Grain stockpiles at lowest for 25 years By Kevin Morrison in London Published: October 12 2006 18:48 | Last updated: October 12 2006 18:48 The world’s stockpiles of wheat are at their lowest level in more than a quarter century, according to the US Department of Agriculture, which on Thursday slashed its forecasts for global wheat and corn production. The lower forecasts were largely attributable to the severe drought in Australia, where the forecast for this year’s wheat crop was cut by 8.5m tons to 11m. That is less than half of the 24m produced last year, of which about 17m went to exports. As a result of the low Australian crop, AWB, the country’s main wheat exporter, said it would suspend exports from the country’s east coast due to the poor crop and review its export requirements. To add to the global supply concerns, Ukraine has introduced licences and quotas on its wheat exports, effectively bringing shipments to a standstill. This has already halted Ukrainian wheat shipments of 50,000 tonnes to India. The USDA also lowered wheat output for China, Brazil and the European Union. Wheat futures on the Chicago Board of Trade reached a new 10-year high of $5.51 a bushel before the release of the USDA report, which represented a rise of 18 per cent since last Friday. The December CBOT wheat contract eased 4 cents to $5.27 in early afternoon Chicago trade, a 56 per cent rise on the year to date. The USDA, which provides one of the most authoritative reports on global grain markets, said global wheat production would fall by 11m tons to 585.1m, causing global stockpiles to drop a further 7.1m from its previous forecast, to 119.3m. This represents a fall of 20 per cent from a year ago, putting stocks at their lowest level since 1981. “The concern now is what happens next year. If we have poor conditions for growing wheat again, supplies could get very tight and we might see some demand rationing,” said Dan Cekander, grains analyst at Fimat. James Barnett, grains analyst for Man Global Research, part of the Man Group, said there is more concern in the global corn market after the USDA cut crop estimates in the US by 209m bushels to 10.9bn after it said that 800,000 fewer acres were growing corn than had previously been expected. The US is the world’s largest corn grower. “We are looking at a structural change in the corn market, because demand is going to increase next year from the ethanol industry, and we might not be planting corn in enough acres to satisfy that demand,” said Mr Barnett. Corn futures on the CBOT rose 20 cents to $3.04 a bushel, its highest level since June 2004 and up more than 35 per cent in the past month. Analysts estimate ethanol to consume between 20 and 25 per cent of the US corn crop next year, which is estimated at about 11.1bn bushels, and forecast to account for about 35 per cent of the following year’s crop.