World Grain - May 2008 - 16

GRAINMARKETREVIEW
U.S. No. 2 hard red winter, ordinary, F.O.B. , Gulf
(in U.S. dollars per tonne)

Wheat
by Melissa Alexander

World wheat ending stocks
(in million tonnes)

210
195
180
165
150
135
120
105
90
75
60
45
30
15
0

rest of world

Big Five

9**

8-0

200

7-0

200

6-0

*Estimated
**Projected
Big Five exporters: Argentina, Australia, Canada, E.U., U.S.
Source: International Grains Council

200

5-0

200

4-0

200

3-0

200

2-0

200

1-0

*Mid-month figure
Source: U.S. Department of Agriculture

200

Although overheated wheat markets have quieted some in recent
weeks, the world continues to cast a nervous eye on the supply/demand situation. Prices have eased by about $80 a tonne from all-time
highs but remain at historically lofty levels, export restrictions among
key suppliers persist and global stocks by the end of the 2007-08 season in June will be depleted to 30-year lows.
But help may be on the way for stressed wheat consumers during
the 2008-09 season, according to the International Grains Council
(IGC). In it first projections for 2008-09 supply/demand, the IGC
forecasts record production that will exceed consumption and will
allow for some recovery in world wheat reserves.
The Council projects total 2008-09 wheat area to expand by about
2.5% from the 2007-08 season, as farmers react to record-high prices, and total production to reach a record 646 million tonnes, up 7%
from 604 million harvested in 2007-08. Most countries are expected
to see production increases, and the biggest gains are expected in
Australia, Europe and North America, the Council said.
In fact, among the Big Five exporters (Argentina, Australia, Canada, Europe and the United States), the only one expected to see a
drop in output is Argentina, the Council said. Argentina's wheat area
could fall by 5% to about 5.2 million ha, with farmers likely to plant
higher-priced crops, leaving 2008 wheat production at 14.5 million
tonnes versus 15.5 million in 2007.
World wheat consumption is forecast to expand by 3% in 2008-09,
to a record 630 million tonnes, if production increases as expected.
That would pressure prices lower, tending to stimulate demand.
If that scenario is realized, the Council expects to see 2008-09 food
use move higher by about 1% to a record 449 million tonnes. Such an
increase would mark a slight acceleration from the slower-than-average growth in the previous two years, when demand in some developing countries was held back by price increases, the Council noted.
High prices also have curbed feed use of wheat in 2007-08, but
it should recover in 2008-09 if wheat prices ease relative to maize
and other ingredients. Early forecasts for maize suggest supplies
may be tight in 2008-09, which could shift feed demand to wheat,
and the Council projects 2008-09 wheat feed use to rise by 12% to
102 million tonnes.
Growth in industrial use of wheat has also been slowed by high
prices in 2007-08, with some ethanol and starch plants switched partly or wholly to lower-priced alternatives, while construction of some
new facilities has been put on hold, the Council said. With higher
wheat production and lower prices, total industrial wheat use is fore-

r
Ma 08
20
Jan
v
No
Sep 07
20
July
y
Ma
r
Ma 07
20
Jan
v
No
Sep 06
20
July
y
Ma
r
Ma 06
20
Jan
v
No
Sep 05
20
July

New-season projections raise
hopes for relief from tight
global supplies

500
450
400
350
300
250
200
150
100
50
0

cast to increase by 6% in 2008-09, to 18 million tonnes.
Based on these forecasts, the Council expects world wheat output
to exceed consumption by about 16 million tonnes in 2008-09, which
would mark a 14.3% jump in global reserves to 128 million tonnes.
More critically, the increase in carryover would lift the 2008-09 ending stocks-to-use ratio to 20.3%, up from the record low of 18.3%
set this season.
Much of the stocks increase is expected to take place in the Big
Five exporters, whose combined carryovers could go up by about 10
million tonnes, to 36 million. Although that number still would be
significantly below the five-year average, it would mark a welcome
change of trend for the world's wheat users.
As for trade, the Council expects to see 2008-09 shipments rebound to about 110 million tonnes, similar to the 2006-07 level. Trade
in 2007-08 slipped to103.3 million tonnes as key importers harvested
adequate domestic crops, while high price levels constrained other
WG
importers, the Council said.
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