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Wheat supplies set to meet ethanol demand
Posted 10 November 09
The world wheat market is looking more amply supplied to meet the growing demand from the milling and industrial sectors, which includes ethanol, said Keith Davis, managing director of Glencore Grain.
Speaking at a biofuels event in Paris, Mr Davis noted that for 2009/10 production is expected to reach 667 mln tonnes versus use of 643 mln tonnes, while 2008/09 also saw a surplus with production at 687 mln tonnes and use at 640 mln tonnes. This followed a marginal deficit in 2007/08 as production was 609 mln tonnes compared with consumption of 614 mln tonnes.
“A big swing factor will be Australia but this year it looks OK,” Mr Davis commented. The crop there is put at 23 mln tonnes, up from 21.4 mln tonnes in 2008/09 and the dismal 13 mln tonnes in 2007/08.
Mr Davis said output in Kazakhstan should hit 14.5 mln tonnes from 13 mln tonnes and Russia is set for 60 mln tonnes versus 63.7 mln tonnes.
“The Former Soviet Union has amazing potential to increase. In 1956/66 it sowed 70 mln hectares. Now it is just 55 mln hectares and has been as low as 40 mln hectares in 2004/05. This is a huge untapped area.”
EU production is expected to rise to 151.2 mln tonnes from 136.6 mln tonnes. But Mr Davis fears the EU could be left behind having traditionally driven yield gains. “Genetically modified wheat will happen in due course,” he said. “Along with stringent pesticide legislation that is due to come in, the EU’s reluctance on GM may slow the yield increase.”
As for 2009/10 consumption, the speaker said feed use was flat at around 100 mln tonnes, while the milling and industrial use (which includes ethanol) has grown strongly. The all-important ending stocks figure (which fell to 122 mln tonnes in 2007/08 and sparked strong price rises) was put at 186 mln tonnes for 2009/10, the highest since 2001/02. There was 166 mln tonnes in 2008/09.
Likewise, the stocks to use ratio should hit 29% from 26.3% in 2008/09 and the lowest ever level of 19.9% in 2007/08.
Concluding, Mr Davis told delegates there was plenty of scope to raise production to meet demand from ethanol makers and others, especially by using less fallow and/or set-aside in the EU and Former Soviet Union.
Source: F.O. Licht’s World Ethanol & Biofuels Report
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