The Hindu Business Line : Comfortable stock level keeps wheat prices on leash

NOTWITHSTANDING rising concerns about the prospects of wheat crop next year, current market conditions continue to be generally consumer-friendly because of comfortable stock level.

Repeated assertions by Indian authorities that imports may not be needed because of sufficient stocks may also be a contributory factor.

Northern hemisphere winter wheat plantings for 2006 (which make up about 70 per cent of world wheat areas) are forecast to be 2 per cent lower than last season, with significant reductions in Russia and Ukraine, while sowings in China, India and the US are reported slightly up. However, recent dry conditions in the US, Pakistan and parts of Near-East Asia are causing some concern, the London-based International Grains Council (IGC) said in its latest report.

On avian influenza, the IGC pointed out that to-date its impact on world feed trade was relatively small, but its recurrence, and particularly any significant spread of the disease to humans, could have worldwide implications for poultry production and the sector's feed needs.

At 611 million tonnes,world wheat production in 2005-06 is projected to trail forecast consumption by a mere 4 million tonnes, while high stocks are expected to rein in prices. Exportable supplies in general are more than adequate to meet projected demand, although availabilities of premium milling wheat from North America will be limited after quality problems, the IGC said.

Forecast world wheat consumption at 616 million tonnes(613 mt) reflects higher food use with growth in many developing countries in Asia, while feed use is higher in the European Union.

While wheat prices in the US have softened following liquidation by speculators holding long futures positions, in the Black Sea area, milling and feed values have hardened following substantial export shipments and the likelihood of a significant fall in output next year.Contrary to initial apprehension, Australian wheat crop prospects have improved considerably which will be marketed in substantial quantities in the coming months.

Maize: World consumption is forecast at 672 mt versus production estimate of 677 mt. Demand for corn from the US ethanol industry continues to grow.

In Asia, there are demand uncertainties following outbreaks of bird flu.

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