WORLD WHEAT supplies will be tighter than expected as a devastating drought in Russia and its neighbours erodes healthy stockpiles, but the US Department of Agriculture (USDA) said yesterday there was no reason for the rising prices to drive a repeat of 2008’s historic surge.
In its August report, the department cut its world wheat production forecast by 2.3 per cent to 645.73 million tonnes, its first estimate since Russia – normally the world’s third largest wheat exporter – banned shipments to conserve domestic stocks.
It joined other government bodies in downplaying fears that the world was headed for another food supply crisis similar to that of two years ago, when Chicago wheat surged to a record above $13 a bushel.
“Expectations that prices in the next few months will hit the record levels of 2007/08 are not substantiated by the reality of the global supply situation,” it wrote.
USDA reduced its forecast for wheat stocks again, having cut it by a total of 12 per cent or 23 million tonnes since May.
However, stocks would still be 40 per cent, or 49.9 million tonnes, higher than in 2007/08.
The crop downgrade was larger than forecasts, and the figures helped wheat set for delivery in September to gain 5.6 per cent or 38-3/4 cents a bushel to $7.33-1/2.
Russian president Dmitry Medvedev said many farmers were close to bankruptcy, and crops were lost on a quarter of Russia’s grain area.
“The FSU numbers were breathtaking. We haven’t seen USDA make an adjustment like that for some time,” said Jerry Gidel, analyst for North America Risk Management.
Wheat overshadowed the department’s forecast of record US corn and soybean yields that will push both harvests to the largest on record – larger than expected for the USDA’s first report based on field surveys.
Traders instead focused on demand for exports from the world’s top seller, underscored by a robust set of weekly sales and reduced forecasts for ending stocks, helping lift corn prices by 4.3 per cent to $4.12-1/2 a bushel and boosting soybeans by 1.6 per cent to $10.61-1/4, both aided by wheat’s gains. – (Reuters)
