World wheat stocks threatened

World wheat stocks currently stand at 121mt, the lowest since 1981/82. The
world wheat stocks-to-use ratio currently stands at 20%, the lowest ever. The
world market is adjusting to these low stocks, but this is coming with increased
volatility, he said. Furthermore, world wheat production in 2006/07 will be
short of 600mt.
In the 2006/07 season, the world coarse grain stocks-to-use
ratio stands at 11.76%, the lowest on record – due in part to part to the
meteoric rise in demand from the bioethanol sector.

Looking forward to
the 2007/08 season, Davis said that world coarse grain production would rise to
around 624mt, but this is just a preliminary forecast, he warned, and
fluctuations could be as much as 47mt either side of this
estimate.

Maize demand to rise
Meanwhile, demand for maize will
also continue to rise, as will plantings, he said, quoting USDA figures which
point to a three-fold increase in US maize use for ethanol production. Mandatory
targets for renewable fuel use will maintain this in the future, he said, adding
that while he believes that the 10% target for renewable fuels is sustainable in
the long term, he doubts any increased percentage would be. Over the next few
years, the US will ‘reactivate’ around 1.86m hectares to accommodate a rise in
coarse grain plantings, he said. The EU will likely abolish compulsory
set-aside, freeing an estimated 3.7m ha, Davis said. Furthermore, the
EU reforms of the sugar regime is expected to free a further 650,000 hectares
for grain output. Russia could also become a significant player on world grain
markets, should all the available agricultural land be pressed into service, he
said.

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