The global wheat market has increased dramatically in size over the years. Since the 1960s, the world’s wheat trade has increased four times over with 120 million metric tons (MMT) being traded on the world market last year. The global wheat trade is the direct result of supply from large producing countries exceeding demand; while several countries who consume wheat lack the necessary growing conditions to produce any at all. That notion combined with the fact that the world now produces 188 MMT, or 38%, more wheat than it did just 20 years ago. Following the nations who make up the largest producers, consumers, importers, and exporters of wheat will help you get a grasp on market conditions. These countries can be good indicators of market fundamentals because they are the largest market participants in the wheat futures market.
China is by far the leading producer of wheat in the world. With 150.5 MMT of wheat planned for the 2009 harvest, they alone will account for 17% of the world’s wheat production. The rest of the global leaders in wheat production and their percent of global market share in respective order are (percent of global production): India (11%), U.S. (10%), and Russia (9%). Altogether they produce 47% of the world’s wheat. The European Union as a group is also a large producer of wheat with 113 MMT, or 17% of global production.
Just because a country is a large producer of wheat doesn’t necessarily mean they are a large exporter. For example, China is the global leader in production, but they also consumer significantly more wheat than any other nation in the world. In fact, China doesn’t even crack the top 10 list of wheat exporters. The U.S. on the other hand is the third largest producer with 10% of the world’s wheat production, but they are by far the number one exporter. Last year the U.S. exported 34.3 MMT of wheat, which accounted for 30% of global exports. Interesting enough, the expected 2009 market share of exports held by the U.S. is going to experience a rather meaningful decline. Exports are expected to drop by over 21% while the world is expected to experience an increase in exports by 8%. The result is U.S. exports as a percent of global figures will fall from 30% last year to 21.5% this coming harvest. These trends are very important to the wheat futures market. A good place to start doing some fundamental research is to look into the USDA FAS’ Production, Supply, and Distribution database to see who’s picking up the U.S.’ slack in exports. Trading wheat futures markets requires at least a basic understanding of the global wheat market.
Trading in futures and options involves a substantial degree of a risk of loss and is not suitable for all investors. Past performance is not indicative of future results.
(USDA FAS- World Wheat, Flour, and Products Table)
(USDA FAS- World Wheat and Coarse Grains: Supply and Demand)
(USDA FAS- World Wheat Production, Consumption, and Stocks)
