Reduced prospects for U.S. corn production from the 2012 harvest, in addition to concern over possible reductions in wheat supplies from traditional areas such as the Black Sea due to lower yields and restrictions on exports, could result in an increase in wheat prices, according to UK-based Offre & Demande Agricole.
In June, the U.S. Department of Agriculture estimated the average U.S. corn yield at 166 bushels per acre, which combined with a record planted area of 96.4 million acres led them to forecast a potential 2012 harvest of 375.7 million metric tons. However, the U.S. has experienced the driest, hottest June in over 50 years, which has led to a deterioration in growing conditions and a decline in yield expectations. “Although some of the damage to potential yields may be reversed if there is significant rainfall before harvest, Offre & Demande Agricole’s estimate for the 2012 U.S. corn harvest is 351 metric tons, some 25 metric tons lower than the USDA’s last-published figure," said Offre & Demande Agricole. "If less corn is available for feed manufacturers that will increase demand for wheat and barley, with prices following suit."
Although the market is expecting a good global barley harvest, there are concerns over wheat supplies, especially from the Black Sea region, due to hot, dry conditions. Russia has reduced its production estimate from 56 metric tons to 46–49 metric tons, which would cut the potential export surplus by 9 metric tons compared with 2011 and raise concerns over a possible export ban. “Wheat prices are also being driven higher by the situation in Ukraine, which is even worse than in Russia," said Offre & Demande Agricole. "Harvest has started in South Ukraine and yield reductions of up to 40 percent compared with last year are being reported. Stocks are lower than officially stated and there are concerns that the elections which will be held in the autumn could lead to a ban on wheat exports in order to keep domestic prices low."
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