North America’s wheat market share seen falling

(Resource News International) — Shares of the world wheat market in the upcoming 2009-10 crop year are expected to decline for both Canada and the U.S. from 2008-09, with the European Union, Ukraine, Russia and Argentina picking up most of that decline.

The five top major wheat exporting countries include the U.S., Canada, Australia, the EU-27 and Argentina, according to Ian Flagg, a market analyst with the U.S. Wheat Associates in Virginia.

Flagg noted that these traditional five largest wheat exporting nations generally account for roughly 70 to 80 per cent of the world trade.

Global output of wheat among the eight top producing/exporting countries was seen hitting 332.5 million tonnes in 2009-10, which would be down from the 377.2 million produced by these outlets during the 2008-09 season, said David Boyes, a commodity risk manager with the Canadian Wheat Board.

The 27 countries which make up the EU were expected to remain the top producer of wheat in 2009-10, accounting for 133.6 million tonnes, Boyes said. In 2008-09, the EU-27 produced 152.2 million tonnes of wheat.

Canada’s share of the world wheat market was seen declining as domestic production of wheat declines. Increased demand for vegetable oils, especially canola oil for human consumption and biodiesel output, along with increased demand for barley, was seen reducing wheat area and in turn limiting wheat export growth.

The U.S. share of the wheat market was seen declining in view of lower domestic production, increased competition and large carryout stocks of wheat in most competitor countries.

Australia’s wheat production was expected to climb to 22.8 million tonnes from 19.8 million in 2008-09.

Ukraine was expected to account for 17.5 million tonnes of the 2009-10 wheat total, but that level will be down from the 24.9 million produced in 2008-09, Boyes said.

Kazakhstan was also one of the few countries in which wheat output was to increase. Boyes pegged 2009-10 wheat output in Kazakhstan at 14 million tonnes, which compares with 12.3 million in 2008-09.

Boyes placed Argentine wheat production at 10.6 million tonnes, which compares with 9.9 million a year ago.

Canada’s all-wheat production in 2009-10 was seen declining to 23.93 million tonnes, from the 2008-09 level of 28.611 million, Boyes said. Reduced seeded area in the spring of 2009 in Canada amid disappointing price projections for the crop among producers were associated with the drop in output.

Meanwhile, chief economist Joe Glauber of the U.S. Department of Agriculture said wheat seeded area in the U.S. in the spring of 2009 will decline 5.1 million acres from the 2008 level to 58.0 million.

Winter wheats

Winter wheat seeded area was expected to decline 4.2 million acres while spring wheat (including durum) was seen dropping 900,000 acres, or five per cent. Soft red winter wheat seeded area was forecast to be down 2.9 million acres or 26 per cent from last year’s 12-year high as lower cash prices and late row-crop harvesting limited seedings last fall, Glauber said.

Hard red winter wheat seeded area was projected to be down 1.1 million acres or four per cent, with declines in prices and delays in fall harvesting in the Central U.S. Plains behind the drop. In the Northern U.S. Plains, spring wheat area was seen declining in reaction to increased soybean plantings, Glauber said.

Boyes pegged wheat output in the U.S. at 57.8 million tonnes in 2009-10, down from the previous year’s 67.9 million.

Glauber, meanwhile, was expecting U.S. wheat production in 2009-10 to come in at 2.12 billion bushels, which would be down from 2.5 billion in 2008-09.

Boyes projected world wheat trade in 2009-10 at an estimated 111 million, which would be down from his 2008-09 forecast of 114.9 million.

Asian demand for wheat was expected to drop to 26.7 million tonnes in 2009-10 from 29.1 million, according to Boyes. Wheat import demand from the Middle East in 2009-10 was pegged by Boyes at 18.4 million tonnes compared with 20.7 million.

Wheat import needs in Latin America, meanwhile, were predicted by Boyes to rise to 18.9 million tonnes in 2009-10, from 18.6 million in 2008-09.

Canada wheat exports for 2009-10 were seen declining to 16 million tonnes, Boyes predicted. Canada’s wheat export total in 2008-09 was forecast at 17.8 million tonnes.

USDA’s Glauber, meanwhile, was working with a world wheat trade projection of 119.8 million tonnes, which was down from his 2008-09 forecast of 124.3 million.

Large carryout supplies of wheat from the 2008-09 season in competitor countries will be a factor and impact the amount shipped by each of the main exporters, Glauber said. Egypt was likely to maintain its position as the world’s largest importing wheat country with imports by Brazil, Algeria and Indonesia also remaining very significant.

The USDA official noted growth in wheat imports will come mainly from developing countries where income and population gains are being made. Important growth markets include sub-Saharan Africa, Egypt, Pakistan, Algeria, Indonesia, the Philippines and Brazil.

Population growth

Little change in per capita wheat consumption is expected, but imports to these countries were seen growing because of the population growth and the inability of these countries to produce or expand their own wheat crop, the USDA official said.

Developing countries account for more than two-thirds of the projected increase in world meat imports. Generally, middle income countries with increasing per capita incomes are expected to have the most rapid growth, Glauber said. However, large increases in poultry and beef imports are projected for Africa and the Middle East. Strong policy support for domestically produced meat is expected to motivate growth in feed grain imports in regions where limited land availability or agro-climatic conditions preclude expanding domestic crop production, he said.

But despite this, it is expected that the strong global import demand for feed-quality wheat in 2008-09 will return to more normal trade and usage patterns in 2009-10.

Glauber also indicated that wheat exports from Ukraine and Russia would likely continue to gain market share. However, he urged caution in his forecast, given the region’s highly variable weather pattern and yield potential, which in turn create some high volatility in production and trade.

Glauber projected U.S. wheat exports in 2009-10 would decline slightly to 950 million bushels from the anticipated one billion seen in 2008-09.

Actual Canadian and U.S. wheat exports will also likely be determined in part by the value of each’s respective currency, Boyes said.

“A strengthening in the Canadian or U.S. dollar would not be supportive to bolstering exports,” he said.

George Davis, chief technical currency analyst with RBC Capital Markets in Toronto, said the outlook for the Canadian dollar calls for some further weakening.

“Basically, Canada’s economy still has some catching up to do with the world and U.S. economies, which have suffered greater losses,” Davis said. “In doing so, the Canadian dollar will ease further.”

Davis projected the Canadian dollar will weaken to the US79-cent range by the end of March and possibly into the US78.43-cent area by the spring.

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