The Hindu Business Line : World grain prices weakening

BUOYED by a substantial increase in world wheat output and with consumption likely to marginally trail production, global end-stocks in 2004-05 will reverse their declining trend of last four years and are set to rise.

However, adverse weather during harvesting has affected quality of crop. In its latest forecast issued today, the London-based International Grains Council (IGC) has placed world wheat production for 2004-05 at a record 606 million tonnes, up 4 mt from June forecast and reflecting a 51 mt increase from 2003-04 (554 mt). The biggest increases in output in 2004 will be in Europe and the CIS.

Wheat consumption estimated at 604 mt (588 ml.t. in 2003-04) will nearly match production. The rise will be mainly in animal feed sector as supplies recover in EU and CIS, although feed use of wheat will remain well short of historic levels.

World trade is placed at 100 mt (101 mt). China's imports are forecast to rise by 7 mt, while purchases by CIS and Eastern Europe will fall sharply, IGC said. Closing stocks placed at 131 mt are marginally above the previous year's 130 mt.

Given the fundamentals, US wheat futures in Chicago fell to their lowest level in a year. World prices, particularly of lower grades, were influenced by the arrival of substantially larger crops in Europe and CIS, with Black Sea export quotations below $100 a tonne.

Grains prices in general and those of maize (corn), barley and soyabean in particular continued their retreat into July from the previous month, in the wake of favourable crop prospects.

Global maize output is forecast at 652.3 mt, up 32 mt from last year, reflecting record prospects in the US and slightly higher figure for China.

World consumption is placed at 658 mt. However, animal feed use in some countries could be affected because of larger wheat supplies.

The US soyabean futures fell sharply due to the increasingly favourable outlook for the 2004 crop and improved pipeline supplies, although old crop stocks are estimated to reach a 27-year low. Forecast of 80 mt US soyabean harvest has exerted far greater pressure on the market than tight supplies.