August 26, 2004

 

 

World 2004/05 Wheat Production Seen Up 10%


Global wheat production this year is expected to jump nearly 60 million tons (over 10%), due to recovering crops throughout Europe and the Former Soviet Union, plus another year of good North African harvests, the U.S. Department of Agriculture said Wednesday in its "Wheat World Situation and Outlook" report.
 
Wheat
 
After six years of decline, global wheat production this year is expected to jump nearly 60 million tons (over 10%), due to recovering crops throughout Europe and the Former Soviet Union, plus another year of good North African harvests. This would be the second highest production level in history, and will encourage greater consumption, allow for some stock re-building, and force down prices, the report said. Larger European crops will support greater feed-use of wheat and trade in feed-quality wheat, which will increase total wheat consumption to the second highest level in history. With greater world supply, stocks are expected to grow, reversing four years of decline. This build-up will be concentrated primarily in the major exporters, where stocks will grow an estimated 9 million tons, or almost 25% year to year.
 
Global Production Use
 
Global Trade: Total world trade is expected to be fairly steady year to year, although import demand will shift substantially from Europe to Asia. Good crops in Eastern Europe and the Former Soviet Union will dramatically cut import requirements, and many of these countries will return to being net exporters. EU-25 imports are also expected to fall, although smaller spring wheat and durum imports will be partially offset by larger imports of low and medium-quality wheat from the Black Sea region, the report said.
 
Import demand in Asia, however, will jump primarily due to China's return as the world's largest market of an estimated 8 million tons. Pakistan has also returned as an important purchaser, and stronger imports are expected in Asian feed-quality wheat markets such as South Korea.
 
While global demand should be steady, greater supplies in exporting countries will result in intensified competition. EU-25 exports are projected to grow more than 5 million tons as a record crop allows for increased domestic consumption, stock rebuilding and substantially larger exportable supplies. In the Former Soviet Union, exports of both feed-quality and milling wheat will be larger and will likely displace supplies from the more traditional exporters. Larger expected Canadian and Argentine production should also create stronger competition in hard wheat markets.
 
US Situation and Outlook
 
U.S. wheat production is down this year with reduced acreage and lower yields, primarily in the Hard Red Winter crop. This smaller production, coupled with stronger export competition, will cut U.S. exports by an estimated 6.5 million tons. Although export sales and shipments have been quite robust during the early part of this marketing year, the much larger crops in Europe and the Former Soviet Union being harvested, there should cause a significant slowdown in U.S. sales during the coming months, particularly to key Mediterranean markets such as Egypt, where French competition has already driven U.S. commitments below year ago levels.
 
Although still early, the forecast is for another good Australian crop and higher exports, which would likely pressure the United States in Asian markets. Canadian production and exports are also expected to be up, which could hurt U.S. sales, especially in Latin America. The bright spot this year, however, is the return of key Asian markets. China has already purchased 1.9 million tons of U.S. wheat, (more than a third of this had already been shipped through mid-August) and Pakistan has also resumed imports.
 

Source: USDA

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