Wheat is a key driver of global food inflation. The prospect of a large increase in global wheat production this year could help to prevent further food tensions in several regions of the world, which have been severely hit by sharp rises in the cost of staple foods such as rice and bread.
Several factors have triggered the current food crisis: unfavourable weather conditions leading to poor harvests in major producing countries, steady international demand, the increased use of crops for biofuels, etc.
As a result, wheat prices reached a record high above $13 per bushel on the Chicago Board of Trade in late February. According to the first edition of the Rabobank's Soft Commodities Monthly Report (April 2008), world wheat prices have now fallen by more than 40 per cent at $8.01 a bushel in early trade on 25 April, their lowest level since November.
World crops appear to be in 'good condition'
Rabobank reports that world wheat crops appear to be in good condition at this stage of the season, particularly in the EU-27, Black Sea and soft red winter wheat areas of the US.
The IGC April Grain Market Report confirms that the outlook for the next wheat crop looks favourable in most major producing countries. The IGC forecasts world wheat production to reach 645m tons in the 2008/09 season, up from 604m tons in 2007/08.
However, wheat prices remain very high as global wheat stocks remain low. Unfavorable weather conditions could trigger further prices increases.
According to the IGC, crops in Europe, the CIS and China are developing well but parts of the US and Canada have suffered from a lack of rain. Hot weather is stressing crops in Near East Asia and North Africa. Rain in Argentina and Australia is boosting their prospects. In India, the wheat crop forecast has been increased by 2m tons, to a record 76.8m.
The rising cost of food has increased the awareness that global solutions should be sought in order for new crop production not only to meet annual consumption, but also to rebuild stock levels.
High prices trigger more crop sowing
High prices have already stimulated an increase in wheat sowing. Rabobank expects world wheat plantings to increase by 5 per cent in 2008. The USDA forecasts plantings of wheat to increase by 6 per cent in the US in 2008. Depending on further rains, wheat production in Australia, usually the world's second-largest wheat exporter, may double in 2008, says Rabobank.
This could lead to a partial recovery in world wheat stocks in 2008, with production forecast to exceed consumption by over 12m tons, according to Rabobank figures. However, it warned that "it is likely to take a number of years of strong production to rebuild world wheat stocks to more traditional levels."
To prevent further rises in the price of bread, rice, maize products, milk, oil, soybeans and other basic foods, the Food and Agriculture Organization (FAO) has urged governments of both cereal importing and exporting countries to take measures to limit the impact of higher international cereal prices on food consumption.
The organisation's objective is to put in place a "coherent international policy to achieve sustainable growth on the long-term".