Drought hits wheat stocks worldwide

PARIS - Drought around the world threatens to leave its mark on global grain trade flows this season, offering welcome new opportunities for some countries expecting large harvests, analysts say.

Against a backdrop of declining world wheat stocks, bad weather has hit world production this year and will raise trading volumes as countries increase their imports.

"Globally, you can't get away from the fact that stocks are declining," AgriNews analyst James Dunsterville said.

"We can still produce enough wheat around the world, but the market is becoming more susceptible to regional losses."

The International Grains Council (IGC) sees global wheat production in 2005/06 at 608 million tonnes, down from 624.5 million last season. World wheat stocks are forecast to fall to 133 million tonnes, down five million from the end of 2004-05.

Trade is seen rising to 109 million from 106 million tonnes.

From the plains in the United States midwest to the wheat prairies of Australia, water shortages have hit. Argentina is dry and India is mulling over a wheat import-duty cut to combat domestic shortages.

The US Department of Agriculture said severe drought in Illinois and Missouri would hit the corn harvest there too.

In Europe, Spain and Portugal are suffering their worst drought on record (halving the size of their crops), and in the major wheat importing countries of north Africa, much lower harvests are expected.

This will help exporters in France, where farmers have large stocks from last season and still expect a good-sized harvest.

Much-needed rain in Australia looks to have now saved the wheat crop there, probably cutting off potentially lucrative markets in Asia from eager European exporters.

China is forecast to consume 15 million tonnes more than forecast production this year.

- REUTERS