Price of Wheat...Corn and Wheat going to par?

[TOM4CWB]

Dear Charlie,

I see the USDA projects the following:

Production, Consumption and Trade
2008/09
• World production forecast at record 656 MMT
– Up 8% (50 MMT) from 2007/08, 11% (65 MMT) above 10-year average
– Up in largest producers: EU (17%), China (3%), Black Sea (7%), India (1%)
– Up in North America: U.S. 16% (9 MMT), Canada 25% (5 MMT)
the world’s Australia reliable choice
– expected up 83% (11 MMT)
– Argentina to reduce plantings on political problems, harvest down 3%
• Consumption sets record: up 4% (22 MMT)
– Wheat feeding to increase 15% (15 MMT)
• High corn prices put wheat in feed rations
– Food use rises (6 MMT)
• Trade increases 7% (8 MMT) to new record
– Importers rebuild stocks
• Imports
– India drops to near 0 from combined 8 MMT over last 2 years
– EU-27 down 1.5 MMT
– Iran up 2.5 MMT, Syria and Israel up 1 MMT, Algeria 1.2 MMT
• Exports
– Up: Australia doubles to 15 MMT, EU up 6 to 15 MMT, Ukraine up 5.3 to 6
MMT, Canada up 2 to 15 MMT
– US down 8 (27 MMT) , Kazakhstan down 2.5 (6 MMT), Pakistan 1.2 (1 MMT)

Major data source:
USDA World Agricultural Supply and Demand Estimates
May 9, 2008
http://www.uswheat.org/justReleased
May 9 S&D Report.

If this comes to pass... does this mean wheat and corn will be on par?

I see Canada is projected to drop to a 08-09 4mmt carry over of wheat from 7mmt in 07-08... and our exports dropped 5mmt in 07-08.

What is going on here?

[charliep]

Perhaps the interesting change in my career is the move to wheat as a world crop. Realizing that northern hemisphere spring wheat and southern hemishere wheat is just getting plant, world farmers are responding to higher prices. The major exporters (Canada, US, EU, Australia, Argentina) make up a lower percentage of both world wheat production and trade - read less important.

Majority of world corn production and trade remains centered in the US. A policy decision which stimulates consumption - ethanol. Both meat and ethanol are targeted at the world's wealthy (mainly north america) who can afford to pay and are very slow to change behaviour. Look at the list of corn importers. Until breeding stock numbers come down (which they are quickly), the feed consumption side of livestock doesn't change quickly either.

Assuming you are right on the corn and wheat at par (particulary if looking at per tonne), losts of other changes will occur including more wheat being fed livestock. We are living in very interesting and dynamic timew without precedence.

[Fransisco]

Here are some interesting corn numbers I came across this morning <b>"33 bu/Acre in 1944 vs. 151 bu/Acre in 2007"</b>

I haven't had time to check but I wonder what wheat yeild has done over the same time.

[charliep]

The place to answer your yield question is the USDA production, supply and disposition data. They have yield data by country and crop for close to 50 years.

http://www.fas.usda.gov/psdonline/psdQuery.aspx

The answer to the question of corn versus wheat yields will vary by country and time period. Wheat benefited greatly from the green revolution during the 60s and 70s. In recent years, corn has benefited from bio technology and yields have shot ahead. Have seen presentations that would indicate by achieving an average US corn yield of over 170 bu/acre in the next 5 to 10 years is quite possible and 200 bu/acre (again an average) a realistic target in the foreseable future.

[Fransisco]

Well according to that data base in 1960 Canada was averaging 21 bu/acre
in 2007 it was 34.5 bu/acre

In the US they went from 26 bu/acre in 1960 to 40 bu/acre in wheat.


Interesting to point out that the fact that all the corn these days is GM doesn't seem to be hurting the price of it one bit.

[furrowtickler]

Canadian wheat at best will be a 10% increase. It is still very dry in the south and wheat acres have been taken out scince the last report, IMO.