Wheat supply shifting as markets get tighter

The report indicates that Mediterranean countries will increasing be sourcingtheir wheat from the EU at higher prices, while exports from the Black Searegion are constrained for a number of reasons.

Wheat production for the 2005 to 2006 growing season are forcast at 616million tonnes, a fall of two per cent from the record set in the previousseason.

Meanwhile consumption is forecast to rise by two per cent to 624 milliontonnes.

Global stocks are consequently forecast to fall this year by five per cent to142 million tonnes, mostly in China and India.

Stocks in the major exporting countries, however, are projected to remain at fairly highlevels, easing

Food use continues to grow to new heights with rapid growth in key countries such as India and Nigeria.The use of wheat for animal feed is also at record levels, with greater use in theformer Soviet Union and Europe due to reduced coarse grain crops, the reportstated.

The price of EU wheat has become more competitive recently, asBlack Sea exporters have reduced their sales during the past few months for a number ofreasons.

Exports from Russia and Ukraine typically occur shortly after harvest, with shipments trailing off later in the year.Another factor is the rise in prices recently on concerns over the size of the newcrops in the region.

Winter plantings were down considerably, especially in Ukraine, and harshweather has heightened concerns about high kill rates.

The freezingconditions have also created logistical problems in the Black Sea, which has impactedshipments. January exports were down sharply from Ukraine and Russia.

Thisreduced competition has created opportunities for expanded EU sales into theMediterranean region.

While export licenses had been in line with last year'space just two months ago, they are now nearly 40 per cent ahead of it. Meanwhile,export subsidies have dropped from nine euros to only three in the past month,the report stated.

World trade is expected to be down this year by about three per cent to 110tonnes, largely driven by sharply lower Chinese imports.

However, Indiahas reemerged as an importer for the first time in six years, and recently issueda half-million tonne import tender.

The supply and demand situation for exportingcountries this year is unique in that Canadian and Australian stocks continue toclimb to four-year highs, while US stocks remain steady at relatively lowlevels, the USDA stated.

In Canada, a second poor-quality crop has hampered growth in exports, andimpacted shipments to key spring wheat markets such as the Philippines.

For next year, US hard red winter wheat exportscould be pressured by a number of factors. The combinationof smaller beginning stocks, as well as lower planted area and poor crop conditionsin some growing regions could reduce exportable supplies.

In addition, exportcompetition could strengthen from Canada, with a return to more normal quality.US soft wheat exports, however, could benefit as Soft Red Winter wheat acreage is up sharply.

Also, there could be less world competition in soft wheat as a result of lowerplantings and possible crop problems in the Black Sea region.

The report covers the growing season from July 2005 to June 2006.