Wheat prices could still yet escalate, despite a forecast of increased global cereal production.
Declining global stocks lie behind the warning of possible pricing volatility from the Food and Agriculture Organisation of the United Nations.
It had in June forecast levels of stocks to disappearance – the level of inventories relative to domestic consumption and exports – at 15.5% for 2013-14 for the EU, Australia, Argentina, Canada, the US, Kazakhstan, Ukraine and Russia. But it has now chopped that to 12.6%, which compares to 13.5% for the year just gone and a 17.5% five-year average between 2006-11.
“Should there be a weather shock or a sudden increase in demand, you could get a sudden sharp reaction in wheat prices,” FAO senior grains economist Abdolreza Abbassian said.
FAO expects global cereals production to show a near 8% rise in 2013 compared to 2012. But 2014 stocks are thought likely to fall 2% to 559million tonnes. That’s 62million above their opening level and the highest since 2001-2.
Global cereals output is forecast at 2.489billion tonnes, a 3million fall on the FAO’s September figure and a reflection of poorer prospects for wheat in South America because of adverse weather.
The largest chunk of the increase will come from the US, where there is a likelihood of the maize harvest hitting a record 348million tonnes, a 27% increase on 2012 when drought affected production.
Ukraine warned yesterday that its wheat crop for 2014 could be hit by poor autumn weather which has prevented winter seed being sown. Heavy rains across most of the country have reduced the sowing area.