Wheat Inventories Are Tied Up in China, India, Rabobank’s Chandler Says

According to Rabobank, global wheat stocks may overstate the grain’s availability on world markets because China and India are unlikely to sell from inventories to make up for lower output by leading exporters, reported “Kazakh-Zerno” NA with reference to the “Bloomberg“.

Drought and floods threaten to curb harvests in suppliers from France to Kazakhstan. That leaves importers more dependent on the U.S. and sellers in the Southern Hemisphere, even as stocks of the grain remain near the highest level in a decade, analyst Luke Chandler said by phone from London today. 

“You can look at world wheat stocks being quite high, but a lot of them are tied up in China and India,” he said. “It’s unlikely that one of those countries would step in to be a significant exporter.” 

Wheat stocks will drop to 187 million metric tons at the end of the 2010-11 marketing year from 193 million tons a year earlier, the U.S. Department of Agriculture said July 9. Chinese and Indian inventories will make up 43 percent of world stockpiles, up from 37 percent in the previous season, as China holds more of the grain, according to USDA figures. 

“The stocks are tied up in areas where they’re unlikely to come to the world market,” Chandler said. “Other exporters will have to step in to fill the void left by Russia, Kazakhstan and Europe, and Canada, of course.” 

Floods in Canada 

September-delivery wheat jumped 26 percent in Chicago in the past month as drought curbed the outlook for harvests in Russia, Kazakhstan and the European Union and floods damaged crops in Canada. Jointly, the three countries and the EU accounted for half of global wheat exports in 2009-10. 

Wheat production in the U.S., the top shipper, is expected to be little changed in 2010-11 at 60.3 million tons, according to the USDA. 

“Everyone is trying to figure out what lower production, and therefore exports, means for the Black Sea region,” Chandler said. “You would expect it to strengthen the U.S. position.” 

Among other exporters, Argentina’s crop is forecast to jump 25 percent to 12 million tons, while Australia will harvest 22 million tons of wheat, down 2.2 percent from a year earlier, according to the USDA. 

Western Australia’s grain crop may drop to 9.5 million tons this year on dry conditions, grain handler CBH Group said. 

“Australia is a tale of two halves,” Chandler said. “The east coast is looking fantastic, but there are some critical risks in the west. There’s no real rain in the forecast until mid-August. That has to be a key risk, given the increased reliance on the U.S. and Southern Hemisphere exporters.”

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