It's unbelievable how much more wheat crops worldwide are yielding this season than expected. Every month, estimates are being revised upwards. And those revisions are significant. Since September, the harvest estimate has been increased by 22 million tons. That's almost as much as the total Dutch wheat production over the past twenty years.
The US Department of Agriculture's September forecast is consistently considered a highly reliable prediction of the final harvest. Deviations from this forecast in subsequent months are normally limited. This year, however, the adjustments are very substantial. Adjustments of 8 to 9 million tons per month are not uncommon. Such changes are exceptional, and this reflects the fact that crops have performed, and are performing, much better than expected.
It's striking that the adjustments are primarily occurring in the major exporting countries, except for the United States. The estimate for the European Union is the highest this year. Since the harvest period, the EU harvest forecast has been increased by almost 7 million tons to 144 million tons.
A few months ago, Australia forecast a harvest of 31 million tons, but due to more favorable growing conditions, that estimate has since been raised to 37 million tons. The Canadian harvest is also 5 million tons higher than predicted this summer, reaching a record high of 40 million tons this year.
No nonsense
Recent years have shown that the US Department of Agriculture's harvest forecasters aren't just talking nonsense. Market participants are also taking this into account. Before the USDA presents its monthly results, a significant number of analysts are asked what they think of the department's findings. And if the results are slightly higher or lower, it has a direct impact on the market. This year, expectations are rising sharply, and adjustments will primarily have a price-depressing effect.
Although the revisions are substantial, the US Department of Agriculture is no slouch. Even hordes of analysts haven't predicted the harvest to be so much higher than previously anticipated. Moreover, other leading market players are facing the same problem this year. The International Grain Council (IGC) and the Food and Agriculture Organization (FAO) are also required to raise their figures monthly, and they are generally doing so along similar lines.
Perhaps statisticians are being somewhat conservative, leading to an underestimation of the harvest. If we look at wheat production trends over the long term, it appears that approximately 10 million tons more wheat is grown globally each year. This year, the jump is suddenly 37 million tons, and such large jumps don't happen often. It's the biggest increase since 2013-2014. That year, production suddenly shot up by 56 million tons, after the previous season's harvest was almost 40 million tons smaller.
Seven fat years
This season, however, completes a run of seven bumper years, during which global wheat production has increased year after year. In 2018-2019, production dropped to 730 million tons, but since then, the harvest has increased by over 137 million tons. More wheat was harvested year after year.
Amidst all the figures, one particularly stable factor stands out. The USDA is maintaining the grower price for wheat in the United States at $5 per bushel. This equates to €158 per ton, and that's not something growers are particularly pleased about, given the cost increases they've faced in recent years. At $5 per bushel, wheat has fallen to its lowest price since 2019-2020, when an average of $4,72 per bushel was paid.