March 10, 2010

High global wheat production will keep prices down

The grain market is expected to remain flat as a surplus of wheat in the northern hemisphere, and good seasons in Europe put a dampener on prices.

A report from the USDA due out later this week is expected to confirm the grim news. It is expected huge crops in South America, India and Russia will stop the market going up.

Grains analyst Lloyd George said Russia is also talking about export subsidies. "I think it is fair to say that we're going to see renewed pressure on prices, as the weight of these increasing stocks just weigh on markets over a period of time," he said.

95% of the world's wheat is produced in the northern hemisphere, and many of the big grain producers have had a bumper season.

With the rain falling in Australia, farmers will soon decide how much they'll plant, taking a gamble with grain.

"Looking at another big wheat crop, we've had a build up in stocks. Buyers are comfortable and waiting for the wheat to come to them," George said.

The Australian Bureau of Agriculture and Resource Economics recently tipped the world wheat price would decline about 6%.