In its latest report published in May, the International Grain Council (IGC) estimates that world wheat production, which was 732 million tons in the 2018/19 season, was 762 million tons in the 2019/20 season. It is seen that the expectation for an increase in the 2020/21 season, which will close in June, continues. The IGC predicts that with the harvest to be completed in the southern hemisphere, world wheat production will reach 774 million tons with an increase of 12 million tons in the 2020/21 season. However, it is thought that this increase will not meet the positive expectations of the sectors that will use wheat as raw material, such as the feed sector.
By Bahadır Büyükkılıç
Wheat is the main grain product used in human nutrition, providing about 20 percent of energy and protein needs. This valuable grain product is also an excellent source of energy for livestock. However, only a certain part of wheat production in the world is used in animal feed. Poor quality damaged wheat that is not suitable for human consumption, and wheat specially grown for feed and waste from wheat processed for food production are among the main raw materials of animal feed. According to estimates, nearly 20 percent of the world’s total wheat production is used in animal feed. It is also stated that this rate reaches 40 percent in industrialized countries. In addition, the production amount of the main grains used for feed and the price situation in the market also affect the use of wheat for feed.
CURRENT PRODUCTION DATA AND 2021/22 PROJECTION
It is thought that there will be a slight increase in world wheat production according to the production yields of the past years, the forecasts for the last season, and the forecasts for the next season, but this increase will not be at a level that will meet the positive expectations of the sectors that will use wheat as raw material regarding prices.
In its latest report published in May, the International Grain Council (IGC) estimates that world wheat production, which was 732 million tons in the 2018/19 season, was 762 million tons in the 2019/20 season (with 30 million tons increase). It is seen that the expectation for an increase in the 2020/21 season, which will close in June, continues. The IGC predicts that with the harvest to be completed in the southern hemisphere, world wheat production will reach 774 million tons with an increase of 12 million tons in the 2020/21 season.
Since March, projections for the 2021/22 season have also begun to form. Despite the drought, which is effective in many regions, the increase in world wheat production is expected to continue in the 2021/22 season. The IGC’s projection on May 27 is that production will reach 790 million tons with an increase of 16 million tons.
Likewise, the May report of the US Department of Agriculture’s Foreign Agricultural Service (USDA) supports the expectation of an increase in wheat production. Estimating 764 million tons for the 2019/20 season, the USDA forecasts 776 million tons for the 2020/21 season. Both amounts announced by the USDA are only 2 million tons more than the IGC’s estimates. The USDA forecasts 2 million tons lower than the IGC with 788 million tons in its 2021/22 projection. Aside from the very minimal difference between the reports of both institutions, it seems that the expectation of increase and the amount of increase is common.
China ranks first in world wheat production in the 2019/20 season with 133,5 million tons. It is estimated that China produced 134.2 million tons in the 2020/21 season. It is predicted that this amount will reach 136 million tons in the 2021/22 season.
The European Union (EU) follows China with 138.7 million tons in the 2019/20 season. It is estimated that the production in the EU decreased to 125.9 million tons in the 2020/21 season. In the 2021/22 season, it is predicted that production will increase again and it will reach up to 134 million tons.
India is the third-largest wheat producer in the world with 103.6 million tons. Production in the country is estimated to be 107,8 million tons in the current season. The 2021/22 projection for India is around 108 million tons.
India is followed by Russia with 85.3 million tons in the ranking of the 2020/21 season, the USA with 49.6 million tons, Canada with 35.1 million tons, Australia with 33 million tons, Ukraine with 25.4 million tons and Pakistan with 25.2 million tons. In the 2021/22 projection for these countries, a decrease is foreseen in Russia, Canada, and Australia, and partial production increases (ranging between 1 and 4 million tons) in other countries.
RATIO OF PRODUCTION TO CONSUMPTION
According to the IGC data, world wheat consumption, which was 740 million tons in the 2018/19 season, reached 744 million tons in the 2019/20 season. While the production in the 2018/19 season was not at a level to meet the consumption amount, this situation was reversed thanks to the record production increase in the 2019/20 season. However, the difference between production and consumption continues to be very limited. While the difference between the consumption amount, which is estimated to be 766 million tons, and the production in the 2020/21 season is 8 million tons, it seems that this difference will decrease to 3 million tons in the 2021/22 projection, where the consumption is predicted to be 787 million tons.
When we look at the world wheat consumption on a national basis, it is seen that countries such as China, the EU, India, Russia, the USA, and Pakistan rank at the top in consumption as well as in production. According to the USDA estimates, wheat consumption was 150 million tons in China, 104 million tons in the EU, 103 million tons in India, 41 million tons in Russia, 30 million tons in the USA, and 26 million tons in Pakistan in the 2020/21 season. It is predicted that these countries will consume similar rates in the 2021/22 season.
In world wheat consumption, Egypt and Iran are among the top 10 countries that are not at the top of the production list but consume the most wheat. It is predicted that Egypt will consume approximately 21 million tons of wheat in the 2021/22 season, while Iran will consume approximately 18 million tons of wheat.
HIGHLIGHTS IN WORLD WHEAT TRADE
According to the IGC report, the world wheat trade, which was 168 million tons in the 2018/19 season, reached 184 million tons in the 2019/20 season. The IGC estimates that the trade reached 191 million tons in the 2020/21 season. In the 2021/22 projection, the amount of wheat subject to world trade is forecast to decline to 188 million tons with a decrease of 3 million tons.
The USDA’s May report, on the other hand, paints a slightly different picture from the IGC report in terms of trade. According to the USDA data, the world wheat trade, which was around 178 million tons in the 2018/19 season, amounted to approximately 195 million tons in the 2019/20 season and 197 million tons in the 2020/21 season. In the 2021/22 projection, the USDA predicts that the amount of wheat that will be subject to world trade will be around 203 million tons.
The ranking of the leading countries in international wheat trade did not change much compared to previous years. Russia, the EU, the USA, Canada, Australia, Ukraine, Argentina, and Kazakhstan take the lead in exports. Russia, which is estimated to have exported 39.5 million tons in the 2020/21 season, is expected to realize an export of around 40 million tons in the next season. In the same period, it is predicted that the EU will export 33 million tons, the USA 25 million tons, Canada 23.5 million tons, Australia 21 million tons, Ukraine 20 million tons, Argentina 13 million tons.
On the import side, countries such as Egypt, Indonesia, China, Turkey, Algeria, Bangladesh and Brazil stand out. The imports of these countries in the 2021/22 season are as follows: Egypt 13 million tons, Indonesia 10 million tons, China 10.5 million tons, Turkey 9 million tons, Algeria 6.5 million tons, Bangladesh 6.5 million tons and Brazil 6.6 million tons. These countries are expected to import similar amounts in the coming season as well.
WHEAT PRICES IN THE WORLD
Overall, global export prices for wheat had risen sharply over the past month (March) amid concerns about the weather across the northern hemisphere and strong uptrends in maize prices.
According to the USDA report;
• Canadian quotes rose $48/ton with dry conditions across the major wheat region of the Prairies, raising yield concerns for the upcoming year.
• The U.S. quotes increased $56/ton amid dry weather and deteriorating crop conditions in some areas.
• EU quotes were up $43/ton on strong export demand and concerns about unseasonably low temperatures.
• Australian quotes rose $35/ton with strong exports.
• Despite continued sluggish shipments, overall strength in the wheat market lifted Argentine quotes $27/ton.
• Even with ample supplies, Russian prices rose $34/ton but remain the most competitive among major suppliers as its upcoming crop is expected to be large.
As a result, the current tables and future expectations for wheat indicate that the production amounts are at a level to meet the consumption. This situation may cause prices to show a more horizontal course in the upcoming period. However, due to very minimal differences between production and consumption amounts, sudden imbalances in seasonal conditions and possible drought may cause the balance to be reversed. For these and similar reasons, there is currently no expectation that wheat prices will decrease in the market.
• International Grains Council (IGC), Grain Market Report, 27/05/2021
• United States Department of Agriculture Foreign Agricultural Service (USDA), Grain: World Markets and Trade Report, May 12, 2021
• Animal feed resources information system, Feedipedia
• Global Wheat Demand: Feeding the World by Milling and Feeding, Stefan Vogel -Global Strategist – Grains & Oilseeds May 2017, Rabobank