By Rod Nickel
WINNIPEG, Manitoba (Reuters) - The world’s farmers will produce only slightly more wheat in 2011, the Canadian Wheat Board said Friday, even as food inflation spurred protests this month and pumped up grain values.
In its first market outlook of 2011, the Wheat Board said that despite attractive prices, global wheat production would be reined in by drought in Russia and potential flooding in Canada, as well as high prices of competing crops ahead of planting season in the Northern Hemisphere.
“In terms of food inflation, at the current projection there isn’t going to be a huge issue,” said Bruce Burnett, the Wheat Board’s director of weather and market analysis, in an interview from Saskatoon, Saskatchewan.
“But if we were to see a couple of weather events happen that move that (production) number lower towards last year or even lower, especially in a major exporting region, then certainly there would be more concerns.”
The world will produce 649.5 million tonnes of all types of wheat, up 0.6 percent from the 2010 crop, he said. Canada will harvest 23.8 million tonnes of wheat, the CWB said, up 2.9 percent from last year.
Predicting a modest increase in world production seems right, but it’s too early to put much weight on forecasts, said Ken Ball, commodity futures and options broker at Union Securities in Winnipeg.
Winter wheat is still in the ground and could turn out to be a bumper or terrible crop, he said.
“To put a number on world wheat right now is plus or minus 20 percent. They’re dart throws.”
The International Grains Council and U.S. Department of Agriculture have not yet forecast 2011 world wheat crops.
Food price protests sweeping across North Africa and the Middle East reached Jordan Friday, but a senior official with the Food and Agriculture Organisation played down concerns that tighter food supplies could cause a repeat of the 2008 food crisis because stocks were ample.
Food grain supply-demand fundamentals have tightened as flooding in Australia downgraded the milling quality of its wheat and after drought-plagued Russia banned grain exports last summer.
U.S. wheat and corn futures are hovering around more than two-year highs, but are still well off peaks seen in 2008, when soaring food prices sparked riots in some countries.
Wheat prices will strengthen over the next two to three months as markets adjust to tightening fundamentals, but stocks will remain above 2008 levels, Burnett said.
The direction wheat prices go depends also on corn. The Wheat Board forecasts a record U.S. corn crop of 13.57 billion bushels because it will take that much production to meet demand, Burnett said.
U.S. wheat production will decline nearly 2 percent because of “severe” planting competition for spring wheat from soybeans and canola and a likely drop in yields, he said.
The CWB has a government-granted monopoly to sell western Canada’s wheat and malt barley. Canada is the world’s largest exporter of spring wheat and durum.
Canada looks to produce more durum wheat, used in making pasta, and barley, than during the excessively wet previous year, but global prices of both crops look well-supported, Burnett said.
Saturated soil and heavy snowfall have raised potential for severe spring flooding across Western Canada, but the number of unplantable acres depends on the rate of spring melting and further precipitation, Burnett said.
Canola may come close to surpassing spring wheat for the first time as Canada’s most widely-planted crop, but that will hinge on whether a soggy canola-planting area of Saskatchewan dries out, he said.
(Editing by Marguerita Choy)
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