A record wheat production expected in 2013

Agricultural , Commodities , Wheat Mar 27, 2013 No Comments

WheatAfter falling 5.74% between the 2011/12 and the 2012/13 season to 656 Mt according to the International Grain Council, the world wheat production should bounce back. In 2013/14, the harvested areas should be at their highest level in four years, while a rise in yields would stimulate the production by 4%.

These estimates are similar to those of the Food and Agriculture Organization of the United Nations (FAO), published earlier this month. In 2013, global wheat production (690 Mt according to FAO, +4.3%) should be driven by the European Union (138 Mt), where the acreage should increase thanks to high prices.

The Association of European farmers and their cooperatives in the European Union, Copa-Cogeca, believes that wheat production should increase by 3.7% between the 2012/13 and 2013/14 to 127 Mt. However, given adverse weather conditions experienced in recent months, “a significant percentage of cultures will have to be sowed again” , warns Max Schulman, Chairman of Cereals working group.

Farmers in major exporting countries were encouraged to plant wheat: prices were high last season, leading to an increase in acreage. The weather is again favorable to the U.S. winter wheat which has been sown in September, on land dried by the worst drought in 50 years in the United States. But the rain and snow of recent weeks have brought enough water for the development of wheat which will be harvested in the month of May. On the other side of the world, India will have a new record harvest for the third time and Australia already expects an increase in production of 13%. Russia is expected to grow strongly after losing 25% of its crops due to drought last summer.

At the global level, wheat production could reach 680 or even 690 MT during the next season, which would make it the first or second most important in history. That would drive wheat prices down and analysts expect six dollars per bushel by the end of the year vs. 7.15 dollars now. That would however not cause a prices collapse since it will not mean that there will be a proportional increase in the quantities available for export: the main wheat suppliers need above all to restore their national reserves. This is the case of Russia which will give priority to filling its warehouses instead of exporting. Australia will do the same to a lesser extent. Only India could double its export quotas which would represent nine million tonnes of wheat on the global market, nearly one third of what the USA sell!

Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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