Washington, DC, USA
February 18, 210
by Chad Weigand, U.S. Wheat Associates Market Analyst
The U.S. Department of Agriculture (USDA) released its long-term agricultural projections update last week, forecasting supply and demand until 2019. The report anticipates continued growth in world wheat trade and consumption and higher feed use. USDA also expects the Black Sea region’s share of global wheat trade to grow.
The report relies on several macroeconomic assumptions about policy, weather, and international developments.* USDA assumes a steady rebound in the global economy, for example, which it says would support consumption, trade, and agricultural commodity prices in the longer run.
USDA projects world wheat trade to increase by 25 million tons, or 20 percent, over the next decade. Demand will grow mainly in developing countries with economic recovery and population growth. USDA estimates economic growth at 5.6 percent annually in developing countries, compared to 2.2 percent for developed countries. The report predicts Sub-Saharan Africa countries, for example, will imports 4.8 MMT more wheat every year by 2019. Over the past 10 years, the U.S. market share in Sub-Saharan Africa stands at approximately 63 percent.**
A major factor driving domestic wheat consumption will be higher feed use. USDA forecasts biofuel demand to increase steadily, which will support corn prices over the long-term. Anticipating a narrowing price spread between corn and wheat will allow wheat to compete for greater domestic feed use and grow from 4.6 MMT to 6.4 MMT in 2019, USDA expects.
USDA predicts that while the world wheat trade and consumption will increase over the next decade, the Black Sea region will grow more competitive over the next 10 years with new investments and low costs of production. As a result, USDA calls for the Black Sea region market share to rise to 35 percent by 2019, up from 22 percent today. USDA projects U.S. exports at an average of 25 MMT per year over the course of the decade.
USDA notes, however, that because of the Black Seas region’s highly variable weather and yields, its production and trade share year-to-year will be volatile. As U.S. market analyst Bob Bresnahan said at the 2009 U.S. Wheat Regional Trade Conference in Sharm El-Sheikh, Egypt, major grain price shifts follow supply shocks. In the last shock, the world’s wheat importers turned to U.S. wheat producers, their most reliable suppliers.
You can read the entire report online at http://www.ers.usda.gov/publications/oce101/.
* Note: The report does not account for possible domestic or external shocks that could affect agricultural markets.
** Source: Global Trade Information Service
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