Wheat Outlook 33.3 million tonnes more wheat is being
consumed globally in 2005/06 than was consumed two years
ago in 2003/04. This is a function of a large volume of
lower quality wheat being available at competitive prices for
use in stock feeding. Also, the very tight supplies overall in
2003/04 saw wheat prices rise, and consumption pull back as
a result.
At the same time, production has lifted from 554.59 mill
tonnes to 615.83 mill tonnes. In part this has allowed the
increased consumption levels since 2003/04.
As we look forward to 2006/07, we would have to assume
that consumption would fall, unless the current supply of
lower quality wheat is able to sustain current consumption
levels for a little longer. We may also see a small reduction
in production if current trends in the northern hemisphere do
not reverse as the growing season gets underway in a few
weeks time.
A drop in consumption from 621.84 mill tonnes, back to
608.8 mill tonnes (2004/05 levels), and a modest 3%
reduction in global output in 2006/07 compared to 2005/06
(a drop of 17.89 mill tonnes to 597.94 mill tonnes) would see
production fall short of consumption by 10.86 mill tonnes.
This would drop global stocks to 133.8 mill tonnes (just
above the 20024/05 level of 132.22 mill tonnes), and see the
stocks to use ratio dip to 21.98%, its lowest levels since
1972/73.
Under this scenario we would expect to see wheat prices end
the year in 2006 at higher levels than we saw at the end of
2005. We would also expect to see volatility and higher
prices during the year as the market trades around the
uncertainty of supply and demand, offering good
opportunities to forward sell and lock in good price increases
compared to the end of 2005.
I think the positive point is that if production does not pull
back by 17.89 mill tonnes, we would also see consumption
levels remain higher than 608.8 mill tonnes, keeping pressure
on the overall balance sheet.
What does all this mean? Leaving the guessing to one side,
it indicates that there is
• A reasonable probability that wheat prices will be higher
at the end of 2006 than they were at the end of 2005.
• That indicates a high probability of a year on year lift in
AWB pool returns.
consumed globally in 2005/06 than was consumed two years
ago in 2003/04. This is a function of a large volume of
lower quality wheat being available at competitive prices for
use in stock feeding. Also, the very tight supplies overall in
2003/04 saw wheat prices rise, and consumption pull back as
a result.
At the same time, production has lifted from 554.59 mill
tonnes to 615.83 mill tonnes. In part this has allowed the
increased consumption levels since 2003/04.
As we look forward to 2006/07, we would have to assume
that consumption would fall, unless the current supply of
lower quality wheat is able to sustain current consumption
levels for a little longer. We may also see a small reduction
in production if current trends in the northern hemisphere do
not reverse as the growing season gets underway in a few
weeks time.
A drop in consumption from 621.84 mill tonnes, back to
608.8 mill tonnes (2004/05 levels), and a modest 3%
reduction in global output in 2006/07 compared to 2005/06
(a drop of 17.89 mill tonnes to 597.94 mill tonnes) would see
production fall short of consumption by 10.86 mill tonnes.
This would drop global stocks to 133.8 mill tonnes (just
above the 20024/05 level of 132.22 mill tonnes), and see the
stocks to use ratio dip to 21.98%, its lowest levels since
1972/73.
Under this scenario we would expect to see wheat prices end
the year in 2006 at higher levels than we saw at the end of
2005. We would also expect to see volatility and higher
prices during the year as the market trades around the
uncertainty of supply and demand, offering good
opportunities to forward sell and lock in good price increases
compared to the end of 2005.
I think the positive point is that if production does not pull
back by 17.89 mill tonnes, we would also see consumption
levels remain higher than 608.8 mill tonnes, keeping pressure
on the overall balance sheet.
What does all this mean? Leaving the guessing to one side,
it indicates that there is
• A reasonable probability that wheat prices will be higher
at the end of 2006 than they were at the end of 2005.
• That indicates a high probability of a year on year lift in
AWB pool returns.