AGRAVIS expert Bernhard Chilla analyses the markets
“The sowing area for winter wheat in the EU is falling ahead of the harvest. However, global shortages will be averted unless the harvest in Russia falls far short of the 2017 level.”
Wheat production outlook for 2018/2019 – another world record harvest?
World record wheat production was reported in 2017/2018 thanks to extremely good wheat harvests in Russia and China. The record wheat harvest in Russia and an outstanding harvest in France also helped to overshadow decreases in production quantities compared to last year in the USA, Ukraine, Australia and Argentina.
Russia set the export pace in business year 2017/18: the record exports are expected to surpass the previous year’s level by some 10 million tons. However, Russia cannot supply the whole world with wheat alone; other countries must help to meet growing global demand. Exports from Ukraine, Argentina and Canada are above average, with export potential already 75–80 per cent utilised (as in Ukraine). On the other hand, exports from countries that market observers tend to focus on (USA and France) have fallen short of expectations. Owing to low domestic supply, high domestic demand and some inadequate wheat quality, Germany exported less than in previous years.
The US Department of Agriculture expects global wheat supplies to rise in 2017/18, but the fact that overall stocks in exporting countries will not increase is often overlooked. Supplies are expected to increase in Russia and the EU in particular. In all of the other main export countries, including Argentina for example, final stocks will remain at very low levels, or steadily deplete as in Ukraine (where they will fall to half the level of two years ago).
Although trends are only just emerging for business year 2018/19 and it is too soon to make definite statements, some initial indications of the cultivation area for the coming harvest are evident. The sowing of wheat is complete in the northern hemisphere.
The above analysis is explicitly not intended to be an investment recommendation! The author merely presents his personal opinion after assessing various market criteria. Neither the author nor AGRAVIS Raiffeisen AG can make any kind of forecast regarding the development of commodity prices and explicitly point out that these can be subject to great fluctuation and be impacted by many, sometimes unknown factors.