Low prices last year induced a decline in global wheat area, and as a result production increased less than 1%, helping to support an expected price i

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1 Wheat

2 Low prices last year induced a decline in global wheat area, and as a result production increased less than 1%, helping to support an expected price increase in 2017/18. It is expected that prices will recover from oversupply and the normal price relationship between wheat and other grains will be re-established in the short to medium term. With the assumption of normal weather and average yields in coming years, production is expected to maintain levels that will balance global supply and demand at more normal, stable prices. These somewhat higher prices than in the recent past will ensure that wheat successfully competes for land against other crops. Despite current moderate prices, the underlying costs of production have risen. Fertilizers and other agricultural chemicals, and other inputs are pricier than just a few years ago, but those prices are not expected to appreciate rapidly. Energy prices are only projected to increase moderately in the next few years. This will help producers meet global wheat demand without large increases in prices. Low prices in 2016/17 resulted in an estimated 1.8 million hectare reduction in wheat area worldwide. The largest reductions were in the U.S., EU, and Kazakhstan more than offsetting gains in Australia and Morocco. Going forward, area is expected to bounce up in 2018/19 in response to this year s price recovery, and then gradually increase over the next ten years. Despite lower area globally, wheat production edged up seven mmt due to an increase in yields. However, this rise in output is insufficient to pressure prices further downward. Inventories are expected to absorb an increasing amount of supply this year, and the increase in food use will more than offset a decline in feed use By the end of the baseline period, wheat area is projected to be around 225 million hectares and production will increase primarily through the expected 1% annual yield growth. Total wheat consumption will increase primarily from population growth, whereas per capita wheat food consumption will be stable throughout the projection period. Nevertheless, income impacts on wheat vary across regions and income levels. Per capita consumption is declining in high-income countries where diets are less based on grains and more on meats and other foods. In many emerging countries, per capita consumption is already high and income growth will contribute little to demand. Health and weight issues also contribute to declining per capita consumption in developed countries. While grains, especially whole grains are important dietary components, the caloric intake of many populations in higher-income countries is well beyond daily nutritional requirements and a growing number of societies are faced with obesity issues. For developing countries, wheat per capita consumption is increasing as incomes above subsistence levels allow the population to diversify diets beyond traditional staples. Globalization also plays a role in changing diets in some nations as foods from other countries become available.

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4 Wheat feed use is expected to decline modestly this year and next as higher prices result in switching back to feed grains. Decreased feed use will occur in Australia, Canada, China, and the U.S, but will be maintained or expand in traditional wheat feeding regions such as the former Soviet Union and Europe. Cattle inventory declines have slowed in Russia and Ukraine, and hog and poultry production have turned the corner in these countries, as well as Kazakhstan. During the baseline period, livestock production is expected to increase again in major wheat feeding regions, and accompanying wheat feed use is expected to increase. Wheat feed use tends to increase or decrease in a given year depending on local wheat and competing feedgrains production and prices. When producers enjoy large wheat crops, wheat feeding generally increases in those countries, especially if some of that wheat is of lower quality. Wheat trade is expected to be similar to last year s levels in 2017/18, although the share of specific importers and exporters will shift. Particularly, production changes in exporting countries will result in substantial shifts in trade patterns this year. Argentina, Australia, EU, Ukraine, and the U.S. are seeing lower exportable supplies. Exports are expected to increase relative to last year in Canada and Russia. Similarly some major importers are expected to show changes in 2017/18. Egypt and Indonesia are expected to increase purchases on the international market this year. Egypt will remain the single largest export market throughout the baseline. Algeria, Morocco, Nigeria, and Brazil also rank consistently among the top importers. Rising global excess demand over the projection period will be met primarily by traditional major exporting nations. Trade will cover 19% to 20% of worldwide consumption. Most major import destinations are expected to increase dependency on the world market in coming years. Globally, inventories are expected to increase by the end of 2017/18 by approximately 16 mmt. The extensive buildup from the sharp drawdown of 2012/13 is expected to last another few years, but at a much slower pace, then inventories are projected to stabilize. This year s increase in ending stocks is expected to occur primarily in China and Russia. A sizable reduction is expected for the U.S. China s grain policies result in holding a large proportion of annual needs in reserve to buffer production shortfalls and high prices. In the past five years, China has been building wheat stocks, resulting in a substantial rise in the stocks-to-use ratio, with a full year s consumption requirements expected to be on hand at the end of 2017/18, compared to about 22% for the rest of the world. Because China s grain markets are still relatively insulated from world markets, the inventories held by that country are not available to buffer production shortfalls in other parts of the world. As a result, that country s higher proportion of stocks does not reduce world market volatility.

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6 World Wheat Supply & Utilization 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 (Million hectares) Area Harvested (Metric tons per hectare) Yield (Million metric tons) Supply , , , , ,139.4 Production Beginning stocks Net imports Utilization Feed and residual Food, seed & industrial Ending stocks Net exports Total Demand , , , , ,139.4

7 World Wheat Supply & Utilization 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 (Million hectares) Area Harvested (Metric tons per hectare) Yield (Million metric tons) Supply 1, , , , , , , , , , ,254.1 Production Beginning stocks Net imports Utilization 1, , , , , , , , , , ,091.0 Feed and residual Food, seed & industrial Ending stocks Net exports Total Demand 1, , , , , , , , , , ,254.1

8 Wheat Area Harvested 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 (Million hectares) Algeria Argentina Australia Brazil Canada China Egypt EU India Iran Japan Kazakhstan Mexico Morocco Nigeria Pakistan Russia South Korea Turkey Ukraine United States Uzbekistan Vietnam Rest of world World total

9 Wheat Area Harvested 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 (Million hectares) Algeria Argentina Australia Brazil Canada China Egypt EU India Iran Japan Kazakhstan Mexico Morocco Nigeria Pakistan Russia South Korea Turkey Ukraine United States Uzbekistan Vietnam Rest of world World total

10 Wheat Trade 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 (Thousand metric tons) Net exporters Argentina 10,715 11,185 6,768 5,096 9,481 12,921 3,548 2,248 5,266 9,588 13,795 Australia 8,634 7,371 14,632 14,706 18,478 24,533 18,504 18,458 16,432 15,965 22,500 Canada 19,114 15,736 18,491 18,611 16,162 16,892 18,499 22,849 23,621 21,593 19,672 EU-28 8,767 5,627 17,722 16,935 18,465 9,366 17,510 28,056 29,476 27,770 22,033 India -6,627-1, ,808 6,028 3, ,380 Kazakhstan 8,125 7,879 6,028 8,207 4,855 11,838 6,271 8,060 4,939 7,533 7,320 Pakistan , ,288 1, Russia 9,862 11,780 18,190 18,392 3,894 21,077 10,136 17,747 22,470 24,724 27,306 Ukraine 3, ,964 9,309 4,261 5,352 7,145 9,687 11,242 17,404 18,066 United States 21,408 31,298 24,179 20,704 32,509 25,527 24,161 27,318 19,407 18,100 25,501 Total net exports 83,917 90, , , , , , , , , ,410 Net importers Algeria 4,860 5,883 6,307 5,155 6,516 6,496 6,455 7,462 7,242 8,139 8,404 Brazil 8,010 6,003 6,008 5,996 4,158 5,302 5,773 6,986 3,683 5,686 6,649 China -2,395-2, ,955 1,991 5,884 1,123 2,747 3,662 Egypt 7,288 7,657 9,806 10,325 10,375 11,418 8,223 9,955 11,006 11,371 10,745 Indonesia 5,409 5,006 5,275 5,152 6,392 6,235 6,910 7,090 7,195 9,775 9,872 Iran ,750 4, ,491 4,685 5,115 3,300 1,000 Japan 5,330 5,362 4,884 5,206 5,577 6,058 6,323 5,854 5,616 5,457 5,634 South Korea 3,352 3,000 3,277 4,365 4,636 5,057 5,295 4,144 3,789 4,243 4,430 Mexico 3,059 1,881 1,936 2,357 2,583 4,230 3,094 3,317 3,367 3,237 4,251 Morocco 1,669 4,077 3,642 2,218 3,847 3,543 3,572 3,713 3,848 4,311 5,157 Nigeria 3,265 2,633 3,020 3,440 3,482 3,421 3,918 4,080 3,844 4,010 4,572 Turkey ,230-1, ,888-1,149-1,641 Uzbekistan ,240 1,277 1,118 2,048 1,513 1,924 2,030 2,462 2,500 Vietnam 1, ,820 2,342 2,552 1,506 1,980 2,066 2,819 5,307 Rest of world 44,050 46,621 57,464 57,632 56,842 62,561 59,428 66,956 69,629 74,769 76,704 Total net imports 86,292 87, , , , , , , , , ,246 Residual -2,375 2,894 6,418 3, ,427-7,263 7,198 4,730 2,740 4,164 (Dollars per metric ton) US SRW Gulf Port Price

11 Wheat Trade 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 (Thousand metric tons) Net exporters Argentina 11,783 11,510 12,672 13,015 13,318 13,678 14,033 14,344 14,617 14,885 15,166 Australia 15,615 17,378 18,406 18,802 18,809 18,850 18,908 18,984 19,055 19,113 19,165 Canada 21,521 19,515 19,894 20,067 20,315 20,566 20,840 21,063 21,268 21,426 21,580 EU-28 21,142 22,472 24,120 25,123 26,177 26,966 27,421 27,575 27,656 27,581 27,539 India -1,925-2,185-2,050-1,926-1,969-2,064-2,161-2,220-2,329-2,419-2,504 Kazakhstan 7,423 7,319 7,565 7,892 8,224 8,550 8,856 9,147 9,424 9,694 9,944 Pakistan Russia 34,405 27,855 24,581 25,561 26,542 27,573 28,604 29,811 30,829 31,809 32,704 Ukraine 16,918 17,183 17,290 17,631 18,018 18,304 18,496 18,652 18,798 18,877 18,916 United States 22,456 20,949 20,599 20,360 20,273 20,335 20,347 20,562 20,441 20,443 20,442 Total net exports 149, , , , , , , , , , ,101 Net importers Algeria 7,664 7,754 7,885 8,002 8,076 8,181 8,272 8,363 8,407 8,443 8,471 Brazil 7,291 7,721 7,739 7,744 7,720 7,687 7,651 7,619 7,595 7,577 7,558 China 3,200 3,066 3,036 2,910 3,067 3,261 3,428 3,511 3,566 3,584 3,581 Egypt 11,470 11,045 11,343 11,975 12,481 12,893 13,272 13,619 13,994 14,361 14,733 Indonesia 11,010 10,040 10,154 10,273 10,388 10,502 10,611 10,714 10,817 10,917 11,013 Iran -47 1, ,033 1,094 1,105 1,098 1,068 Japan 5,532 5,440 5,440 5,440 5,440 5,440 5,440 5,440 5,440 5,440 5,440 South Korea 4,374 4,384 4,305 4,256 4,237 4,230 4,237 4,234 4,250 4,264 4,320 Mexico 4,033 4,098 4,137 4,172 4,211 4,246 4,291 4,325 4,375 4,431 4,494 Morocco 4,680 4,924 5,100 5,269 5,426 5,554 5,673 5,792 5,906 6,015 6,120 Nigeria 4,760 4,827 4,944 5,071 5,215 5,367 5,521 5,677 5,837 6,000 6,165 Turkey -2,049-1, ,091-1,279-1,470-1,702-1,856-1,968-2,002 Uzbekistan 2,609 2,385 2,521 2,686 2,813 2,873 2,950 3,011 3,080 3,143 3,191 Vietnam 3,646 2,602 2,681 2,799 2,879 2,961 3,045 3,130 3,218 3,309 3,405 Rest of world 81,085 73,487 73,844 75,994 77,943 79,796 81,176 82,792 83,648 84,350 84,886 Total net imports 149, , , , , , , , , , ,441 Residual (Dollars per metric ton) US SRW Gulf Port Price