Combined wheat production in the European Union, Russia, and Ukraine is forecast down 12 percent from last year to the lowest level in 5 years, the U.S. Department of Agriculture (USDA) said on Friday.
It said in its latest monthly production report that the EU wheat crop is down 9 percent from last year on hot, dry weather in the northern member states, while production in Russia and Ukraine is down from recent bumper crops on a return to normal yields.
“With global wheat production down substantially from last year, prices are rising,” it said.
According to the report, the recent climb in global prices has led corn prices higher as well, even as the spread between the two has widened. Thus, wheat has become less preferred in feed rations relative to corn. This is particularly evident in the European Union, where corn imports and feeding are expected to be record high to support domestic feed demand.
Wheat and barley feeding are expected down from the previous year, the report said.
Also offsetting the lower EU feeding is higher soy consumption. Globally, wheat food use is forecast to continue steady growth, but the share of global trade occupied by the European Union, Russia, and Ukraine is expected lower.
“These suppliers are likely to keep much of their core markets in place, but will likely lose share in regions such as North Africa, Sub-Saharan Africa, and Southeast Asia as their price advantage diminishes,” the report said, adding that Argentina, Canada, and the United States are all expecting larger wheat crops and will likely become increasingly price competitive later in the year.
Exporter prices were mostly up at the end of July, according to the report.
“Concerns of drought in Australia have driven its prices up, leaving Australia uncompetitive on the international wheat market. EU prices were up based on concerns over the size of the new crop,” it said.
Black Sea quotes rose on tightening global supplies. U.S. prices are up similarly, supported by international market supplies. Argentina is down this month on expectations of a bumper crop, it added.