Wheat market gains strength
There was more good news in wheat markets last week.
The International Grains Council lowered its forecast for world wheat production in 1999-2000 and cut its year-end stocks forecast for next year to 105 million tonnes, the lowest since 1980.
This news, plus indications that the United States might end its ban on wheat sales to Iran, Libya and North Korea, sent wheat futures prices higher.
At the end of the week, prices gained again on expectations that the March 31 U.S. Department of Agriculture planting intentions report will show American farmers intend to seed a smaller wheat crop.
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But the news was not all positive, particularly for short-term prices.
The London-based IGC decreased its forecast of consumption by seven million tonnes and increased ending stocks for the current crop year by six million.
Lower demand
The council believes it has been overestimating consumption for several years, especially in the amount of wheat used to feed livestock in the Commonwealth of Independent States and China.
But while stocks are up, the IGC sees less wheat produced in 1999-2000. Wet weather and larger set-aside area curtailed seeding in the European Union, and the winter wheat area in the U.S. is the lowest since 1972. Dry weather is hurting the crop in Iran.
The wheat crop in northern China was under severe drought pressure but showers have improved the situation. Still, the crop is in a precarious position and insect pests are reported to be severe. China will dip deeply into its grain reserves to make up for the production shortfall. This action will contribute greatly to a reduction of 24 million tonnes in world wheat stocks, lowering them to 105 million tonnes, IGC estimated.
That should help firm wheat prices, but it would have been better if the stocks were drying up in the world’s five major exporting regions, the United States, European Union, Canada, Australia and Argentina.
The IGC says exporter stocks will be down by 10 million tonnes to a still-plentiful 46 million tonnes.
IGC is optimistic of increased wheat trade next year. It forecasts a six-million tonne rise to a record 99 million tonnes.
The bottom line? Big year-end stocks will hold back the wheat market in 1999, but things could heat up in 2000 when attention turns to how the stocks will be replaced.
