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Wheat supply still ‘comfortable’ after USDA lowers forecast, says analyst

By Oliver Nieburg , 12-Mar-2012

The United States Department of Agriculture (USDA) has lowered its forecast for global wheat end stocks for 2011/12, but supply overall remains comfortable, according to an analyst.

In its March World Agricultural Supply and Demand Estimates (WASDE) the USDA lowered its forecast for global wheat end stocks by around 2% on the previous months’ estimate, from 213.1Mt to 209.6Mt.

'Less bearish' stocks

However, David Eudall, senior analyst for cereals and oilseeds at UK’s Agriculture & Horticulture Development Board (AHDB) told BakeryAndSnacks.com that supply would still be higher than the previous season

“The key thing about the stocks figure is that it is not bullish that it has been reduced but less bearish.”

“It is very much as you were. There is still a more than comfortable level of wheat stocks around the world and with area of wheat for harvest 2012 expected to be 1.5% higher, the supply fundamentals for wheat remain comfortable,” he said.

Maize market driving wheat prices

Eudall said that wheat prices had been dictated by a tight global maize stock in recent times.

“There were some concerns about poor South American maize crops after a dry growing season, but these seem to have been priced into the market now,” he said.

He added that there was an expectation for an increased US maize area in 2012, while farmers were also planting more wheat to profit from high prices.

Weather warning

“This could lead to more production; but only if the weather is favourable, otherwise the tight stock situation may continue for another season,” he said.

He warned that weather events somewhere in the word had prevented stock increases for the past two seasons.

“Further weather-related disruptions to supply would see a firm reaction in prices from world markets,” he said.

According to Eudall the full picture would emerge in the coming weeks as crops around the world emerged from winter dormancy.

FAO forecast

The UN’s Food and Agriculture Organization last weekforecast 2012 world wheat production to be the second highest on record in its Crop Prospects and Food Situation Report.

It forecast that the 2012 world wheat crop will reach 690m tonnes, a figure well above the average in the last five years, but 1.4% lower than last year’s record crop.

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