Global wheat futures prices are still hovering near record highs, with CBOT wheat prices hitting an all-time high of $13.63 a bushel in March, surpassing the all-time high set in 2008. Based on the latest forecast of the US government, some analysts believe that the market is generally too optimistic about the prospect of wheat supply, and the situation of wheat supply and demand may become more severe in the future.

According to APP, the US Department of Agriculture (USDA) forecast released on Thursday local time, global wheat end-of-term stocks for the 2022-2023 sales year were about 267 million tonnes, the lowest level in six years and well below analysts' consensus forecast of 272 million tonnes.

Gap between supply and demand

In its report, the USDA estimates that the global wheat production in 2022-23 will be about 774.8 million tons, and the global consumption will reach 787.5 million tons in the same period. The demand for wheat will still far exceed the supply. Compared with the USDA's forecast of global demand, wheat supply in the future cycle is widely seen as close to an all-time low and well below the low level that has fallen this year.

Excluding china, the data show that the ratio of global wheat inventory demand (stocks-to-use) in 2022-23 will fall to 14.9 per cent from 16.4 per cent this year, the fourth lowest level ever. It set a record of 14.3% in 2007-08, compared with an average of 19% in the middle of the last decade. The USDA's forecast on Thursday is its first forecast for the 2022-23 cycle.

Some analysts believe that this may keep wheat prices rising until 2023, affecting food prices for global consumers and keeping costs high in importing countries. Wheat supply in 2022-23 may face further risks.

The most active Chicago wheat futures hit a two-month high of $11.83 a bushel on Thursday, hitting an all-time high of $11.96 after opening today. Euronext wheat traded on Euronext in Paris hit a contract high on Thursday.

The situation in Russia and Ukraine aggravates the shortage of wheat supply

Continuing tensions between Russia and Ukraine have also created great uncertainty in the wheat supply market. Ukraine is usually the top five wheat exporters, while Russia is the world's largest wheat exporter. The USDA expects Ukraine's final wheat harvest in 2022-23 to be the lowest in a decade.

The USDA estimates that production in Russia, the world's largest wheat exporter, is expected to increase by at least 6% over the same period last year, but Russian wheat may not be able to enter the global circulation market because of economic sanctions.

In addition, the USDA expects production from major suppliers, Argentina, Australia, India and the European Union, to fall by about 4 per cent. Bad weather in France and India is likely to put tremendous pressure on production there. Canada's wheat production is expected to rebound nearly 50% from last year's drought, but analysts are watching the planting speed and drought in the country's growing areas.

Us production expectations are not optimistic

The USDA forecasts that total winter wheat production in the US this year will be 1.174 billion bushels, 8 per cent lower than in 2021. According to the USDA, the abandonment rate of winter wheat in the United States is expected to reach 28% in 2022, which, if realized, would be the highest level since 2002. The data also takes into account drought conditions in Colorado, Kansas, Oklahoma and Texas.

One of the most surprising forecasts on Thursday was the USDA's forecast of 590 million bushels of hard red winter wheat (HRW) this year. Analysts had expected $685 million, down from $749 million last year. It will be the smallest HRW harvest in the United States since 1963.

The HRW forecast is arguably the worst range ever, but history suggests that the USDA's forecast may be reasonable. Over the past decade, the USDA's May HRW forecasts that, overall, years of poor harvests are closer to the final results.

But spring wheat production in the United States is also not optimistic, which may limit the country's production. As of Sunday, the sowing rate was the slowest since 2011, with North Dakota, the largest producer, sowing only 8 per cent of crop seeds, compared with an average of 37 per cent, and widespread rainfall this week is likely to exacerbate delays.