WORLD MARKETS AND TRADE:

COMMENTARY AND CURRENT DATA

WHEAT: WORLD MARKETS AND TRADE

MONTHLY HIGHLIGHTS: See PDF version for charts

Exporter Stocks Continue To Shrink: Drastic deterioration in the Australian crop is further tightening the world wheat situation, causing stocks in the major exporting countries to fall below the benchmark low level of 1995/96. Stocks are expected to decline in every major exporter, pushing prices to the highest levels in a decade. In the European Union, milling wheat has been sold out of intervention storage at 25 percent ($33) above acquisition costs. U.S. ending stocks are now forecast to drop to a 10-year low.

Domestic: For September, prices rose for most classes, especially at the end of the month as supplies continued to tighten in many of the world’s major exporters, especially Australia. For soft wheat, very strong export demand also supported prices and continued to narrow the hard/soft wheat price spread. For the month, Soft Red Winter (SRW) prices rose $18 per ton and Soft White (SWW) prices rose $17. Hard Red Winter (HRW) rose $4 per ton, while Hard Red Spring (HRS) prices fell $2.

• Argentina is up 500,000 tons to 9.0 million on robust shipments of old crop supplies in recent months and very strong new crop sales.

• Australia is down 4.5 million tons to 13.0 million as drought-ravaged production is expected to significantly curtail exports.

• Canada is up 1.5 million tons to 20.5 million as production is raised this month and supplies are plentiful enough to replace Australian sales in key Asian markets.

• EU-25 is up 500,000 tons to 16.0 million despite a downward revision in production. Wheat export licenses are currently nearly 30 percent ahead of last year’s pace, despite zero subsidy. With exports expected to wane from the Black Sea region during the second half of the trade year, coupled with less competition from Australia, this should create more opportunities to export European supplies to key Mediterranean markets.

• Kazakhstan is up 500,000 tons to 5.0 million. Production is expected to be up from last year, and very high world prices will likely result in greater exports outside the Former Soviet Union.

• United States is up 500,000 tons to 26.0 million. Despite sluggish sales, reduced competition from Australia is expected to boost sales and shipments in coming months.

• Brazil is up 200,000 tons to 7.0 million as production has fallen to only half of the level of 2 years ago.

• Egypt is down 200,000 tons to 7.0 million on very high world prices and the slow pace of purchases by GASC (General Authority for Supply Commodities).

• Nigeria is down 400,000 tons to 3.9 million. Although consumption is still expected to expand, very high world prices and slow purchases to date indicate import growth will be less than previously anticipated.

• South Africa is down 100,000 tons to 1.0 million as a sharply larger crop reduces import needs.

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Last modified: Friday, October 13, 2006