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COMMODITY REPORTS: FAO

FAO: 2014 wheat production to drop amid record cereal trading

By Kacey Culliney+

03-Apr-2014

Global wheat production will drop by 2%, the FAO forecasts
Global wheat production will drop by 2%, the FAO forecasts

There are large supplies of cereal and record trade levels set for 2014, but world wheat production will drop by 2%, according to the Food and Agriculture Organization (FAO).

The FAO published its Cereal Supply and Demand Brief today which has forecast wheat production for 2014 to drop by 2 million metric tons to 702m metric tons.

In Canada, production could dip as much as 22% because of reduced plantings, it said. Australia’s wheat production could also decline from last year’s above average level due to drier conditions.

Similarly, weakness in wheat production was expected from the Commonwealth of Independent States with yields expected to fall from high 2013 levels.

Strength in US, EU, China and India

However, US wheat production was set to rise 3.5%, “assuming good results from spring plantings and despite the adverse impact of continued dryness on winter crops”.

Similarly, EU production should prove strong with increases and China’s higher plantings should boost yields. India is also set for record levels of wheat production.

Utilization of wheat across the globe was expected to remain steady, the FAO report said.

Cereal trade at record levels

These production calculations come amid healthy prospects for global cereal trade, with forecasts for 2013/14 raised by 4.5m metric tons to record levels – up 6.6% on 2012/13.

Among the major cereals, wheat trade is set to rise by 6% and coarse grains by nearly 8%; both sparked predominantly by mainland China.

Could Ukraine unrest hit wheat?

Last month, analysts warned that continued unrest in Ukraine – an area considered the breadbasket of Europe – could cause the country’s wheat prices to rise and harm exports .

Euromonitor and the AHDB suggested that continued unrest in the country could cause uncertainty on the ability of the country to trade – impacting prices and exports.

The FAO’s cereal price index followed a similar take. It said that while initial fear over disruptions in grain shipments from the Ukraine had subsided, the geopolitical tensions between the country and Russia, combined with unfavorable weather conditions had led to a sharp rise in prices.

The average price of cereal was up 5.2% to 205.8 points – the highest value since August 2013. However, the FAO noted that levels remained 14.4% lower than March last year.