September 27, 2010

Global wheat supplies may set record next year

Global wheat supplies may reach a record next year, signalling that the wheat rally, while appearing underpinned for now, faces an "ambiguous" future, the world's biggest seller of the grain has said.

According to the Canadian Wheat Board (CWB), world wheat stocks may fall to 160 million tonnes over 2010-11, below estimates from forecasters including the US Department of Agriculture and the International Grains Council, which on Thursday (Sep 23) pegged year-end inventories at 183 million tonnes.

The size of the decline, which reflected the impact of soaring corn costs in improving wheat's attractions as a livestock feed, will continue to offer support to the current price situation, CWB said.

World wheat supply, as measured by production plus stocks left over from last season, were set to fall by less than 2% from the 2009-10 record of 845.5 million tonnes, despite drought devastation to Russia's harvest.

"Factoring in an increase in world wheat acreage and projecting average weather conditions, it is not unreasonable to speculate that the world's wheat supply will challenge the all-time high," the board said.

Informa Economics last week forecast US wheat sowings for next year's crop at 57.0 million acres, a rise of 2.7 million acres year on year.

One of the best hopes for continued strength in wheat prices was offered by corn, whose run up in prices to US$5 a bushel was "merited" by its tightening supplies, and which may yet see further gains.

Rising corn prices provided "broad support" to wheat markets, and had, indeed, given "the entire feed-grain complex a firmer floor."

Grain prices staged a revival on Friday (Sep 24), attributed largely to thoughts that a drop in the last session had been overplayed given the squeezes on supplies of corn and, in particular, high quality wheat.

The CWB itself flagged a "deteriorating quality profile" for Canadian wheat, following last weekend's frost damage and a wet spring, with rain delays slashing Germany's supplies too.

Chicago wheat for December stood 1.1% higher at US$7.04 ¾ a bushel at 11:15 GMT, with corn up 1.2% at US$5.05 ½ a bushel.

However, stronger currencies held back the performance of Paris wheat, which fell 0.8% to EUR221.50 a tonne, and London wheat, which dipped 0.6% to GBP162.00 a tonne.