“If we have a weather problem next year in wheat, we need to remember that we don’t have a cushion to cover ourselves.”
– dan basse
World wheat production is likely to fall five per cent to 647 million tonnes next season, against a record 682 million tonnes harvested in 2008, due to a drop in area sown, U. S. analyst AgResource said Nov. 19.
“We believe the world wheat crop will lose around 35 million tonnes largely because of lower seeding,” AgResource president Dan Basse told Reuters in an interview on the sidelines of the GlobalGrain2008 conference in Geneva.
The fall in area is due, in most places, to the recent slump in prices and soaring fertilizer costs that have discouraged farmers from sowing wheat, Basse said.
The United States would experience one of the steepest falls, with a forecast of 2.3 billion bushels (around 62.6 million tonnes) for 2009, down 200 million bushels or eight per cent on 2008, as farmers switched to more profitable soybeans and corn.
He did not give forecasts for soybeans and corn.
The world produced a record-high wheat harvest in 2008 as farmers, attracted by the surge in prices, increased sowings.
This led to a collapse in global prices, amplified over the last months by fears that a recession would slash grain demand.
The world’s benchmark price, the front-month contract on the Chicago Board of Trade futures market, closed at nearly $5.3 per bushel Nov. 18, weighed down by dull demand and spillover pressure from a fall in crude oil and stock markets.
But the analyst warned that prices remained fragile and that volatility would continue to prevail.
“If we have a weather problem next year in wheat, we need to remember that we don’t have a cushion to cover ourselves,” he said, pointing to tight global stocks despite a hefty crop this year as global demand continued to increase.
“It does not take much to shift the scale from wheat being a $4 to $5 (per bushel) commodity to being a $9, $10 or $11 commodity in a very short period of time.”
Unforeseeable events aside, Basse said he expected the “bull market” to return around February or March next year as investors regain confidence and take account of rising demand in fast-developing countries and a still expanding biofuel sector.