.19 MMT from the previous year to 546 MMT. That estimate remained virtually unchanged throughout the year, but estimated feed demand increased from 124 MMT to 148 MMT, a 27 percent increase from 2010/11 and a new record. Therefore, total world consumption increased 6 percent from the previous record.

World trade also increased in 2011/12 as suppliers tried to meet the higher demand. In 2010/11, Black Sea wheat re-emerged on the world market. Russian exports increased from 3.98 MMT in 2010/11 to 21.0 MMT, 63 percent above the five-year average. Additionally, Kazakhstan more than doubled its exports from 2010/11 to 10.5 MMT, 49 percent above the five-year average.

In the United States, expected exports fell from 35.1 MMT in 2010/11, supported by the withdrawal of Black Sea wheat, to 27.9 MMT. Last May, USDA predicted 2011/12 sales would drop to 28.6 MMT. Strong price competition from other exporters slowed export demand in mid-year. In fact, USDA dropped its 2011/12 export estimates to as low as 25.2 MMT in December. But the pace increased significantly thanks to more competitive prices and USDA last estimated total 2011/12 U.S. exports will reach 27.9 MMT. As of May 10, with three weeks left in the marketing year, total known U.S. export sales were 27.8 MMT.

As the focus now shifts to predictions for the 2012/13 marketing year, one fact remains clear. The United States will continue to have a reliable supply of high quality wheat for our customers around the world.

Source: U.S. Wheat Associates