By contrast, U.S. production fell 10 percent to 54.4 MMT due to drought conditions in the southern plains and too much rain in the northern plains.

Hard red winter (HRW) production fell 23 percent in 2011/12. Many farmers in North Dakota and Montana were unable to seed some hard red spring (HRS) and durum and production dropped an estimated 30 and 53 percent, respectively.

Relatively strong cash prices and good planting weather encouraged eastern farmers to plant a lot of soft red winter (SRW) and production increased 93 percent.

With near ideal conditions all season in the Pacific Northwest, white wheat production jumped 14 percent.

Estimated world wheat trade will be the second largest on record at 139 MMT if realized. According to USDA, Black Sea suppliers will capture close to 25 percent of the global market in 2011/12 after accounting for only 10 percent of total trade last year.

EU and U.S. wheat sales appear to be the most affected by the reemergence of Black Sea wheat. Projected EU exports are down 25 percent to 17.0 MMT and estimated U.S. exports are at 25.2 MMT, 28 percent below last year when global supplies were limited. U.S. commercial wheat sales as of Dec. 22, 2011 are 24 percent lower than last year at this time.

Since the beginning of winter wheat harvest in June 2011, average world wheat prices have dropped by about $100 per MT. That drop provided an incentive for U.S. wheat producers with the means to store a significant portion of their crops to withhold wheat from the market, especially spring wheat and durum.

When harvest ends soon in Australia and Argentina, a clearer picture of the quantity and quality of the 2011/12 global wheat supply will materialize. News out of Australia suggests the crop will be sizable but late rains may affect quality.

The Argentine crop is expected to be larger than previous predictions with much-needed moisture following a very dry planting season. Crop quality and freight costs are both variables that will help determine the competitiveness of Argentina’s wheat in the next few months and help shape the global market.

USDA will release its latest World Agricultural Supply and Demand Estimates report on Jan. 12.