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24-4-2008 | Other news

The first edition of the Rabobank's Soft Commodities Monthly Report says world wheat prices have recorded a sharp decline in the last 30 days. With the current extreme tightness in the world wheat balance sheet, this season’s weather will prove even more crucial than most.

• World wheat prices have recorded a sharp decline in the second half of March and first half April after reaching record levels in the first quarter of 2008.
• Record world wheat production forecast for the 2008/09 season, bearish for wheat prices.
• Current wheat crop conditions appear to be in good condition.
• Indian import requirements expected to be significant in 2008/09.    

Wheat prices
Prices have eased significantly from their record levels in second half of March and early April. However, they remain at very high levels in order to ration demand given the extremely tight supply situation both in the US and globally.

World wheat fundamentals
In 2007, exports were limited from some major producing regions in order to control domestic food inflationary concerns and ensure adequate supplies. Political interference in Russia, Ukraine, Kazakhstan and Argentina was a supply-side shock for the world wheat market and looms as a major issue for trade and price for 2008.

US 
Recent record spring wheat prices are also expected to lead to an increase in US spring wheat plantings in coming months. However, these upcoming spring wheat plantings are threatened by current dry conditions. The majority of crops have time  to improve if seasonal conditions are favourable, but some areas have already been lost due to a lack of moisture.

EU-27
Moisture is fine in Europe, though timing of the EU-27 crop will be extremely important for market dynamics this season. US exporters are expected to aggressively pursue business in the months of June, July and August before large EU-27 and Black Sea crops come onto the world market. 

Australia
Depending on further rains, Australian wheat production may double in 2008. Rabobank is currently forecasting a production range of 23 to 26mt, resulting in a rebound in Australian exports in late 2008 and early 2009 and also easing domestic supply shortages and hence prices.

India
The government has announced that they will be looking to establish a strategic reserve of wheat on top of the current buffer stock and public distribution scheme requirements in the 2008/09 season. A substantial wheat import program will be needed if the government is to achieve its stated goals in wheat stock rebuilding.

Rabobank's analysts aim to provide clients with value added initiatives such as this monthly report to support their business development.