by Ann Courtmanche, U.S. Wheat Associates market analyst

While many people have commented on this year's record world wheat production hitting 617 million metric tons (MMT), few have remarked on the record world wheat consumption at 606 MMT, 17 MMT higher than the prior five-year average.

Over the past five years, total consumption in the rest of the world has increased from 548 MMT to 572 MMT. Why the increase? Much of the growth in wheat consumption is the result of population growth, which slowly boosts food use generally. In India, total consumption may reach a near-record 72 MMT in 2004/05 due to increased food use, according to USDA statistics. Wheat use in Argentina, Canada, Pakistan and Turkey are also forecast to increase to their highest levels since at least 1996/97, due largely to increased food use, but also increased feed use.

However, per capita feed and food use is also falling in at least one key wheat market. In China, consumption will drop by 8 MMT in five years from a record 110 MMT in the 2000/01 marketing year to 102 MMT this year, according to USDA statistics. A USDA Economic Research Service report cites increased urbanization and higher per capita income as the cause of lower wheat consumption in China.

The USDA estimates U.S. domestic wheat consumption for 2004/05 at more than 33 MMT, just above the five-year average. USDA's domestic consumption estimate in 2004/05 is comprised of 25 MMT food, 2 MMT seed and industrial, and 6 MMT feed and residual use.

Perhaps the record world wheat consumption is helping to fend off a bearish market. This year, U.S. export sales remain as strong as last year and U.S. prices are firm.