February 23, 2010

Global decline to weigh on higher EU wheat output

Weaker wheat sowings in Argentina, Australia, Canada and the US are likely to more than outweigh a rise in EU plantings.

A reduction in the global wheat harvest is likely in 2010 after the record crop in 2008 and the near-record again last year, the Food and Agriculture Organisation said in a report on crop prospects.

A decline would follow a second season of strong production in 2009-10, with the FAO raising its estimate for the harvest by five million tonnes to 683.2 million tonnes, only 600,000 tonnes short of the 2008 high.

The strong output had left stocks on course to end the season up 10% at 523 million tonnes.

The outlook follows expectations from organisations such as the International Grains Council and a range of financial analysts that weak market prices would discourage farmers in many countries from sowing wheat.

The USDA estimated that American sowings would fall by 12.2% thanks to a sharply reduced winter wheat area, and lower expected yields because of the area reduction in higher-yielding soft red winter wheat.

US winter wheat plantings fell to their lowest since 1913.

Expectations are also growing of a sharp decline in Australia, where a strong currency has compounded the impact of the weak global wheat market on local prices.

However, the FAO forecast that there may be rise in global coarse grain output this year, due to the recovery in Argentina's harvest.

Buenos Aires said production may be on course to jump by up to 60% from last year, when crops were damaged by drought.

The agency pegged global coarse grain production in 2009 at 1.11 billion tonnes, a decline of 2.4% year on year, and reflected in a small decline in world inventories.