Global Wheat Price Outlook Cut by Australia as Supply Rises

Wheat prices are poised to drop more than estimated as bigger harvests in Europe and the Black Sea region boost supply and surging output of other crops curbs use in feed, the Australian government said.

Hard-red winter wheat, the most exported variety, may average $285 a metric ton at U.S. Gulf ports in the year started July 1, the Australian Bureau of Agricultural and Resource Economics and Sciences said in a report today. That compares with $300 forecast in June and a $317 average in 2013-2014, the Canberra-based bureau said.

Futures in Chicago are set for a second quarterly drop as the U.S. Department of Agriculture predicts world output will climb to the highest ever. The Bloomberg Commodity Index of 22 raw materials fell to the lowest since July 2009 yesterday as corn and soybeans trade near four-year lows. Increasing supplies have helped cut global food prices, with a United Nations’ index slumping in August to the lowest since 2010.

“There will be significant carryover stocks from 2013-2014,” said Jammie Penm, chief commodity analyst at Abares. “For coarse grains such as maize, production will increase quite significantly so that’s going to take some substitution for feed demand out of wheat.”

Futures in Chicago rose 0.5 percent to $5.03 a bushel after dropping to $4.96 yesterday, the lowest since July 2010. Prices have slumped 22 percent in the past year.

Global Supply

Global output may total 714 million tons in 2014-2015, from 696 million tons predicted in June and 713 million tons a year earlier, the bureau said. Inventories at the end of 2014-2015 may reach 200 million tons from 190 million tons a year earlier, it said. The USDA forecast on Sept. 11 that world production will reach a record 719.95 million tons.

While world coarse grain production, including corn and barley, is set to decline to 1.267 billion tons from 1.274 billion tons, it will still be the second-highest on record, according to Abares. U.S. farmers will collect a record 14.395 billion bushels of corn, the USDA forecast. The U.S. is the biggest grower of corn and the top shipper of wheat.

Australia’s exports may total 18.1 million tons in the year started July 1 from 18.7 million tons estimated in June, Abares said. Output may be 24.2 million tons from 24.6 million tons predicted in June, the bureau said last week.

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