World Grain - June 2012 - 20

GRAINMARKETREVIEW

Wheat
U.S. starts harvest early while Europe’s crop triggers fears
by Chris Lyddon
As the northern hemisphere wheat crop gets closer to harvest, there’s a difference between the sides of the Atlantic. In the U.S., wheat harvesting is already under way, with conditions good, while analysts are concerned about the condition of the crop in Europe. U.K.-based Homegrown Cereals Authority (HGCA) analyst Jack Watts told World Grain how he sees developments so far. “From a European perspective we’re getting closer and closer to harvest, although it’s still some time away,” he said. “The European crops are still growing. We’ll only really know when we get to harvest the full extent of that.” A poor crop is already factored into the European wheat market. “If you look at European prices, they have certainly moved to increasing premiums over global and U.S. prices, reﬂecting the concerns,” he said. The U.K. had a wet spring, ending fears of a repeat of last year’s drought. Its crop is possibly in the best condition of any in Europe. “Germany, Poland and some of the eastern states have had very dry conditions,” he said. “France has had a combination of a dry start to the spring and winterkill, which has moved some cropping toward spring barley. We are looking at quite a big spring barley area and subsequently quite a big spring barley crop in France this year. That has potentially a negative impact on malting premiums. “The winter wheat crop in some of the southern states is very well advanced, and it is likely that we’ll see a very early start to the U.S. wheat harvest,” he said. U.S. Wheat Associates produced its ﬁrst harvest report of the year on May 18. For Hard Red Winter wheat, it reported that “after precipitation stalled, the early HRW harvest in north Texas and southwest Oklahoma in mid-May, combines are now running with cutting as far north as central Oklahoma. Crop progress continues to be two to three weeks ahead of normal, extending into Colorado and Nebraska. “The harvest in southwest Oklahoma will be winding down (in late May) while areas south of Dallas are still making slow progress due to wet ﬁelds, high moisture grain and lodged wheat. Early yield reports are highly variable, ranging from the high teens to well over 70 bushels per acre, but a common average from several elevator managers has been in the upper 30s.” The 2012-13 outlook for U.S. wheat is for larger supplies and use, but lower prices, the USDA said in its World Agricultural Supply and Demand Estimates report. It put the world wheat crop at 677.56 million tonnes in 2012-13, compared with 694.64 million in 2011-12. Its ﬁgure for U.S. production in 2012-13 is 61.11 million tonnes, compared with 60.06 million tonnes the year before. “Lower 2012-13 production for FSU-12, E.U.-27, Australia, Morocco, Argentina, Turkey and Pakistan accounts for most of the reduction,” the USDA said. “Record production for India and China and larger crops in Canada, Afghanistan, Algeria and Iran limit the decline.”
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Global wheat situation
(in million tonnes)

800 700 600 500 400 300 200 100 0 2008-09 Production 2009-10 Trade 2010-11 2011-12* 2012-13** Carryover stocks

Consumption

Source: U.S. Department of Agriculture

Wheat futures forward curve 8.10 7.80 7.50 $/bushel 7.20 6.90 6.60 6.30 JUL 12 CBOT
Source: U.S. Wheat Associates

SEP 12 KCBT MGEX

DEC 12

“Global wheat consumption is projected down 7.9 million tonnes, or 1 percent, from 2011-12 as small increases in food use in most countries partly offset the decline in global wheat feeding,” it said. “Global ending stocks for 2012-13 are projected at 188.1 million tonnes, down 8.9 million on the year. Stocks are expected to remain sharply higher than the recent low of 125.6 million tonnes in 2007-08.” In its most recent Grains Market Report, the International Grains Council (IGC) cut its forecast of world wheat production by 5 million tonnes to 676 million, 19 million below last year’s record. “The E.U. crop forecast is reduced sharply due to reports of worse than expected winter damage and recent dry conditions,” the IGC said. “Growth in food and industrial use is expected to be outweighed by a fall in feed, but total world consumption is forecast to show only a limited decline.” It forecast ending stocks for 2012-13 at 206 million tonnes, down 2 million on its previous estimate and down from 210 million a year earlier. Chris Lyddon is World Grain’s European editor. He may be contacted at: chris.lyddon@ntlworld.com.
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World Grain - June 2012

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