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Global wheat prices likely to ease in fiscal year
Staff Reporter
Islamabad—Global wheat prices are expected to ease in the second
half of this year as a potential record-breaking world wheat crop
looms. Though a number of months of still left till the northern
hemisphere crops are harvested, at this stage, they appear to be in
good shape, according to a Rabobank International “Soft Commodity
Note”. Wheat stocks are expected to decline to 110 million tonnes,
the lowest in 30 years this season (July 2007-June 2008) with the
stock-to-use ration of a low 18 per cent, the note said.
Global wheat plantings and production are expected to rebound
strongly this year as farmers respond to record prices and policy
changes, particularly in the European Union (EU) where the Common
Agricultural Policy land “set aside” restrictions have been lifted,
making available an additional 10 per cent land. That has led to a
forecast of five per cent increase in wheat plantings in 27-member
countries bloc. Rabobank said though it was early to make a crop
projection for the next season starting July, it was forecasting a
crop of 640 mt, a six per cent rise from this season.
“World production is forecast to outpace consumption for only the
third time in the past nine season with the year-ending stocks
forecast to nine per cent rebound over this season,” the note said.
A significant weather premium has been factored in 2008-09 prices
given the 30-year low global stock levels and nearby futures price
movements are expected to be driven by demand announcements, it
said.
Policy changes such as ban on exports by Kazakhstan, unexpected
announcement in demand and index money flow movements are factors
that would drive the prices. Wheat for May delivery on the Chicago
Board of Trade ruled higher at $342 a tonne, though it is much lower
than the $495 reached on February 27. The note said downside risk
was likely to be the greatest in Chicago, given the expected
fundamental differences between hard and soft wheat this year.
Significant harvest pressure is likely to be felt in Chicago from
July-August onwards, given the US Department of Agriculture’s
expectations on planting.
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