Global wheat production to fall in 2016 season, reports FAO
The forecast, the first made by the FAO for the 2016 season, puts global production at 723 million tonnes, 1.4% below 2015. The decline will be driven by lower winter plantings in Russia and Ukraine as a result of dry weather conditions, although this is predicted to be partly offset by strong harvests in China and Pakistan.
In the United States, early forecasts put production at just below the 2015 level, with higher yields expected to make up for lower winter plantings.
Increased food consumption
Wheat usage is set to rise by 1.8% to 724 million tonnes as a result of increased food consumption. A resurgence of wheat usage in animal food in the EU is also set to contribute to this, although the FAO predicted use of maize for feed will increase, particularly in China and Argentina.
Global wheat trade between July 2015 and June 2016 is tipped to be down 2.5% on the previous season to 151.5 million tonnes because of reduced import requirements.
US climate concerns
Concerns have been raised over dry conditions in parts of the US – prompting increases in key wheat futures this week.
Areas of persistent dryness have been highlighted for key wheat growing states including Texas and Oklahoma by the US Drought Monitor.
“A direct impact of the unseasonable warmth on the growing winter wheat crop has already been identified, with wheat in parts of Oklahoma and Kansas breaking dormancy early,” reported the Grain Mark Daily report issued by UK’s Agriculture and Horticulture Development Board.
“Worries about the conditions of the crop being grown for this summer’s harvest led to increases for both old and new crop prices.”
Lower wheat inventories in Iran and Uzbekistan have prompted the FAO to forecast a slight drop in world cereal stocks by the close of the 2016 season from a “very high” opening level.
High 2015 ending stocks
Predictions of a dip in production and stocks in 2016 will offer some hope to suppliers who have been faced with low prices in 2015 as a result of high ending stocks and strong global production.
“Ending wheat stocks are expected to reach a record high in 2015/16 and this is likely to keep prices subdued,” Mintec analyst James Hutchings told BakeryAndSnacks, adding that further downward pressure on prices was expected from lower than anticipated feed demand and the narrowing of the differential between wheat and maize.
The USDA’s latest Wheat Outlook report, published on 11 February, showed US ending stocks were predicted to be 966 million bushels, the highest since 2009/10. Meanwhile, predictions for US exports were the lowest since 1971/72 as a result of increased competition from other countries including Canada, which has benefited from the strength of the US strong dollar.
Fall in UK usage
The UK’s Agriculture and Horticulture Development Board this week reported that, in the case of the UK, wheat surplus available for export or carry over into next season is estimated to be 38% higher than the previous season. It added that human and industrial usage is forecast to fall 7% year on year, with wheat used for milling (and starch and bioethanol production) 8% less from July to December 2015 than at the same point last season.
Analysts The Hightower Report this week said: “While the short-term supply fundamentals are bearish, it does appear possible global production and ending stocks for the 2016/17 season might be smaller than this season.”
