Market disruptions may create a wheat shortage.
World wheat production is projected to be a record 28.72 billion bushels (Bb). During the last 10 wheat marketing years (2013/14 through 2022/23), world wheat production set a record high in eight of the 10 years. World wheat production went from 24.29 billion bushels in 2012/13 to 28.72 billion bushels in 2022/23 (4.45 Bb increase). The average increase in production was 445 million bushels (Mb).
During the same period, world wheat use went from 25.24 billion bushels in 2012/13 to 28.87 billion bushels in 2022/23 (3.76 Bb increase). Wheat use set a record in seven of the 10 years. The average annual increase in use was 363 million bushels.
Production is more variable than use. During the 10-year period, the yearly change in production went from a decline of 1.13 billion bushels to an increase of 1.12 billion bushels. The average yearly change in production was a 445-million-bushel increase.
Use was more stable with a range of a maximum decrease of 308 million bushels used to an increase of 1.24 billion bushels used. The 1.24-billion-bushel increase was a result of COVID, which caused most countries to build stocks.
Numbers can be deceiving. In 2012/13 (the base year), use was about one billion bushels higher than production because world wheat production in 2012/13 (24.3 Bb) was below 2011/12 (25.7 Bb) production. So, the difference in average production increases may not be as high as implied by these numbers.
The 10-year average world stocks-to-use ratio (ending stocks divided by total annual use) may be used to measure the availability of wheat. The 10-year average world wheat stocks-to-use ratio is 36% compared to the 2022/23 wheat marketing year projected stocks-to-use ratio of 34%. By comparison, the stocks-to-use ratio was 26% in 2012/13 and 41% in 2019/20.
Even with a slightly below-average world supply situation, there is an adequate supply of wheat in storage to meet the world’s wheat demand.
First COVID and then the war between Russia and Ukraine reduced the amount of world wheat that was “available” for use. COVID disrupted the handling and transportation systems over the entire world. The COVID impact is mostly corrected.
The current problem is exports out of the Black Sea ports. Without Black Sea exports of wheat, corn, petroleum, natural gas, and fertilizer, stocks will remain tight and prices relatively high.
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The world’s wheat stocks-to-use ratio may be used to show the impact of Ukraine’s and Russia’s wheat exports on the world’s wheat supply.
Ukraine’s 2022/23 wheat exports are projected to be 404 million bushels. Russia is projected to export 1.54 billion bushels. Assume that Russia restricts exports out of the Black Sea ports and that Ukraine and Russia only export one-half (50%) of the projected bushels (934 Mb). Removing 934 million bushels from the world’s wheat supply would lower the world’s 2022/23 stocks-to-use ratio from a projected 34% to 30.7%.
A 30.7% world wheat stocks-to-use ratio implies tight world wheat stocks, relatively high prices, and a shortage of wheat in countries that are relatively poor economically.
At this writing, the price of wheat at Medford, Okla., and Perryton, Texas is $9.15 (KEZ22 – 35 cents). The wheat price is $8.50 in Snyder, Okla., (KEZ-100 cents). Wheat may be forward contracted for $8.75 (KEN23-50 cents) in Medford, $8.80 (KEN23-45 cents) in Perryton and $8.25 (KEN23-100 cents) in Snyder.
World wheat stocks are adequate to meet demand. Disruptions in the market may create a shortage of wheat. Thus, wheat prices are relatively high and are expected to stay relatively high for the next year or so.
