Australia Trims Wheat Price Drop Forecast on U.S., Ukraine

Jun 17, 2014 2:48 am ET

(Updates wheat price in ninth paragraph.)

June 17 (Bloomberg) -- Wheat prices will fall less than previously estimated amid concern that supplies from Ukraine may be curbed and the U.S. will have a smaller crop, said an Australian government forecaster.

The price at U.S. Gulf ports of hard-red winter wheat, the most exported variety, may drop 5.4 percent to an average $300 a metric ton in the year starting July 1, the Australian Bureau of Agricultural and Resource Economics and Sciences said in a report today. In March it forecast a decline of 6.6 percent to $285 a ton. World production will decline 2.2 percent to 696 million tons in 2014-2015, the Canberra-based bureau said.

Wheat climbed to a 14-month high in May before tumbling into a bear market this month as increasing supply in Europe and the Black Sea compensated for a drop in U.S. production. Rising supplies are helping to keep a lid on global food inflation, with the United Nations reporting a second monthly drop in prices in May. The S&P Agriculture Index of eight commodities tumbled 4.6 percent through June 13 in a seventh week of losses, the longest slump since 2001.

“We are talking about a higher base now,” said Jammie Penm, chief commodity analyst at Abares. “Certain parts of the wheat producing region in the U.S. have had less than favorable seasonal conditions. We’re closely monitoring the situation, but we have factored in some of the possible impacts.”

Wheat futures in Chicago climbed to $7.44 on May 6 amid poor U.S. crop conditions and after Russia’s incursion into Ukraine increased speculation that the flow of supplies from the region would be threatened. Information indicates that there hasn’t been any real disruption to shipments, Penm said.

Global Stockpiles

Global wheat output will total 701.6 million tons from 697 million forecast last month as production outside the U.S. increases, the U.S. Department of Agriculture said June 11. The crop was seen lower in the U.S. after a drought cut yields, data showed.

World stockpiles are set to increase to 193 million tons in 2014-2015 from 192 million tons a year earlier, Abares said today. While the decline in stockpiles is expected to be substantial in the U.S. and Canada, a modest increase is expected in the European Union, it said.

Australia’s exports may be 18.7 million tons in the year starting July 1 from 19.1 million tons forecast in March, Abares said today. Output may total 24.6 million tons from 24.8 million tons forecast in March and 27 million tons a year earlier, the bureau said June 11.

Wheat for September delivery rose 0.5 percent to $5.94 a bushel on the Chicago Board of Trade at 2:07 p.m. in Singapore. Prices settled at $5.8925 on June 11, a 20 percent slump from a 14-month closing high of $7.39 on May 6, heralding a bear market.