Global wheat production for 2008/09 is projected at a record 656 million tons, up eight perc ent from 2007/08, and five per cent above the previous record in 2004/05. Higher production is projected for most of the world’s major exporting countries including Australia, Canada, EU-27, Russia, and Ukraine. Strong world prices and favorable weather in most of EU-27 and FSU-12 raised production for 2008. Production is also projected higher in Brazil, China, and India. This will partly offset reductions in Argentina and Kazahkstan. The only significant weather problems for winter wheat remain in drought stricken Middle East and North Africa countries.

World wheat imports, exports, and consumption are also projected to be higher for 2008/09. Imports are generally projected higher throughout the world with EU-27 the major exception, where imports are expected to fall sharply as wheat production rebounds from weather-reduced crops in the two previous years. EU-27 exports and wheat feeding are expected to rise sharply. World wheat ending stocks are projected at 124 million tons, up 13 per cent from the current year’s projection. India may import five lakh tons of wheat in the marketing year 2008-09 if domestic prices rise significantly against sharp fall in global prices during August-October period, according to US Department of Agriculture (USDA).

The prospect of a large increase in global wheat production this year could help to prevent further food tensions in several regions of the world, which have been severely hit by sharp rises in the cost of staple foods such as rice and bread. Many factors have triggered the current food crisis. These include unfavourable weather conditions leading to poor harvests in major producing countries, steady international demand and increased use of crops for biofuels. As a result, wheat prices, which had risen to a record high above $13 per bushel on the Chicago Board of Trade in late February, have now fallen by more than 40 per cent at $8.01 a bushel by end- April, their lowest level since November.

However, wheat prices still remain very high as global wheat stocks remain low. Unfavorable weather conditions could trigger further price increases. High prices have already stimulated an increase in wheat sowing. Global wheat stocks remain low however and any recurrence of the unfavourable weather which devastated crops in several key regions last year could see prices shooting back up again. Soaring wheat prices have sparked increases in the price of staples such as bread, helping spark riots in several developing countries whose populations were already struggling to cope with living cost increases linked to record high energy markets. High prices have also, however, sparked a response from farmers with an increase in plantings.

The rising cost of food has increased the awareness that global solutions should be sought in order for new crop production not only to meet annual consumption, but also to rebuild stock levels. This could lead to a partial recovery in world wheat stocks in 2008, with production forecast to exceed consumption by over 12m tons. The prospect of a record world wheat crop is likely to keep prices that have already fallen sharply from all-time highs under pressure, putting a temporary brake on a key driver of global food inflation.

Historically high price volatility has continued over the past month – particularly in US wheat futures markets, where December 2008 values have dropped $1.50 per bushel over the past month. This trend is also reflected to a lesser extent in wheat cash prices around the world. The probability of an extremely tight supply-demand balance in 2008-09 has decreased as crop conditions improve in key wheat-producing countries, a factor that has weighed on both old-crop and new-crop futures. Winter wheat crops in both the US and the Black Sea region received timely rains over the last month, increasing production prospects.

CBOT July wheat prices, after having fallen by more than a third since mid-March, gained 28cents to $8.00 ½ a bushel as the cheaper price boosted export demand.Fall rains will favor pre-winter growth of wheat through West Australia, with more shower activity possible during the next week. Recent rainfall has helped replenish soil moisture for planting wheat in South Australia and Victoria, but more rain is needed there and in New South Wales and South Queensland. Bulls’ next upside price objective is to push and close CBOT July wheat above psychological resistance at $8.50. The next downside price objective for the bears is pushing and closing prices below technical support at last week’s low of $7.49.

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