from USW Wheat Letter
U.S. Wheat Associates

The first Canadian planting intentions will be released on April 23. As of March 29, the Canadian Wheat Board reported some problems with soil moisture, especially in the southern and southwestern Prairies. Precipitation during the first half of April will be critical in those areas to improve soil moisture for planting, CWB reported, and above normal precipitation is required over the next two months to help replenish soil moisture reserves. Southern Manitoba, northern Alberta and eastern Saskatchewan have an improved the topsoil moisture outlook.

French analyst Strategie Grains forecasts wheat output in the European Union at around 118 million metric tons (MMT) this year, up about 20 percent over last year.

In Australia, the AWB Ltd projects wheat acreage for the 2004/05 harvest at 12.0-12.5 million hectares, which would be a slight increase over the 11.8 million sown for 2003/04. The Australian Bureau of Agricultural and Resource Economics (ABARE), on the other hand, is forecasting a drop in wheat production, from an estimated 24.9 million metric tons in 2003/04 to 21.89 MMT in 04/05.

China's Grain and Oils Information Center places China's 2004/05 wheat acreage at 21.09 million hectares (mh), which is 0.95 mh less than last year. China's wheat production is forecast at 83.07 MMT, a drop of three percent from last year.

In Kazakhstan, USDA Foreign Agricultural Service (FAS) agricultural specialist Alexander Simon reported this week that their MY 2003/2004 wheat production is officially reported at 11.5 MMT, assuming normal weather conditions. He reports that specialists expect that the production area will increase slightly this year to 11.5 million hectares, but that lower than average snow cover in production areas may result in lower yields.

Dmitri Prikhodko, FAS agricultural specialist in Ukraine, reported that following on the heels of the worst grain crop on record, MY 2004/2005 should be a year of recovery for Ukraine’s wheat stocks and consumption. The anticipated production level should also ensure that Ukraine will return to the status of net wheat exporter with estimated wheat exports at 1.5 MMT.

Pakistan's MY 2004/05 wheat production is forecast at 20 million metric tons (MMT), resulting from widespread rains in November and December, and greater availability of fertilizer and herbicide inputs. The FAS agricultural attache reports that, despite the second largest crop forecast, Pakistan is expected to import 200,000 MT of wheat due to the lower stock level in the government reserve and an anticipated shortfall in local supplies available for procurement for the food department.

Herman Germishuis, from FAS in South Africa, says indications are that wheat plantings this year will rebound to about 850,000 hectares after only 750,000 hectares were planted in 2003. This could produce a crop of about 1.95 million tons after only 1.47 million tons were produced this year, he says. Import demand will however stay high with marketing year 2003/04 imports expected to reach 1.2 million tons and MY 2004/05 demand about 900,000 tons. Exports and re-exports generally amount to more than 300,000 tons.

Will India be a player?

by Ann Courtmanche, USW market analyst

Even though India's domestic wheat use outpaced production, the country will likely export a 4.5 million metric tons (MMT) in 2003/04. With news of a bumper crop in India this year, many are wondering if India will be a major player in the 2004/05 world wheat market.

Production rises
India's production is estimated at 65 MMT for 2003/04 and may increase to more than 74 MMT in 2004/05, due to the introduction of higher yielding (but suspect quality) varieties and expanded acreage as a result of improvements in irrigation systems. There's also a strong economic incentive, USW regional vice president Mark Samson explains. "Producers will continue to grow wheat, as opposed to other course grains, because they receive a price support from the government greater than or equal to their full costs of production, roughly 6,300 rupee per ton (US$137.56) for the 2003/04 season," he says.

Wheat doesn't reach the hungry
India has recently become self-sufficient in wheat, producing and consuming between 65 MMT and 75 MMT of wheat annually. With nearly 64% of India's rural children underweight due to malnutrition, according to the World Health Organization, it is inconceivable that food does not reach the poor -- but grain allocated to feed the poor is not distributed because of administrative and cost problems. In the mid-1990's, the Indian government began to reform the public distribution system (PDS), which sells government-procured wheat (and rice) to consumers at subsidized prices, but progress is achingly slow. An expanding middle class accounts for strong domestic demand, but ending stocks still tripled in five years to 23 thousand metric tons by 2001/02.

Cheaper to export
With half of the Indian government's PDS budget going to storage costs of the undistributed wheat, they began to export. It was actually cheaper to sell the wheat on the international market than to store or distribute it. India's World Trade Organization (WTO) status is a developing country, so the government provided subsidies to exporters to cover taxes, portions of both domestic and ocean freight and some "fobbing" costs, such as cleaning and inspections. Even though other exporting nations saw India's policies as an illegal export subsidy, nobody brought a complaint to the WTO so India was able to export 4.5 MMT in 2003/04, a little less than the previous year but much higher than the previous eight years.

Ending stocks are currently at their lowest levels since 1997/98, estimated by USDA at 6.5 MMT for marketing year 2004/05, and last fall the state-run Food Corporation of India ended the subsidized sale of wheat for export. According to news reports, the government will implement a new policy after elections this spring, which would allow traders to buy grain directly from producers without having to go through government middlemen. However, India's exporters are reportedly not optimistic. Without knowing the extent of government reimbursement, traders may be reluctant to sell.

Will India's exports continue?
With two-thirds of the population employed in the agricultural sector, removing subsidies may be too sensitive politically. If the government takes the easy way out and allocates spending to subsidies, rather than investing in infrastructure improvements, exports will likely resume -- but at a bigger cost for the future.

There will always be markets that are very price sensitive and will accept low quality wheat. But if India invests in transportation systems, advises farmers on small-scale farming methods, improves food grading and inspection services, and properly cleans their wheat, the country has a much better chance at long-term export marketing success.

Until then, India will continue to be the world's cheap wheat provider, going further into debt by paying (possibly illegal) subsidies, and failing to care for millions of hungry people. India's total exports are projected at 3.5 MMT for 2004/05.