November 23, 2007

 

World wheat output to reach record at 648 million tonnes
 

 

World wheat production should reach a record high of 648 million  tonnes in 2008-2009, with the added supplies expected to trim prices from the current, historically high levels.

 

Speaking at the Global Grain conference in Geneva on Thursday (November 22 2007), Dan Basse, president of the Chicago-based AgResource Company, said it has been the high prices that has caused farmers to react.

 

His estimate assumes favorable weather and improved yields and would be well above the 2007-08 harvest of 603 million tonnes, as currently estimated by US Department of Agriculture.

 

Basse said the bumper crop would drive wheat prices down.

 

He estimated nearby Chicago Board of Trade wheat futures would trade between US$7.70 and US$8.50 a bushel for the next few months, but longer-term to slip back closer to US$5.00-US$5.50. Front-month CBOT wheat closed up the US$0.30 daily limit Wednesday at US$8.03 1/2, but was closed Thursday for Thanksgiving.

 

He also expects Liffe's Paris milling wheat futures to drop to EUR185 a tonne in the nearby contract by mid-2008 as newly harvested wheat eases supply tightness. The nearby contract was trading at EUR225/tonne as of 1508 GMT Thursday, while the November 2008 contract was at EUR188.75/tonne.

 

Basse said grain price volatility will be a major theme in 2008.

 

"Bullish, dynamic and volatile ag markets lie ahead - but unlike last year where prices rise almost every day, a much more two-sided marketplace will be in the offing by mid-2008," said Basse.

 

Basse estimated the E.U. 2008-09 wheat crop at 134 million tonnes, its second largest after 2004 and significantly higher than the 121 million tonnes produced in 2006-07, as currently estimated by the USDA.

 

Because of this Basse projects E.U. wheat exports will jump up to around 15.5 million tonnes in 2008-09, up from the 9.5 million tonnes USDA estimates in 2007-08.

 

World demand in 2008-2009 is estimated by Basse at 626 million tonnes and world wheat stocks are expected to increase to 137 million tonnes.

 

This would mean a rebuilding of stocks from three-decade-low 2007-08 global wheat carryout of 110 million tonnes, as currently forecast by the USDA.

 

The Black Sea will play a large role in contributing to the massive wheat output, with Russia alone expected to produce a record crop of around 51 million tonnes in 2008-2009, said Basse.

 

Russia and the Ukraine are expected to provide around 16 percent of world wheat exports in 2008-2009, up from around 12 percent in 2007.

 

In summary, Basse describes 2008 as a year where wheat will be the downside leader in grains, while oilseeds will be bullish.