March 30, 2007

Worldwide shortfall of wheat imminent 
 

Analysts forecast a huge shortfall of wheat which could affect worldwide supplies due to the increasing unsteadiness and low production of world wheat output.

World wheat stocks currently stand at 121 million tonnes, the lowest since 1981/82. The world wheat stocks-to-use ratio currently stands also at its lowest to 20 percent.

The world market is presently adjusting to these low stocks, but this is coming with increased volatility, according to Keith Davis, managing director of Glencore Grain UK Ltd, adding world wheat production in 2006/2007 will be short of 600 million tonnes.

In the 2006/07 season, the world coarse grain stocks-to-use ratio stands at 11.76 percent, the lowest on record due to its demand from the bioethanol sector.

On 2007/08 season, Davis said preliminary forecast for world coarse grain production would rise to around 624 million tonnes but fluctuations could be as much as 47 million tonnes either side of the estimate.

Meanwhile, Davis said demand and plantings for corn will also continue to rise based on the USDA figures which point to a three-fold increase in US corn use for ethanol production.

The demand for renewable fuel will maintain the figures in the future, he said, adding that the 10 percent target for renewable fuels is sustainable in the long term and would probably not increase.

Over the next few years, Davis said the US will 'reactivate' around 1.86 million hectares to accommodate a rise in coarse grain plantings as the EU will likely abolish compulsory set-aside to free an estimated 3.7 million hectares for additional grain plantation.

Furthermore, EU's land reforms for sugar are expected to free a further 650,000 hectares for grain output. Russia could also become a significant player on world grain markets, should all the available agricultural land be pressed into service, concludes Davis.