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Wheat Futures – Wheat crops worldwide will probably decline 2 percent in the year starting July 1 as yields return to average after record production, said Australia’s government commodity forecaster.
Harvests may drop to 682 million metric tons from 693 million tons as consumption gains 0.3 percent to 681 million tons, the Canberra-based Australian Bureau of Agricultural and Resource Economics and Sciences said today. The world wheat indicator price will drop 7 percent to average about $275 a ton.
Wheat futures have tumbled 17 percent in the past year as global production and inventories headed for all-time highs and world trade surged to the second-highest level in at least in five decades. Global stockpiles may reach 220 million tons in 2012-2013 from 213 million tons a year earlier, Mike O’Dea, a senior risk manager at INTL FCStone Inc., said Feb. 22.
“If we see supply increasing more strongly than what it has and stocks continue to rise, that will put pressure on prices,” said Paul Morris, bureau executive director, in an interview yesterday.
Abares joins the International Grains Council in predicting a decline in harvests in the coming year because of lower yields. The council expects global production to drop by 15 million tons to 680 million tons, it said Feb. 23.
Wheat output in the U.S., the biggest exporter, may gain 6 percent to about 58 million tons as yields recover, while China’s production may gain 2 percent to 120 million tons, the bureau said in a report. The Russian Federation may produce 5 percent more wheat at 59 million tons as output in Kazakhstan, the second-largest shipper in the former Soviet Union, slumps 31 percent on a return to average yields, it said.
Wheat: Canada, EU
The crop in Canada (WHETCA00) may be 2 percent higher at 26 million tons, while production in the European Union may gain about 2 percent to 140 million tons, according to the bureau.
“It is unlikely that the supply-side growth will be able match the demand increases” in the short-term, said Jammie Penm, chief commodity analyst at the bureau. “We don’t think that demand will come very quickly or very sharply. It’s a gradual process,” Penm said in Canberra today.
Global demand for grains may climb 50 percent over the next 40 years, faster than forecast population growth of 40 percent, Alison Watkins, chief executive officer of GrainCorp Ltd., eastern Australia’s largest handler, said today.
The area planted to wheat in Australia, the second-biggest shipper, may decline 2.5 percent to 13.7 million hectares (33.9 million acres) in 2012-2013 as farmers switch to barley and canola on better returns, according to Abares.
Wheat: Australian Crops
Output may drop 13 percent to 25.7 million metric tons in the year from July 1, from a record 29.5 million tons a year earlier, the bureau said. Canola plantings may rise 4.8 percent and barley sowings may gain 2.9 percent, it said.
“Things are looking a little better for barley and canola than wheat,” said Morris. “Because of the nature of Australian agriculture, where there’s a lot of mixed-enterprise farms and the farmers are quite savvy to changes in prices, they’ll move to some extent between activities depending on price.”
Australia’s canola production may increase 5.4 percent to a record 2.9 million tons and barley output gain 5.1 percent to 9 million tons, Abares said. Wheat exports may total 21 million tons in the year from July, from a record 21.2 million tons a year earlier, it said. Australia is set to be the second-biggest wheat exporter in 2011-2012 after the U.S., according to the U.S. Department of Agriculture.
Wheat: Black Sea
The area sown to wheat, coarse grains and oilseeds in Kazakhstan, Russia and Ukraine may increase by an average of 2 percent a year to about 90 million hectares “over the medium term,” the bureau said. Between 11 million hectares and 13 million hectares of idle land suitable for cropping is available for expansion, it said.
The so-called free-on-board Gulf price of U.S. hard-red winter wheat may fall 7 percent in 2012-2013, reflecting record world opening stockpiles and expected high global production, the bureau said. Global wheat stockpiles may total about 210 million tons in 2012-2013 as production exceeds consumption and as inventories in the U.S. rise about 10 percent to 28 million tons, it said.
“Globally, we’ve seen prices for crops come down a bit over the last few months and we’re expecting, in real terms, that prices will ease over the next few years,” Morris said. “In terms of returns, they’ll be a little less favorable than in the last 12 months or so but, in historical terms, remaining reasonably high.”
- Phoebe Sedgman in Melbourne at Bloomberg.