The world’s wheat market is heading for a well supplied 2013-14 despite a difficult growing season in many areas. Trade flows will shift as availability changes. What doesn’t appear likely to have any long-term effect on trade is the discovery of genetically modified wheat in a field in Oregon, U.S.
In its most recent market report, the International Grains Council (IGC) played down the potential effect of weather problems on the 2013-14 wheat crop.
“Although there is continued uncertainty about harvest prospects in some major producers, global wheat availabilities are still set to be ample over the year ahead,” it said, putting the 2013-14 global wheat crop at 682 million tonnes, up from the 680 million it forecast a month earlier.
Shifts in production will mean changes in trade flows, as the USDA’s Economic Research Service explained in its most recent Wheat Letter publication. “Tighter supplies and reduced competition from Russia and Ukraine are expected to support export prospects for these countries’ main competitors, namely E.U.-27, Canada, and the United States, up 1.5 million, 500,000, and 1 million tonnes, respectively,” it said. “For 2013-14, reduced foreign wheat supplies and strong demand are expected to boost U.S. exports to 26.5 million tonnes. Prospects for tightening U.S. ending stocks are expected to be a limiting factor for U.S. 2013-14 exports.”
Analysts at the Australian Bureau of Agricultural and Resource Economics predicted lower prices in their June report on Agricultural Commodities. “The world wheat indicator price (U.S. No. 2 hard red winter, fob Gulf) is forecast to fall by 10% in 2013-14 to average $315 a tonne,” the report said. “The forecast price decline largely reflects the combined effect of an expected increase in world wheat production, from the drought-affected 2012-13 season, and forecast higher world corn production, which is expected to reduce demand growth for wheat used in livestock feed.”
The IGC report outlined the effect fading supply concerns had already had on price. “After a rally at the end of April, sparked by worries about poor 2013 crop conditions in some areas, world wheat markets mostly had a weaker tone during May,” it said. “Although there was continued uncertainty about harvest prospects in major producing areas, prices were weighed by ideas that global availabilities would nevertheless be ample in the year ahead.”
“To some extent, this stemmed from a record world wheat production forecast by the USDA in early May,” it said. “There was additional pressure from expectations for heavy world maize supplies, which was seen limiting demand for feed wheat. The IGC GOI wheat sub-Index fell by around 4% month on month.
“Although there was little improvement in HRW prospects, U.S. winter wheat futures retreated from a late April spike amid improved sentiment about crop outlooks in other countries. Although brisk new crop sales were reported, increased supplies and competitive prices in other exporters were seen restricting future demand.”
E.U. market prices responded to U.S. gains in late April, but the IGC noted that slowing export demand had limited gains, as did signs of competition from Black Sea origins.
Recent weeks have seen a certain amount of disruption to U.S. exports after an announcement by the USDA’s Animal and Plant Health Inspection Service on May 29 it had identified an unapproved genetically modified, glyphosate-resistant trait in volunteer wheat in a field in Oregon.
“This discovery is isolated,” U.S. Wheat Associates said in its Wheat Letter. “There is no evidence that wheat with this trait has entered commercial channels.”
“Some importing customers have suspended purchase of some U.S. wheat classes; these decisions are limited and being managed thoughtfully,” the article said, noting temporary suspensions of imports of certain sorts of wheat by Japan and Korea, while at the same time noting that buyers in both countries have purchased U.S. wheat since the discovery.
“The European Commission has recommended to its member states that they should test U.S. SW wheat imports,” U.S. Wheat Associates also said. “We cannot confirm if any E.U. member state has or has not tested any wheat, nor can we confirm if any country there has postponed any purchases of U.S. wheat because their purchases are not made on a set schedule.” The article also clarified confusion created by the widespread habit of European trade and publications of referring to all wheat that’s not durum as “soft wheat.”
“In fact, less than one half of 1% of all wheat exported to Europe from the United States since 2008-09 was SW wheat,” it said.
Chris Lyddon is World Grain’s European editor. He may be contacted at: email@example.com.
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