The Global Wheat Situation

Chicago wheat set contract lows yesterday, as it frequently does at this time of year with the harvest just getting underway. By the time it reaches Kansas in a few weeks time we will have a clearer picture of how good, of bad, yields are likely to be this year.

The unusually cold and wet spring has led to significant problems with stripe rust this year, a disease that lowers yields and quality of wheat. The Kansas Wheat Quality Council's crop tour of wheat fields in early May suggested that yields in the top-producing US state may disappoint.

If reports of subsequent widespread stripe rust are accurate, then we may see final Kansas yields average below 40 bu/acre (from 42bu/acre in 2009).

Spring wheat planting is underway in Kazakhstan under very dry conditions, yields could also be a problem there this year.

Russian wheat has only suffered very low levels of winterkill in the past couple of seasons, but losses this year are estimated to be around 12%, potentially cutting their wheat crop to around 53 MMT from 61.7 MMT in 2009.

Have rains arrived just in time to save wheat in Northern France, Europe's largest producer? We'll know before too long. Winter wheat in the UK looks a whole lot better than it did a few weeks ago, although it's too early to put an accurate prediction on yields just yet.

Whilst April and May were cooler and much drier than normal in western Europe, its been tipping it down in Poland, Czechoslovakia, Romania, Hungary etc. That may lead to some quality issues. Lack of finance may also end up having a negative impact on output here.

That could also be an issue for many growers in Ukraine this season, where winterkill rates were also higher than in recent years.

Spain and Portugal enjoyed a much wetter than normal winter which should give them a decent wheat crop. That also applies to Italy.

Chinese officials, bless their little lying cotton socks, are estimating a wheat crop broadly unchanged from last season despite a number of weather issues this season, with an unprecedented drought in the south, and cold in the north. Then again they are still saying that they had a corn crop of almost 164 MMT in 2009, so why would say anything different about this years wheat?

The harvest in India and Pakistan is at an end, with official estimates here showing a wheat crop similar to last season in India, and around 2 MMT down in Pakistan. The Indian government have wheat coming out of their ears they say, carryover stocks from last season are so large. In reality the quality of last season's wheat is so poor that it may well indeed have been stored in the Indian governments ears.

Whilst we have harvest time just around the corner, planting is only just beginning in the southern hemisphere.

Argy farmers are likely to finish wheat planting by the end of the month, they are around 15% done at the moment. Production is expected to be significantly higher than last seasons measly 7.5 MMT, although estimates vary quite widely at the moment.

Planting is also underway in Australia. Conditions in the east are said to be largely favourable, although there have been problems with dryness in Western Australia, the nation's largest producing state. Output overall is seen holding steady around 22 MMT.