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NAB: World Wheat Production to Exceed Consumption By 10M Tonnes

31 October 2011

GLOBAL - National Australia Bank agribusiness has revised its 2011-12 wheat crop forecast up to 25.05 million tonnes.

Increasing world production is pointing to further falls in prices over the medium term, but tight world corn stocks will provide some support to wheat prices for Australian growers over the remainder of the year and into 2012, writes Weekly Times Now.

The October Rural Commodities Wrap reports that the Australian wheat price is forecast to fall 7.2 per cent in 2011-12 in year average terms, with a 4.8 per cent decline in production compared to the bumper 2010-11 crop.

NAB Agribusiness general manager, Khan Horne, said world wheat production would exceed consumption this year by almost 10 million tonnes.

"With a solid crop on the cards in Australia and yields close to being locked in, the market will start focussing its attention on quality.

"Any quality downgrades this season are likely to expose producers to significant downside risk on prices received," said Mr Horne.

In October, the US Department of Agriculture revised global wheat stocks up more sharply than the market anticipated, reflecting increasing global production. Corn stocks were also revised up sharply, however supply still remains very tight.

"Australia's wheat price is anticipated to be supported in the medium term by the tight global supply of corn which is set to come in at its lowest level since 2006-07.

"As corn prices rise as a result of the tight stocks, wheat will be supported as buyers look for a substitute grain, particularly in the Asian feed grain market.

"On the other hand, financial market turmoil is providing some downside risk to prices and has clearly weighed on commodity markets.

"In our view, most price risk going forward will be thrown up by financial market volatility - while this remains elevated, we can expect normal supply and demand factors to take a temporary back seat," said Mr Horne.

Across other commodities, price increases were greater than anticipated in September.

The NAB Rural Commodity Index increased 1 per cent in AUD terms, while the strengthening AUD saw the index increase 1.5 per cent in USD terms.

The September result was largely due to rising livestock prices with cattle and lamb prices up 4.5 per cent in the month. Barley and cotton also recorded increases, while wool, sugar and dairy all fell.

TheCropSite News Desk

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