World wheat production to increase following FSU-12 recovery in 2011/2012

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World wheat production in 2011/12 is projected to reach 669.6 million tons, up 21.4 million, or 3 percent from the previous year. Foreign wheat production is projected to increase 25.9 million tons, or 4 percent compared to 2010/11. If realized, this year’s wheat output would be the third largest in history, just behind the record harvests of 2008 and 2009. Global wheat plantings are projected to increase in response to high 2010/11 wheat prices and expectations for even higher prices in the 2011/12 marketing year, though the increase in wheat area is only marginal. Some major wheat producers (Canada, Australia, Argentina, and India) did plant--or intend to plant-- more wheat in 2011/12 than in the previous year, while wheat area in the EU-27 is projected to remain virtually unchanged on the year.

The FSU countries’ combined wheat acreage for 2011/12 is projected to decline. The relatively small increase in projected wheat area can be attributed to (a) higher expected returns from other crops (corn and sunflowers); (b) fall weather conditions in some regions that prevented full-scale winter wheat planting (Russia); and (c) government interference into the countries’ grain economy that artificially depressed domestic prices (Russia and Ukraine). A recovery from the 2010/11 drought in the FSU-12 coupled with higher yields in a number of other countries is projected to more than offset anticipated lower
yields in the United States, Australia, Argentina, Canada, and several other countries and boost global wheat yield in 2011/12 by 2 percent, and foreign yield by 3 percent.

The European Union-27 (EU-27) is expected to remain the world’s largest wheat-producing region in 2011/12 (about 20 percent of world wheat output), and is projected to marginally increase its wheat production to 138.6 million tons. This is only a 2-percent increase from the adversely affected wheat crop of 2010/11, when dryness in western Europe that spread from the UK to Germany occurred, simultaneously with excessive wetness in eastern Europe. Wheat area is projected at 26.0 million hectares, just 0.1 million higher than in 2010/11. Fall weather in central and Eastern Europe (Germany, Hungary, and Romania) was not favorable for winter wheat planting, with heavy rains and soaked soil. As a result, a higher-than-average percent of fields were left fallow to be planted with spring crops.

This year, the growing season in the region is also far from ideal. Since January, dryness in some major wheat-producing areas has hurt wheat crop conditions across northwestern and northeastern parts of the EU-27. April was exceptionally dry across northern France and Germany, northwestern portions of Poland, and southeastern England (in the UK). Several dry pockets have as well developed in the northern
Balkans. In some areas, moisture levels are below 75 percent of normal and dryness is affecting plant nitrogen fertilizer absorption.

In early May, late freezes in Germany, Poland, and Hungary, on some occasions reaching minus -7 degree C, could also have reduced wheat yield potential in some areas. A mild winter and higher average temperatures have accelerated wheat plant development, thereby making the crop more vulnerable to freezing at a time when protective snow cover is long gone.

China is expected to be the second largest wheat producer in 2011/12 (about 17 percent of world production), reaching 115.5 million tons, an increase of 0.5 million tons from the previous year. Area planted is reported up slightly. Planting conditions for winter wheat (the major part of China’s wheat crop) were favorable, and current crop conditions are on par with last year.

Despite below normal rainfall in April in most wheat areas, intensive irrigation assisted crop development, and there are no signs that the wheat crop suffered significant damage. Spring wheat in China is being planted on time.

Wheat production in the FSU-12 is forecast at 100.6 million tons, up 19.6 million, or 24 percent from a year earlier. The region is recovering from the worst drought on record with a 26-percent rebound in projected wheat yields. Although world wheat prices have been high, projected FSU-12 planted wheat area for 2011/12 is 1.0 million hectares lower for the year, with the biggest reductions in Russia and Kazakhstan.

Russian wheat area is projected to drop for a number of reasons. Winter wheat planting in Russia is projected to be down 0.9 million hectares, the lowest in 4 years. Fall planting conditions were suboptimal in a number of drought-affected regions of Russia. The Volga region, where about 30 percent of Russian winter wheat is usually planted, was affected the most, with the largest drop in winter grain planting.

Another reason for the projected drop in FSU-12 planted wheat area is that last year’s severe drought motivated the Russian government in August 2010 to impose a complete ban on grain exports to avoid domestic price increases. This has had two main effects. The first is that the inability to export has resulted in high grain stocks, such that there is very little excess storage capacity. The second effect is that the high stocks have driven Russian domestic grain prices down to about 2/3 of world levels. These developments are reducing Russian grain producers’ incentives for planting wheat and encouraging producers to plant other spring crops.

Another reason for the projected drop in Russian wheat area concerns spring wheat, the dominant spring crop in Siberia and the Urals, and also in the Volga region. However, in the large Volga region, climate allows a variety of spring crop options, including corn and sunflowers. High expected returns for those two crops are motivating a switch to them at the expense of spring wheat. On the other hand, the drop in winter wheat planting in Russia mentioned earlier has left more area for spring wheat planting, such that on net, Russian spring wheat area will marginally increase this year.

In Kazakhstan, a long-term government policy of diversifying grain production away from wheat towards feed grains, as well as rising prices for fuel and other inputs, are projected to lower wheat area in 2011/12 by 0.5 million hectares. In Ukraine, where fall planting conditions were favorable, wheat area is projected slightly up. In both countries, wheat yields are projected to be close to the past 5-year average.

India is projected to produce a record wheat crop of 84.0 million tons, up 3.2 million, or almost 4 percent from a year earlier. High wheat prices motivated an almost 4-percent increase in area, and growing conditions have been mostly favorable. This crop is already largely harvested. Harvesting also has been almost completed in Pakistan, where the wheat crop is forecast down 0.4 million tons on the year to 23.5 million. Yields are slightly lower because the share of nonirrigated plantings has increased this year, and this wheat did not get sufficient rain during the winter. In Afghanistan, where low precipitation in the major wheat-producing areas in the northern part of the country is expected to cut yields, wheat production is forecast down 1.2 million tons to 2.5 million.

The Middle East is projected to produce a 37.9-million-ton wheat crop, 6 percent lower than the previous year. The main reduction in projected regional wheat output comes from Iran, down 11 percent. This is because of a return to average yields after a bumper year, and a 3-percent contraction of wheat area due to losses in irrigation supplies. Wheat production is also projected down 15 percent on the year for Iraq, and 10 percent for Syria.

North Africa’s wheat production in 2011/12 is projected up 19 percent to 19.1 million tons. With the exception of western Algeria, where dryness raises some concern, the main wheat-growing areas of the region are enjoying a good growing season, with generally favorable soil moisture. Surveys of Canadian planting intentions indicate a 17-percent increase in total wheat sowings, a rebound from the last year’s planting, the lowest in 40 years. The wheat area upswing is in response to high prices. The intended planting of Canadian western red spring wheat is up 17 percent (mainly in Saskatchewan), planned area for durum wheat is up sharply 60 percent (mainly in Saskatchewan, but also in Alberta), and winter wheat seeding is up 9 percent in eastern Canada (mainly in Ontario), due to improved planting conditions last fall. This spring, very wet and cool weather in Canada is delaying planting. However, the planting window in Canada is generally open through mid-June, and farmers are capable of planting very quickly. Wheat production in 2011/12 is forecast up 12 percent to 26.0 million tons.

South America is expected to produce 23.3 million tons of wheat, down 8 percent from the previous year. In Argentina and Brazil, wheat planting has just started. In Argentina, there are early indications of increased wheat planting, as it is widely expected that the government will ease up on exports regulations, because of both ample supplies and upcoming elections. In Brazil, area stays marginally the same. Both countries had almost ideal growing conditions last year and bumper wheat crops with the highest yields on record. As yields are expected to return to trend levels, wheat production in Argentina and Brazil is projected down 10 and 19 percent, respectively.

In Australia, early indications suggest an increase in wheat area by 0.5 million hectares to 13.8 million. Winter wheat will be planted in late May-July, and the subsoil moisture level in eastern Australian provinces is very good following last year’s heavy rains. Western Australia, however, is still seasonably dry, and will need abundant precipitation to recover from last year’s drought. Based on trend yields, Australian wheat production is projected at 24.5 million tons, 1.5 million tons lower than last year’s second highest wheat output on record.



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Joshua    
Australia  |  May, 15, 2011 at 08:05 PM

Thanks for the info, Gives a good background indication of price variations to come. Would you be able to type a total estimated global Increase or decrease relitive to your information at the end of the report this would also be very helpful. Cheers

Eldon & Edna Andres    
Peabody, KS 66866  |  June, 22, 2011 at 05:41 PM

What is the outlook on the price picture for the next several months; the price really has moved down? THe information on the world production was helpful and interesting.


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