Macquarie Bank expects to see a reduction in wheat production across many regions of the world in 2015. Whilst weather may not have been fantastic in the US, near perfect growing conditions for wheat in the Former Soviet Union and European Union have been moving the world into a large surplus. As a consequence, wheat prices have weakened during 2014 and have already fallen below the cost of production, discouraging farmers to spend on inputs and thus, limiting production potential into 2015. This is a major concern for production in the Russia and Ukraine, as the prolonged political conflict between the two countries has made lending for farmers far more difficult.
It is worth noting that while growth in world wheat stocks is likely to return, wheat quality has been detrimentally impacted. Wet harvests in Western Europe, US and Canada have seen the proportion of the crop that will produce milling grade decline, exacerbating the surplus of feed grains around the world. Macquarie thinks that this phenomenon is unlikely to have a great deal of impact on the world’s wheat futures market though, and would only see an increase in the premium milling grade wheat attract in the cash market.
More prospects of the global market of grains will be given by the speaker of the Second round of the Ukrainian Grain Congress (November 25-26, Kiev) Daryna Kovalska, Agricultural Commodities Research, Macquarie Securities.
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