August 13, 2010

 

US expects lower global wheat production

 

 

The US government has reduced global wheat crop estimates amid Russia's drought and Pakistan's floods, but does not expect a global crisis. 

 

The USDA reduced its forecast for the world wheat harvest by 2.3% on Thursday (Aug 12) to 645.73 million tonnes in its August report, below the 650.02 million tonnes traders expected.

 

However, its authoritative monthly report said the world stocks-to-use ratio, the amount of wheat available in proportion to consumption, was estimated at 26%, well above the 20.3 % seen in 2007/08 when food shortages sent prices soaring and led to riots.

 

The lowered estimate prompted a surge in Chicago wheat futures prices, which had fallen 10% from two-year highs touched last week. At 9:33 a.m. CDT (1433 GMT), CBOT September wheat futures were up 19 cents at US$7.13-3/4 a bushel.

 

Russia's President Dmitry Medvedev, visiting southern agricultural areas, noted that many farmers were close to bankruptcy. "Grain has been lost on one quarter of the sown area," he said.

 

In response to its worst drought in a century, Russia has imposed a grain export ban which is due to come into force from August 15 to restrain domestic food prices.

 

Russian Agriculture Ministry data showed the country may export no more than 4.5 million tonnes of grain in the 2010/11 crop marketing year and may have none to export after the ban expires on December 31.

 

"With a crop of 60-65 million tonnes, exports may be 2-4.5 million tonnes," it said in a presentation.

 

Meanwhile, the USDA data showed unexpectedly strong production forecast for the US, which will be expected to fill any global deficit. It pegged the 2010/11 US all wheat crop at 2.265 billion bushels, helping maintain world wheat stocks about 40% above the crisis levels seen in 2007/08.

 

Washington was already preparing to grab the chance offered by Russia's export curb to meet demand in markets such as Egypt, the world's largest wheat importer and major Russian customer.

 

"There is no question this is an opportunity for us and we're going to take advantage of it," said Agriculture Secretary Tom Vilsack.

 

While there was no global crisis in sight, the wheat situation in Pakistan was grim due to deadly floods.

 

Ibrahim Mughal, president of a national farmers' association, estimated up to 500,000 tonnes of wheat stocked with farmers has been washed away in Asia's third-largest wheat producer. A Food Ministry official said up to 600,000 tonnes of wheat stocks had been damaged or destroyed in the flood.

 

"The devastation to crops is immense. I think it's safe to say it will take some billions of dollars to recover," UN humanitarian operations spokesman Maurizio Giuliano said.