WHEAT: WORLD MARKETS AND TRADE
As Stocks Continue To Shrink, Indian Government Commits To Import: At the end of this marketing year (Apr-Mar), ending stocks in India are estimated to fall to only 2 million tons -- down more than 90 percent from just 5 years ago. This tightening of supply has caused prices to rise, especially in the wheat-deficit Southern regions. As a result, the Ministry of Food recently announced that the State Trading Corporation would soon purchase 500,000 tons specifically for those regions, to arrive before mid-May. These would be the first substantial wheat imports in nearly 6 years. Although the approaching harvest could temporarily reduce the need for additional purchases, diminished stocks will likely necessitate additional imports in the longer term. (see PDF version for chart).
EU Export Subsidies Drop: In the last two weeks, the subsidy level granted by the Commission for wheat exports has fallen from 9 euros to 3 as a result of rising competitor prices and reduced competition. Severe cold winter weather in Russia and Ukraine has heightened concern over winterkill in the new crop and has strengthened prices. Additionally, freezing conditions have created logistical problems in exporting old crop supplies, and January exports from Black Sea ports were down considerably. Diminished competition from the Black Sea region has helped EU export licenses to surge in the past month. Common wheat export licenses are currently 39 percent ahead of last year’s pace, when exports were unsubsidized.
Less wheat has been offered into intervention so far this year as subsidized exports and stronger domestic feed demand have created greater market opportunities for farmers. Lower-quality crops in certain EU countries may also be a factor in fewer applications this year. Quantities offered or accepted so far stand at 2.8 million tons, down from 4.4 million this time last year.
Domestic: Prices rose for all wheat classes in January, accelerating at the end of the month. Hard Red Winter crop conditions continued to worsen, especially in Texas and Oklahoma. Also, the possibility of additional sales to Iraq, the second largest HRW market this year, helped to strengthen prices.
For the month, HRW and HRS prices were both up $6 per ton, with SRW up $10 per ton and Soft White up $1 per ton. (see PDF version for chart).
TRADE CHANGES IN 2005/2006
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Last modified: Friday, February 10, 2006