World wheat production in 2010 is forecast to fall, but with a large carryover from the previous year, supply will likely continue to be a burden.
The high prices of early 2008 sparked a huge production increase, generating a record crop that outstripped demand, adding almost 43 million tonnes to year-end stocks.
In 2009, the world’s farmers grew the second largest wheat crop ever, adding another 32 million tonnes to year-end stocks.
The Canadian Wheat Board expects world production will fall 3.8 percent in 2010 to 651 million tonnes.
North American production will likely fall, as will production in the former Soviet Union. However, Argentina’s crop will be up as it recovers from last year’s drought, and European production might rise slightly.
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Even with the smaller crop, production is still expected to be more than consumption, causing world wheat ending stocks to rise for the fourth consecutive year to 204 million tonnes, the CWB reports. That would produce a stocks-to-use ratio of more than 30 percent, up from less than 20 percent in 2007-08 and a level not seen since 2001.
With these stocks hanging over the market, an argument could be made for even lower wheat prices, but the CWB believes the stronger outlook in oilseeds and corn plus the expectation of slow economic growth should prevent a real market collapse.
The CWB’s first Pool Return Outlook for 2010-11 forecasts spring wheat prices to be little changed from the current crop year.
The durum PRO forecasts slightly lower prices for the next crop year.
With dismal prices this year and a lot of unsold durum still in the bin, the board thinks Canadian farmers will sharply reduce acreage, leading to a 3.8 million tonne crop, down from 5.5 million last year.
U.S. production is expected to drop to 2.2 million tonnes from three million last year, but European Union production is expected to climb to 8.4 million from 7.8 million last year.
In total, the CWB sees the world’s major producers growing 34.2 million tonnes of durum, down from 37.4 million last year.
North Africa, a major importing region, had a bumper crop last year and is enjoying good production weather this year, reducing its durum imports.
Depreciation of the euro against the U.S. and Canadian dollars is hurting Italian demand.
