(The opinions expressed here are those of the author, a market analyst for Reuters.)

NAPERVILLE, Illinois - Chicago wheat futures this week hit their lowest levels in almost three years, yet relative to demand, exportable global wheat supplies are expected to approach historic minimums by mid-2024.

In theory, that news should limit further slippage in world wheat prices, but there is one problem: this is a recurring story that has yet to become reality.

Russia’s early 2022 invasion of Ukraine sent wheat prices to new highs as the two countries account for nearly 30% of global exports. Concerns over Ukraine’s production and export potential have lingered ever since, though this has largely been a bearish factor for prices rather than a bullish one.

Monthly supply and demand estimates from the U.S. Department of Agriculture published on Tuesday suggest wheat stocks-to-use among major exporting countries will fall to 13.5% in 2023-24 from 15.1% in 2022-23.

The distinction between global stocks and stocks among exporting countries is important because top wheat grower China carries about half the world’s supply but trades a relatively small amount.

A 13.5% stocks-to-use is the second lowest on record behind 13.1% in 2007-08, another extremely volatile time for wheat prices. The recent five-year average in exportable wheat stocks-to-use is 15.7% and the highest within the last decade was 18.9% in 2017-18.

CBOT wheat futures are about a third stronger so far this month than they were in September 2017, for example, but they are down more than 30% from September 2022.

A year ago, exportable wheat stocks-to-use were predicted to reach 15-year lows by mid-2023, and two years ago, mid-2022 was expected to feature all-time lows. Neither scenario panned out, and this pattern of the perpetually upcoming dip in wheat supplies has likely created fatigue among grain traders.

USDA’s latest forecasts showed a supply contraction among key exporters based on poor weather. Wheat crop outlooks for 2023-24 in Argentina, Australia, Canada and the European Union fell a combined 7 million metric tons (mmt) from last month’s figure, and those countries are slated to export 91 mmt this year.

UKRAINE, ETC.

Ukraine’s wheat harvest and export expectations have fluctuated greatly since early 2022, but the market has been consistently underestimating them.

For example, USDA’s year-ago estimates for the recently concluded 2022-23 marketing year showed Ukraine wheat exports at 11 mmt versus the latest figure of 17.1 mmt.

Ukraine’s recently harvested 2023-24 wheat crop is now seen topping last year’s versus original forecasts for a 20% decline, though USDA still has exports falling by 36%, likely due to the lack of a clear agreement between Russia and Ukraine regarding Black Sea trade.

Based on recent trends, one might naturally expect Ukraine’s 2023-24 wheat exports to eventually surpass current estimates, but the country’s Sept. 1 to 13 grain shipments fell nearly 50% from the same period a year ago.

As of Aug. 30, Ukraine had exported around 4.3 mmt of wheat since 2023-24 began on July 1, up from about 4 mmt in the same period a year earlier, so this month’s decline is a very recent development that is worth watching.

Just before the Russian invasion in February 2022, exportable wheat stocks-to-use had been slated for all-time lows by mid-2022, suggesting Ukraine cannot fully explain why global wheat supplies have been consistently underestimated.

No. 1 global wheat exporter Russia plays a large part in that, having shipped a record 46 mmt in 2022-23, well above the original outlook of 39 mmt after last year’s crop far surpassed expectations. Russia is set to export 49 mmt of wheat in 2023-24.

Karen Braun is a market analyst for Reuters. Views expressed above are her own.