- The world wheat indicator price is forecast to increase by 8% in 2021−22 to US$290 per tonne.
- Global supply of high-quality milling wheat expected to fall.
- Australian wheat production is forecast to be second highest on record.
- Australian wheat exports to remain high to meet global demand.
World wheat prices to increase
The world wheat indicator price is forecast to average US$290 a tonne in 2021–22 – an upward revision of 14% from the forecast in Agricultural commodities: June quarter 2021. This reflects a downward revision in world supplies of hard, high-quality wheat, driven by significant declines in Canadian, US and Russian Federation production.
World wheat production is forecast to increase marginally in 2021–22 to 779million tonnes. Production prospects in the major exporting countries of Canada, the United States and the Russian Federation have fallen significantly as a result of poor growing conditions. This is expected to be partially offset by upward revisions for other major exporters, including Argentina, Australia, the European Union and Ukraine.
Consumption to outpace production
World wheat consumption is forecast to increase by marginally in 2021–22 to 784million tonnes, outpacing world production and leading to a fall in world stocks.
Milling wheat has few substitutes and is used to produce bread, pasta, noodles and other staple food products. Demand for these products is relatively unresponsive to changes in consumer incomes but increases with population growth. High global demand for staple wheat products is likely to be partially offset by a fall in demand for discretionary foods. This is being driven down by a weaker recovery in economic growth in some major markets (particularly South-East Asia) due to the ongoing impact of COVID-19. An increase in the use of wheat for food is expected to be offset by a marginal decline in wheat used as livestock feed. Global feed demand is forecast to remain strong and demand for feed wheat will be determined by the increased competitiveness of substitutes such as corn.
World stocks to fall – particularly in major exporters
World stocks are forecast to fall in 2021–22 to around 280million tonnes. Almost half of the world’s wheat stocks are estimated to be in China and are generally not available to the world market. The world stocks-to-use ratio is forecast to fall to around 36%. Stocks held by major exporters (those that are available to the world market) are forecast to fall by 7% to their lowest level since 2012–13.
Supply in key major exporters to fall
Supply in key major exporting countries is forecast to fall in 2021–22, which is expected to result in higher world wheat prices. Russian Federation wheat production is forecast to fall by 12% in 2021–22 to 75 million tonnes. Area and yield estimates have been revised down as a result of a series of thawing and refreezing events in February and March known as ‘ice crusting’. This was followed by heatwave conditions in June. The negative impact on yields from these events appears to be worse than initial expectations, resulting in a significant decrease in production estimates as harvest progressed.
US production for 2021–22 is forecast to fall to 46 million tonnes, 7% lower than in 2020–21, despite a 4% increase in the area planted. Hard red winter wheat and soft white winter wheat production were both revised down by the US Department of Agriculture in August, reflecting below average yields. Expectations for US spring and durum wheat production have diminished further due to drought. In August more than 60% of the US spring crop was in poor or very poor condition.
Canadian production has also been revised down to 26 million tonnes for 2021–22, 26% lower than in 2020–21 and the lowest level of production since 2011–12. Persistent drought conditions across the Canadian Prairies, combined with several heatwave events, have significantly impacted yields.
In the European Union, wheat production is forecast at 138 million tonnes, up 9% from the below average harvest of 2020–21. Seasonal conditions across the region have been mixed – crop development was hindered by heatwaves and low rainfall earlier in the growing season and a wet finish in France and Germany is likely to impact quality. Production in the United Kingdom is also forecast to increase from the drought affected low of the previous season but will also be impacted by a wet finish.
Production in Ukraine is forecast to increase by 23% from the drought-impacted harvest of 2020–21 to a record 31 million tonnes. Production in Argentina is forecast to increase by 12% in 2021–22 to just over 20 million tonnes.
Australian production second highest on record
Australian wheat production is forecast to reach 32.6 million tonnes in 2021–22. If realised, this will be the second-biggest wheat crop Australia has produced following the 2020–21 record. An excellent start to the winter cropping season in New South Wales, Queensland and Western Australia has been followed by above average winter rainfall in most states, with crops having excellent yield potential heading into spring. If realised, a positive outlook for spring rainfall in the eastern states is expected to result in above average yields. However, there is an increased chance of an overly wet spring, which could interrupt harvest and negatively impact grain quality, depending on timing.
Australian export volume to remain high, export value to reach record
Australian marketing year exports (October to September) of wheat are forecast to be around 23 million tonnes in 2021–22, 3% less than the high level of exports in 2020–21 but 37% above the 10-year average to 2019–20. The value of exports (October to September) is forecast to increase to a record $8.5 billion dollars, reflecting the high volume of exports combined with high wheat prices.
Opportunities and challenges
World supply of high-quality milling wheat low
Due to poor seasonal conditions in Canada and the United States, world supply of hard, high-protein milling wheat will be lower in 2021–22. Australian high-protein milling wheat is generally considered one of the best in the world and usually competes with Canadian and US wheat exports. Due to a fall in supply, the prices of high-protein Canadian and US wheat have surged. Australian production is forecast to be the second-biggest on record, and Australian exports are likely to be competitively priced to meet world demand.
Increased chance of a wet spring
The latest 3-month rainfall outlook (September to November), issued by the Bureau of Meteorology on 26 August 2021, suggests that spring is likely to be wetter than average across Queensland, New South Wales, Victoria and South Australia, and most areas have a greater than 70% chance of exceeding median rainfall. This is likely to be beneficial for average yields, but an exceptionally wet spring may delay harvest and result in a greater proportion of low-protein wheat and an increased likelihood of damaged and downgraded grain. This may diminish Australia’s opportunity to capitalise on low world supply of high-quality wheat.
|Agricultural commodities: September quarter 2021 - Report PDF||77||6.2 MB|
|Agricultural commodities: September quarter 2021 - Outlook tables - data tables XLS||12||152 KB|
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