Washington, DC
December 18, 2008
Source:
U.S. Wheat Associates (USW)
Wheat Letter - December 18, 2008
by Ian Flagg, USW Market Analyst
As the world concludes the 2008/09 wheat harvest, attention is
turning from the record quantity to the quality of available
supply amid production issues for many of the world's largest
exporters. The increase in exportable wheat supplies may not
meet the demands of quality-sensitive buyers, indicating
increased premiums for high quality wheat.
Production in major exporting countries should be 24 percent
higher at 75 million metric tons (MMT) this year than last, but
unfavorable weather during harvest and insect damage has limited
the supply of high quality milling wheat. Producers in the
European Union harvested over 150 MMT but rain during harvest
resulted in a glut of feed-quality wheat. The EU-27's import
requirements for high-quality wheat and its ability to find a
home for excess feed wheat remain uncertain. Rain at harvest and
Suni bug damage in Russia and Ukraine severely reduced end-use
quality leading some buyers to tighten specifications or shy
away all together. Ukraine's Department of Agriculture reported
only 46 percent of the harvest was graded milling quality
compared to 80 percent a year earlier.
Poor weather conditions in Australia and Argentina have
heightened concern about quality as harvest continues in the
Southern Hemisphere. Dryness at the kernel filling stage and
untimely November rainfall in Australia likely will reduce wheat
quality to some degree. Commonwealth Bank estimated that up to
2.8 MMT or 14.5 percent of the national wheat crop may fall to
feed grade. Up to 40 percent may be downgraded in parts of
northern New South Wales and southern Queensland. Meanwhile,
Argentina's wheat crop suffered from long-lasting drought that
affected nearly 75 percent of the wheat area along with untimely
frosts and reduced fertilizer use. Argentina's Agriculture
Secretariat lowered its 2008/09 wheat production estimate to 9
MMT from 10.1 MMT in November and 16.3 MMT in 2007/08.
The only source without quality questions remains the North
America. Once again, American producers harvested a large,
high-quality crop of HRW, hard red spring, soft white, soft red
winter and durum this year. The milling and flour
characteristics, with the consistent advantages of low moisture,
that just about any buyer needs, are available from the U.S.
Given the diminishing supplies of high protein wheat in the
world, prices may well have seen their lows for the marketing
year. |
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