World wheat output will return to surplus next year, but not by enough to refill inventories by more than a fraction, Macquarie has said, forecasting that Chicago prices will remain above $6 a bushel for at least two years.The bank forecast a jump of more than 5% in wheat production in 2011-12, the sowings for which have begun in northern hemisphere countries, as growers raise plantings to capitalise on firmer prices."European Union, US and Canadian farmers are expected to expand wheat plantings at the expense of other crops," Macquarie said.However, with consumption also to grow, in the absence of cheap alternatives, even the world's third-biggest wheat crop looked unlikely to surpass consumption by much.'Little downside risk'Indeed, as a proportion of consumption, inventories would actually looked set to tighten a fraction, with the stocks-to-use ratio, a key measure of pricing potential, set to edge lower to 25.1%.
The bank said it saw "little downside risk" of wheat prices falling below $6 a bushel in Chicago heading into the first quarter of next year, and forecast that level holding until at least the last quarter of 2012.
World wheat dynamics 2011-12, (year-on-year change)
Production: 672.5m tonnes, (+5.2%)
Consumption: 672.1m tonnes, (+1.0%)
Balance: +314,000 tonnes
Year-end stocks: 169.8m tonnes, (+0.2%)
Stocks-to-use ratio: 25.1%, (-0.2 percentage points)
Source: MacquariePrices would, for now, need to remain high to "encourage major exporters to draw down stocks to potentially tight levels", with those in Europe, where shipments have risen by more than 30% so far in the 2009-10 crop year, set to continue to outperform those in the US.The EU has been the first port of call for importers scrambling to replace supplies lost since Russia, the world's third-ranked wheat exporting country last year, in August banned shipments after the worst drought on record ravaged its crops....MORE
Does that stocks to use ratio in the factbox seem a bit light?