November 10, 2010

China's growing feed-wheat need tightens world supplies

China is expected to raise its demand for feed wheat by two million tonnes, which will tighten global ending stocks after months of concern about drought in the Black Sea bread basket, the USDA said Tuesday (Nov 9) in its latest forecast.

The surprise jump in Chinese demand offset news that world wheat production was forecast higher on an improving outlook in South America and Australia.

As a result of China's demand, 2010/11 global ending stocks were projected 2.2 million tonnes lower.

But global wheat production was projected 1.5 million tonnes higher for 2010/11 as increases by Argentina, Australia, Europe and Paraguay more than offset reductions by the US, Russia and other Black Sea producing nations.

"Global wheat supplies are projected slightly higher for 2010/11 as higher world production offsets lower carrying, mostly reflecting higher 2009/10 wheat feeding in China," USDA said in its November report.

Argentina production is raised 1.5 million tonnes as favourable returns and timely rains boost area and yield prospects, USDA said, adding Australia's production was boosted by one million tonnes on better prospects in eastern growing regions.

US wheat ending stocks, however, were cut to 848 million bushels, below average market expectations of 855 million bushels and the 853 million bushels projected by USDA last month.

"US wheat ending stocks for 2010/11 are projected five million bushels lower this month as downward production revisions of 11 million bushels for Hard Red Spring wheat and four million bushels for durum more than offset higher projected imports," the agency said.