The Hindu Business Line : Global wheat supply may exceed demand

THE global grain market is set to be flush with large harvests of wheat and coarse grains, especially maize (corn), which is expected to encourage higher consumption. However, the price effect of a strong demand growth across the world is likely to be tempered by large supplies.

For the first time in recent years, global wheat output would be higher than consumption, leading to a reversal of declining global inventory level.

However, weather aberrations have had some impact on crop quality, especially in Canada, while in Australia several areas may have lower yields.

Notwithstanding larger supplies, in October, wheat values firmed nearly everywhere with most grades moving higher including premium milling and feed categories. Increase in ocean freight caused by high crude oil prices pushed the cost up for importers.

For 2004-05, global wheat output is forecast at a new high of 617 million tonnes, a massive increase from 554 mt of previous year. Consumption, however, is expected to rise at a modest level; yet, reach a record 606 mt versus 591 mt of previous year, according to the latest report of the London-based International Grains Council (IGC).

Recent US data indicated higher than anticipated feed use, although in the European Union, where wheat feeding will rise significantly, the consumption estimate is trimmed in favour of cheaper maize and soyameal, the report added.

Year-end stocks of wheat are expected to rise to 138 mt from the previous year's 126 mt thereby reversing the trend of falling inventory in recent years. Global wheat trade, which has been declining marginally last three years, may remain steady this year at a forecast 101 mt (102 mt).

With so much wheat available in the international market, exports from India are most unlikely to materialise at least until the next crop is harvested beginning April 2005. The freight subsidy is unlikely to make Indian wheat really competitive.

The decision on minimum support price/procurement price for wheat expected soon will also have an impact on domestic prices.

Global coarse grains output in 2004-05 is set to scale a new high of 987 mt, sharply up from 914 mt of previous year following a massive increase in maize production to 686 mt, contributed mainly by the US and EU.

Very large crops will encourage higher consumption worldwide which is now forecast at 673 mt, up from 643 mt of last year.

Lower US feed costs and strong domestic and export demand for meat are encouraging livestock expansion, IGC pointed out adding that maize trade is forecast to fall by around 4 per cent to 77.2 mt, largely due to sharp fall in EU imports and competition from feed wheat in various markets.