World wheat stocks have been very tight for quite awhile and decreased production around the globe last year made them even tighter. Many have said a rebound in world wheat production was needed this year and it looks like it is happening.
Earlier this week the Russian Agricultural Ministry reported that wheat harvest and exports were significantly higher at this time than they were in 2007. The Ukraine also reported excellent grain harvests of 70% more than a year ago. While Rabobank cut the estimate of Australia's wheat harvest by a half million tons, their forecast of 20.5 million is still a significant increase over the past two year's harvests that were hit by severe drought. A report out of Europe shows a 25% increase in forecasted wheat production over last year.
"What we are looking at now is an increase of world wheat production to the tune of nearly 70 million tons," says World Trade Outlook Chairman Gerry Bange. "That is a very, very sharp increase; over 11% increase in one year."
The U.S. wheat production has also increased by 21% over last year. However Bange says there is a slight problem with this rebound.
"The recovery is coming at a time where we are having sort of an economic slowdown world wide. That has contributed to our decrease in commodity prices that we've seen of late," Bange says. "So it depends really on which side of the fence you're on. If you are looking at it from the perspective of less pressure on food prices it's good news; if you are looking at it from the perspective of the farmer it's not such good news."
Bange says the board has cut U.S. average wheat prices for next season by 25 cents to $7 a bushel which is still more than a half dollar above what growers received this past season.