FAO predicts decline in global wheat prices

Written by ASHOK B SHARMA | New Delhi, Jul 13 | Updated: Jul 14 2007, 05:01am hrs
Contrary to the assessment made by India, the UN Food and Agriculture Organisation (FAO) has said global wheat prices are expected to decline in the coming months, with generally improved supply prospects and spill-over impact of recent reduction in maize prices.

On July 10, India finalised contracts with three select bidders for import of 511,000 tonne wheat at $322-300 a tonne, apprehending further rise in global prices. The government had, in May, scrapped the bids quoting $263 a tonne as it found the price too high.

According to FAO, wheat prices in 2006-07 had risen due to declines in production in major exporting countries, export restrictions imposed in several countries and also due to the impact of surging maize markets. The situation is reverse in the coming months.

FAO, while making a forecast of falling global wheat prices in the coming months has, however, cautioned that much would depend upon favourable planting conditions in Australia in the 2007 season. Wheat cultivation is in progress in the southern hemisphere.

FAO said India may have to import only 2 million tonne in 2007, while the government said it needed to import 5 million tonne.In the recent issue of Crop Prospects and Food Situation, FAO has said global wheat output in 2007 is likely be around 621 million tonne, marking an increase of 4% over the previous years level.

The estimated global wheat output in 2007 would be well above the average of the past five years, despite damage to the crop in US due to harsh winter and decline in production in Canada.

Wheat output has good prospects in Europe and Asia, with production in 2007 likely to be close to the level of the previous year. Decline in Chinas wheat output is likely to be offset by increased production in India and Pakistan.

FAO has said that world trade in wheat in 2007-08 is likely to decline by 3.5 million tonne to be at 106 million tonne as many countries would feel the need to import wheat. This is a welcome development, it said.However, Indias decision to import wheat at high prices is based on the Unites States Department of Agricultures assessment of downgrading global wheat output to 610 million tonne and indicating future rise in prices.

The official press release, while admitting this, has also citied bullish trend in the Chicago Board of Trade futures.