Global wheat stocks declining due to drought

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Warm and dry weather conditions continue to eat away at global wheat crops around the world. Drought and heat are to blame for reducing wheat inventories around the world. As a result, world inventories are expected to decrease next year the most since 2007, according to analysts Bloomberg interviewed.

Stockpiles on June 1, 2013, will drop 6.1 percent to 185.06 million metric tons from a year earlier, according to the average of 19 analyst estimates compiled by Bloomberg.

“Supplies are not as ample as they were expected to be just three or four months ago,” Christopher Narayanan, the head of agricultural research for Societe Generale in New York, said by phone to Bloomberg. “We have multiple crop problems, and that should support prices.”

The U.S. Department of Agriculture released its World Agricultural Supply and Demand Estimates June 12, which confirmed that wheat supplies for 2012/2013 are decreasing. According to the report, global wheat supplies for 2012/13 were lowered 7.0 million tons with beginning stocks lowered 1.5 million tons and world production is expected down 5.5 million tons. Russia production is reduced 3.0 million tons due to a continuation of spring dryness in key winter wheat producing areas and indications of crop development problems resulting from winter freeze damage.

EU production is reduced 1.0 million tons with reduced acreage in Germany, Poland and Spain, only partly offset by higher than expected yields in France and Bulgaria.

Meanwhile, in the U.S., projected U.S. wheat supplies for 2012/2013 were lowered 51 million bushels. Beginning stocks were lowered 40 million bushels with a 10-million-bushel increase in food use and a 30-million-bushel increase in exports for 2012/2013.

U.S. all wheat production for 2012/2013 is projected at 2,234 million bushels, which is down 11 million, with lower forecast winter wheat production and small reductions in forecast durum wheat production for Arizona and California. Winter wheat production is forecast 10 million bushels lower with reductions for Hard Red Winter (HRW) and Soft White Winter heat. The largest production declines are in the HRW states of Nebraska and Colorado, but higher production for Oklahoma is partly offsetting.

The good news with U.S. spring wheat is that most of it is in good condition and it is about two weeks ahead of schedule on average thanks to the warm spring.

Wheat prices are expected to have both negative and positive aspects, according to Doane’s Agricultural Report 6/8/2012. “Most damaging news comes from India where there are again reports that country may put up to 5 million metric tons of its bulging reserve stocks on the world market, at a discount no less. Reason? India’s reserve policy is for 19 million tons in storage, and they’ve got double that now, with big new crop prospects to boot.”

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