China's wheat woes may have been far worse than thought, US farm officials said, slashing their harvest forecast amid a wave of downgrades totalling more than 13m tonnes to harvests worldwide.
US Department of Agriculture foreign staff downgraded forecasts for crops in a series of major producers, including Canada, the European Union and Russia, thanks in the main to weather setbacks.
However, the biggest cut was to the crop in China, the top wheat-producing country, where output was pegged at a seven-year low of 108.0m tonnes – 10.0m tonnes short of the USDA's official forecast, and well beneath estimates from Beijing authorities too.
The downgrade follows a caution from the US Grains Council that the weakness of China's wheat harvest would force raised imports of corn as an alternative feed.
However, the USDA's Beijing bureau, citing "expectations of higher corn prices" in top exporter the US, pegged at 5.0mn tonnes its forecast for China's corn imports in 2012-13.
'Head blight spread'
The bureau said that its field surveys had revealed results "not as positive" as those of Chinese officials, who have said that disease outbreaks were controlled by a state-backed crop-spraying drive.
"But it is unclear if the campaign effectively addressed the problem on a national scale," the bureau said in a report, citing interviews and tour findings that "head blight had spread to more areas than normal this year".
|Attache China wheat data 2012-13, diff from USDA official and (yr on yr)|
Area harvested: 24.3m hectares, no change, (+0.2%)
Production: 108.0m tonnes, -10.0m tonnes, (-8.0%)
Imports: 2.0m tonnes, no change, (-38%)
Exports: 1.0m tonnes, no change, (no change)
Consumption: 122.5m tonnes, +0.5m tonnes, (2.5%)
Year-end stocks: 45.7m tonnes, -10.0m tonnes, -23%
An increase in planting density of some 50-100% appeared to have exacerbated the spread of fungal infections, leaving many wheat heads with "yellow, white, and black spikelets, with many containing no kernels or smaller, shrivelled kernels".
"Some farmers also said that high temperatures caused poor pollination, and wheat yields were negatively affected by a higher level of pests such as aphids and red spiders," the report said.
'Higher rate of unsound kernels'
Temperatures were reported to have reached 100 degrees Fahrenheit, or 38 degrees Celsius, in early June, when conditions above 36 degrees Celsius are believed to lead to smaller wheat kernels.
Certainly "many grain purchase stations reported lower test weights and higher rate of unsound kernels, which could be disease infected or smaller due to stress".
One dealer reported rates of 10-17% in rates of unsound kernels, compared with less than 8% last year.
"Some flour mills estimate that the flour milling rate might be down by 2-5% due to lower test weights."
The USDA bureau estimated China's wheat imports falling 38% to 2.0m tonnes in 2012-13 despite the poor harvest, flagging "high international wheat prices", but this forecast assumed inventories dropping to a five-year low of 45.7m tonnes.
'Increased lodging and disease'
For Canada, USDA foreign staff pegged the wheat harvest at 23.3m tonnes, 300,000 tonnes below the official USDA forecast, noting a shift in plantings as "strong competition from oilseed crops this year, as economic strongly favoured canola over wheat".
European Union production was estimated at 132.0m tonnes, 1.1m tonnes down on the current official USDA figure, thanks "contrasting weather conditions"
"The north and west, particularly France and the UK but also to some extent Germany, has been experiencing unusually wet weather, increased lodging and disease incidence.
"In the south and east, particularly in Spain, Italy and Romania but also in Bulgaria, hot and dry conditions are presenting their own challenges and reducing yield forecasts."
Moscow-based USDA staff pegged the Russian harvest at 47.0m tonnes, 2.0m tonnes below the official USDA forecast, and 3m tonnes below indications from a Russian government source on Wednesday.
"Although July rainfalls improved grain crop conditions in the central provinces of European Russia, in most provinces of the Volga Valley, the Urals, and Siberia, dryness and hot weather continue to severely damage crop prospects," the USDA's Moscow bureau said.
The Russian harvest is the subject of considerable market debate, given the country's status as a source of competitive wheat, and at large quantities in 2011-12.
The estimate of a 50m-tonne harvest "may have gotten the attention of some of the long speculators" given that "the marketplace has been trading Russian wheat production estimates in the neighbourhood of 42m-43m tonnes", Brian Henry at US broker Benson Quinn Commodities said.
The trade has further noted a series of recent Russian wins for 2012-13 wheat export orders, from the likes of South Africa and Iraq.
"Current Russian [export] offers keep them in a very competitive position, but there isn't anything offered out the Black Sea after October," Mr Henry noted.