Despite estimates of the global wheat output being lower by 6 per cent, wheat prices are unlikely to see any significant changes in 2009 as comfortable carry-over stocks from the previous season may provide sufficient cushion through the 2009-10 season (May 2010).
According to a Rabobank report, the total global wheat output is likely to decline to 640 million tonnes during 2009-10 compared with 683 million tonnes in the previous year. But, about 14 million tonnes of the carryover stocks, around 3 per cent lower than the previous year, may compensate the fall in production.
Apparently, the world wheat stocks-to-use ratio is also expected to fall by 1 per cent to 22 per cent, well above the 30-year lows it reached in 2007-08 at 19 per cent.
The forecast will provide a big relief to the Indian decision makers who were earlier anticipating a significant price rise on a lower production forecast. India, which has already built up comfortable buffer stocks by raising the minimum support price (MSP), is expected to record a 4.34 per cent decline in output in 2009-10, at 75 million tonnes compared to 78.4 million tonnes last year. The government raised MSP during the last rabi season by Rs 80 to Rs 1,080 per quintal for 2009-10.
But, the global politically-sensitive commodity may continue to average $5.5 per bushel (1 bushel = 27.22 kgs), around Rs 10.51 per kg on the Chicago Board of Trade (CBOT) unless a significant production issue in at least one major producing region crops up, the report forecast. The price averaged $5.5 per bushel in the fourth quarter of 2008 and will continue to remain rangebound throughout this year and will spill over into the first quarter of 2010.
Based on the benign old crop (2008-09 season) fundamental situation and uncertain economic environment, there appears to be limited upside for wheat price in 2009, the report said.
At the start of 2009, the area under wheat in India was at 26.26 million hectare (ha), marginally higher than the 26.21 million ha during the 2008-09 season and below the record plantings of 28.15 million ha in 2007-08 season. The area under this main staple crop has not risen to 29 million ha as targeted by the government as farmers in Madhya Pradesh and Rajasthan diversified to other crops.
Reports said farmers in 4-5 districts of Madhya Pradesh have increased the area under gram (chana of chick peas) hoping for better returns, while farmers in Rajasthan have shown an inclination for mustardseed.
Uttar Pradesh, the largest wheat producing state, may see more area under the wheat this year as at least half of the 1 million ha under rice in the state will go to wheat. Wheat acreage in Punjab stood at 3.5 million ha so far, while sowing in Haryana hit the record 2.48 million ha.
Consumption of wheat as a feed is expected to decline during the 2009-10 season. This is based on falling animal numbers and a subsequent slowdown in demand for feed, largely driven by weak global macroeconomic conditions together with an ample supply situation of coarse feed grains.
Depending on the extent of competition from other grains, world wheat consumption may actually fall by as much as 6 per cent in 2009-10, largely offsetting the contraction in the global production.
