August 16, 2006

Low wheat production prompts worries about global supply

The latest report by the USDA predicting that world wheat production for 2006/07 would be 20 million tonnes lower has prompted worries from analysts.

Current production is expected at 598 million tonnes while consumption levels is expected to reach 615 million tonnes.

Although the forecast predicted lower consumption levels, world stocks of wheat is expected to slip from 151 million tonnes to 128 million tonnes.

Most analysts feel that stocks at that level is dangerously low and any major climatic event could see prices skyrocketing, bringing about instability in the market.

Meanwhile, the USDA has increased its forecast of coarse grain supplies, maize and barley, with production estimated at 973 million tonnes.

Increased supplies of US maize are expected to make up for a fall in the EU-25 and Ukraine. However, global end-of-season stocks of coarse grains is expected to fall 20 million tonnes from last year's 167 million tonnes to 147 million tonnes.

The US maize crop is a key world crop that would influence all grain prices, the UK's Cereals Authority cautioned. Thus, final developments leading up to the harvest, along with plantings for 2007, would be closely watched, especially since global stocks have hit historically low levels, the organisation said.

Yields of all cereals are expected to fall in most states in the EU, especially in Germany, Poland and France, according to the European Commission. The European harvest is expected to fall by 4 percent, compared to last year.