May 16, 2008

 

Outlook turns mildly bearish for EU wheat due to large crop 

 

 

The global outlook for wheat is "moderately bearish" amid forecasts for a record large 2008-09 crop, according to analytical report Strategie Grains Thursday (May 16, 2008).

 

However the effect of the large crop is expected to be limited owing to high corn prices and because global wheat supplies will be tight going into the new harvest, the report said.

 

"World demand for wheat is set to rise very sharply, particularly in animal feeds at the expense of (corn)," said Strategie Grains.

 

Strategie Grains forecasts world wheat 2008-09 ending stocks to climb 9 percent to about 120 million tonnes, from about 110 million tonnes in 2007-08.

 

Although wheat supplies would not be as tight as they were in 2007-08, it is certainly not "heavy". Stocks will remain very low relative to demand, the report said.

 

Paris November milling wheat, traded on Liffe, fell to a nearly half-year low Thursday at EUR188/tonne. This is down 37 percent from the record high of EUR300/ton set in September 2007, but still up about 20 percent from year-ago levels.

 

Based a current crop estimate for a 15 percent increase in EU soft wheat output in 2008-09, Strategie Grains expects 3 million tonnes in leftover supplies when the marketing year ends June 2009, with France to hold over half of those stocks.

 

"The required correction is less than EUR20/ton, and could be reduced to almost nothing if the price of (corn) rises," the report said.

 

UK wheat is already at parity with US new crop corn, the report added.

 

Liffe second-month London feed wheat fell to a near 6-month-low of GBP149/tonne Thursday. This is down from the record high of GBP210/tonne set in February, but up from mid-May 2007 level of about GBP100/tonne.