Milling & Baking News - February 10, 2009 - 7

Editorial

Record export trade a sign of wheat demand growth

n response to the weakness ruling in wheat in the 2007-08 is what may have caused market participants
first half of 2008-09, which was a sharp reversal to neglect equally significant changes on the demand
of previous exceptional strength, market analy- side. This year's record crop has been matched by
ses of wheat and wheat flour prices in the remainder a new high in global disappearance, forecast at 648
of the season and reaching into 2009-10 have tended million tonnes. Demand does not always move parto focus on the impact of this season's dramatic crop allel with crop size, as witness past sharp fluctuaincreases in countries of the northern hemisphere. tions in carryovers. That it has happened this season
Even as harvests in the southern hemisphere are reflects how the peak crop included a large quantity
just being completed at levels below the prior year, of lower or feed quality wheat being raised in both
which is a likely forerunner of this year's harvests in Western and Eastern Europe. Thus, of the 34 million
northern countries, assessments should not neglect tonnes of additional wheat being used this season, 28
changes on the demand side. The latter have been million, or 82 per cent, are being fed to livestock. It is
overlooked in the enthusiasm
also likely that a part of this exCurrent wheat stocks are hardly pansion in non-food use is credover production rebounds.
equal to twelve weeks of
Global numbers from the Inited to industrial processing, for
consumption, which is a narrow
ternational Grains Council are
starch and for biofuels.
margin in these treacherous
themselves revealing when it
Another record on the detimes.
comes to appreciating the shifts
mand side is in exports, where
under way. Yes, world production of wheat in 2008- the total moving globally in 2008-09 is forecast at
09 reached a new record, of 687 million tonnes, up 118 million tonnes, the largest volume to move in
a whopping 13 per cent from the prior year. Con- world trade. While purchases for feed use play a
sidering that only a decade has passed since global role in the 7 per cent export increase, it is noteworproduction first surpassed 600 million tonnes, the thy that no single importing country stands out,
new mark is striking evidence of the way global that demand has enjoyed a rebound globally. It also
wheat crops directly respond to rewarding grower is significant that the projections of global trade
prices. A further measure of confidence about the in wheat have increased every month since last
supply side of the current global wheat equation is spring, reflecting the way that this trade growth
provided by the prospect that the ending 2008-09 has been a surprise. In the nine crop seasons since
carryover, projected at 155 million tonnes, repre- the beginning of the 21st century, the annual world
sents a 32 per cent recovery from 117 million a year wheat crop has been larger than disappearance in
earlier. While this carryover forecast is still well be- only two, the current 2008-09 and 2004-05. The
low the recent peak above 200 million tonnes at the result has been a drawing down of ending stocks
start of the 21st century, it reaffirms the adage that from well above 200 million tonnes.
a season of carryover increase is characterized by
Regardless of whether the expanding demand
downward pressure on prices. That this season's reflected in this season's record export trade is a
ending stock will be 24 per cent of wheat use, up short-term response to weakness or a fundamenfrom a year ago when the total was less than 20 per tal boost in consumption, low carryovers do excent for the first time in modern history, reinforces plain the exceptional price volatility of the past 12
the apparent comfort about supplies.
months. Current stocks are hardly equal to twelve
This understandable enthusiasm in the wake of weeks of consumption, which is a narrow margin
totally opposite supply and price performance from in these treacherous times. MBN
MORTON SOSLAND, EDITOR-IN-CHIEF
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