March 16, 2007

Strategie Grains: EU 2006/07 wheat balance tight, outlook fragile

Supply and demand of wheat in the European Union is closely balanced, leaving the outlook for the remainder of the 2006/07 marketing year "fragile," according to Strategie Grains monthly report released Thursday (Mar 15).

With few carryover stocks, the market outlook for 2007/08 is also volatile. And despite improved crop prospects, world wheat stocks will remain low in 2007/08, said Strategie Grains.

There are improved crop outlooks for major wheat producers, US, EU, Ukraine, Australia and India, said Strategie Grains. However, it also expects reduced North African wheat output and a tight world corn balance sheet.

Strategie Grains forecast that the EU will have 12.5 million tonnes of surplus wheat available for export in 2007/08.

"This level should be sufficient to meet demand likely to be addressed to the EU without leaving a significant surplus," Strategie Grains said.

The report warned that with more than three months to go before the 2007/08 harvest, the balance situation is still to be determined.

EU wheat prices could drop in the short-term if crops in the Commonwealth of Independent States are in line with current projections, said Strategie Grains. However, "if the outlook for the world's harvests deteriorates, prices would have an increase potential".