Although January marks the start of a new calendar year, the 2011/12 wheat marketing year is just past its mid-point.

With the Northern Hemisphere’s harvest complete and the Southern Hemisphere’s nearly completed, world supply and demand are both projected at record levels.

The production and trade landscapes look different from last year as some key players returned to the market and increased global competition.

According to theU.S. Department of Agriculture(USDA), estimated 2011/12 global wheat supplies are at a record 889 million metric tons (MMT) despite four consecutive years of record-setting consumption levels.

World wheat production is on pace to be the largest on record at 689 MMT, helping meet that growing demand.

Few changes contributed to the increase global production more than the sharp rebound in the Black Sea region. The region harvested an estimated 112 MMT this year, 38 percent more than the 81.0 MMT produced in a drought-stricken 2010/11.

Moving west on the continent, European Union (EU) production this year was larger than initially expected, adding to the global supply. An estimated harvest of 137 MMT is up 1 percent from last year and beat pre-harvest predications of 132 MMT.

U.S. production down 10 percent

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 salesas 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 Estimatesreport on Jan. 12.