Washington, DC
August 18, 2006Source:
U.S. National Association of
Wheat Growers
The
World Agricultural Supply and Demand Estimates (WASDE) report
released by USDA last week sharply reduced world supplies that
compete with U.S. soft red winter (SRW) and soft white (SW) by
reducing the EU-25 production forecast by 7 MMT. The reduced EU
crop, short crops in the Black Sea region and other major
exporting countries, and a huge increase in imports by India all
tighten world supplies. As a result, USDA forecasts a 24 percent
(1.6 MMT) increase in exports of U.S. soft wheat classes this
year even as total U.S. exports decline by 3.0 MMT because of
very limited supplies of drought-reduced US hard red winter and
hard red spring wheat classes.
Production problems in the EU-25 and Black Sea countries will
decrease exportable supplies from those regions. Severe heat and
drought last month in Europe cut yields significantly. Untimely
rains during harvest in Germany are further decreasing yield and
quality there. EU-25 production is now forecast to be 119 MMT,
down 3.4 MMT from 2005/06. Although weather in the Black Sea
region, including Russia, Ukraine and Kazakhstan, has improved
significantly in recent months, extreme winter weather following
a dry fall already had reduced winter wheat in the region. USDA
forecasts a 12 MMT production decline and a decline in exports
of 22 percent (4 MMT).
Major exporters in the Southern Hemisphere are also experiencing
poor crop weather. USDA forecasts a 12 percent (3 MMT)
production decline in Australia as dry conditions have decreased
planted acreage and are continuing to affect yields. Conditions
in Argentina are also unfavorably dry with production forecast
to fall 1 MMT below the 10-year average. Beneficial weather
could still increase yields in the Southern Hemisphere where
harvest is months away.
Reduced production is changing import patterns. USDA forecasts
Indian imports to reach 4.5 MMT this year from nearly zero in
2005/06, making India the eighth largest importer in the world.
The Egyptian import market, expected to remain the world’s
largest at 7.2 MMT, will be more competitive this year due to
the lower production expected in the Black Sea and EU-25. In
2005/06 the EU-25 and Russia accounted for 56 percent of
Egyptian imports. Brazil, the third largest importer in the
world, is expected to increase purchases by 600,000 MT this year
in anticipation of a short domestic harvest. With production
down in Argentina, which typically accounts for nearly 90
percent of Brazilian imports, other exporters will have more
access to South American markets.
While total U.S. production is down in 2006/07, U.S. SRW and SW
supplies are plentiful in 2006/07. Carry-in supplies of these
soft wheat classes are 22 percent (900,000 MT) higher than last
year, and USDA estimates a 9 percent (1.6 MMT) increase in
production of these two classes. A record 2.4 MMT harvest of
soft red wheat in Ontario further increases North American soft
wheat supplies.
According to the most recent commercial sales report, SRW sales
are 44 percent (325,000 MT) and SW 35 percent (424,000 MT) ahead
of last year’s pace. Egypt has purchased 230,000 MT of SRW and
SW this marketing year. Sales pace of SRW has also been much
stronger in Mexico, Nigeria and Venezuela while the Philippines
leads in SW at 399,000 MT, or 122,000 MT more than this time
last year.
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