According to USDA’s preliminary World Agricultural Supply and Demand Estimates for marketing year 2010/11 (June-May), the world will produce less wheat while world demand will increase for the fifth consecutive year.

That will cut slightly into exportable supplies by year’s end, although global stocks will remain strong.

USDA forecasts world production to reach 672 MMT in 2010/11, which is 7.8 MMT less than 2009/10, but still the third largest crop on record. USDA expects the largest decrease in the United States, where it currently pegs production at 55.6 MMT, down 8 percent from 2009/10.

USDA predicts larger crops for Argentina and the EU. Argentina’s production, crippled by drought the past two years, fell to a 14-year low of 9.6 MMT in 2009/10. Although Argentina’s crop will still be below its five-year average of 13.7 MMT, it should rebound to approximately 12.0 MMT in 2010/11. USDA forecasts a 6.2 MMT increase for the EU, to 145 MMT.

The top three EU producers (France, Germany, and the United Kingdom) all increased planted area and expect larger crops in the upcoming year.

Both world consumption and world trade are forecasted to increase by 2 percent. Consumption is expected to reach a record 667 MMT, which would be an increase of 15.8 MMT over 2009/10. Global trade is pegged at 129 MMT, second only to 143 MMT in 2008/09.

USDA expects the U.S. to retain its place as the No. 1 wheat exporter in the world, with a projected 24.5 MMT in exports. This is up slightly from the 2009/10 current estimate of 23.5 MMT. As of May 6, exporters had reported U.S. wheat export sales of 22.3 MMT.

Global carry-in stocks for 2010/11 will be approximately 193 MMT, the largest since 2002/03. However, the combination of reduced production and record demand will reduce exporter stockpiles as the year progresses.

While USDA estimates 2010/11 ending stocks at 198 MMT, up 5.0 MMT from 2009/10, USDA noted that China’s stocks should increase by 8.3 MMT. This implies a decrease in stocks for the rest of the world (ROW).

China’s forecasted ending stocks, at 63.7 MMT, account for 32 percent of the 2010/11 projected ending stocks. Global ending stocks outside China are projected to fall 6.0 MMT, from 140 MMT in 2009/10 to 134 MMT in 2010/11.