Global wheat production to increase but cereal markets remain tight Back Print this item Email this item The FAO projects that global wheat production will grow 3.4% in 2011 in response to high global prices. However, this will ‘still be below the bumper harvest of 2008 and 2009’. Wheat production in the EU is forecast to increase 4%, with a major bounce-back in production in Russia (+32.5%), Ukraine (+27.1%) and Kazakhstan (+56.2%). In terms of the overall supply and demand balance, FAO confirms a ‘tightening of the global cereal supply and demand balance in 2010/11’, with ‘a sharp drawdown of world stocks’. According to the International Grains Council, ‘inventories will fall for a third consecutive season in 2011-12’, despite these production increases. This is in part attributed to greater use of maize by ethanol plants in the US and for the manufacture of high-fructose corn syrup in the face of high world sugar prices. Rising prices, however, are likely to place limitations on the use of maize for ethanol production. This underlying situation is reflected in a 70% increase in cereal export prices since February 2010. However, cereals markets are subject to considerable price volatility, in part linked to the role played by speculators and in part linked to varying fears over oil prices. Press reports indicate the EU wheat market is also ‘extremely tight’. Source FAO, ‘Global wheat production to increase in 2011’, summary of the March 2011 edition of FAO’sCrop Prospects and Food Situation report, 23 March 2011 In English: http://www.fao.org/news/story/en/item/53813/icode/ In French: http://www.fao.org/news/story/fr/item/53813/icode/ FAO ‘Crop Prospects and Food Situation’, full text, Report no. 1, March 2011 http://www.fao.org/docrep/013/al977e/al977e00.pdf CommodAfrica.com, ‘La FAO prévoit une augmentation de la production mondiale de blé en 2011’, 23 March 2011 (in French) http://www.commodafrica.com/fr/actualites/matieres_premieres/faoproducti... Agrimoney.com, ‘World corn stocks to fall again in 2011-12 – IGC’, 24 February 2011 http://www.agrimoney.com/news/world-corn-stocks-to-fall-again-in-2011-12... Agrimoney.com, ‘Black Sea states to lead rise in world wheat crop’, 23 March 2011 http://www.agrimoney.com/news/black-sea-states-to-lead-rise-in-world-whe... Agrimoney.com, ‘Grain stocks to dip further despite record harvest’, 24 March 2011 http://www.agrimoney.com/news/grain-stocks-to-dip-further-despite-record... Agrimoney.com, ‘Bargain hunting buyers tighten EU wheat supplies’, 17 March 2011 http://www.agrimoney.com/news/bargain-hunting-buyers-tighten-eu-wheat-su... Editorial comment In recent months, EU wheat exporters have been regaining markets in north Africa that were previously lost to Black Sea wheat exporters. However, wheat production increases of 13.5m, 5.6m and 3.8m tonnes in Russia, Kazakhstan and Ukraine respectively are likely to result in increased competition on north African markets in the coming year. While north African food import needs are increasing as a result of political unrest, this increased competition for north African markets could see EU wheat exports to sub-Saharan African markets increasing once more, given the projected 5.5m-tonne increase in EU wheat production. This situation raises important issues related to cereals-sector trade policies in sub-Saharan Africa, given governments’ efforts across the region to stimulate cereals production, and the complex links between different cereals markets (wheat, maize, millet). There is likely therefore to be an intensification of discussions on the use of trade-policy tools in the ongoing EPA negotiations, in view of the potential growing commercial interest of EU cereals and cereal-product exporters in sub-Saharan African markets. Agritrade News Update – May 2011