Under the revised estimated production of wheat in Argentina for crop season 2016/17 that our Board of Trade published last week, we update the balance sheet for the cereal. With an output of 17 million tons, domestic consumption will stand around 6.6 million tons (including the use for seeding) while exports may add up to 11.2 million tons. Therefore, ending stocks may fall to barely 800,000 tons, a minimum for the last 15 years, while the stock/consumption ratio will drop to 4% supporting prices.
On the supply side, based on a seeded area of 5.32 million hectares and a lost area of 165,000 hectares, harvested area is now estimated at 5.16 million. Average yield was kept unchanged at 3.3 tons/hectare. Therefore, production is now estimated at 17 million tons for crop season 2016/17 in our country, the maximum volume in almost 10 years and 50% over the average for the pasts five years.
Meanwhile, with seeding labors of the 2017/18 crop year soon to be over, we expect an increase in total wheat area for second year in a row. Seeded area with wheat may rise to 5.5 million hectares, slightly above the historical average of 5.4 million.
On the demand side, we estimate domestic consumption for the 2016/17 marketing year at 6.6 million tons, based on a milling usage of 5.9 million and another 0.7 million to be used as seed for the next crop season.
Meanwhile, exports are outstanding this year, and we estimate total shipments for the 2016/17 marketing year at 11.2 million tons, a maximum on record for Argentina that almost double the average amount delivered in the last five years.
With these numbers, we have a total supply of 18.5 million tons for season 2016/17 and a total consumption of 17.8 million tons. As a result, ending stocks may fall below a million tons, the least volume in many years.
What about next marketing year?
Excessive humidity is preventing the fulfillment of seeding in different areas. Based on a projected area of 5.45 million hectares and a trend yield, an increase in production will be quite limited in comparison with potential demand.
If total wheat output in the 2017/18 season is 17.6 million tons and domestic consumption stands around the average volume for the past five years, argentine exports could hardly keep peace with the previous year’s one. Even projecting a retraction to 11 million tons, ending stocks won’t be able to avoid a new retraction, given support to local prices.