US Farmers to Benefit From Failing Wheat Crops
US farmers will reap the benefits from failing crops round the world, the US Department of Agriculture said on Thursday as it forecast the country’s second-largest wheat exports in 15 years, worth billions of dollars.
The USDA cut sharply its forecast for global wheat production following Russia’s worst drought in more than a century and lower output in the European Union, Ukraine and Kazakhstan.
But it predicted that US farmers would harvest a bumper wheat crop, leaving them well-placed to meet the needs of importing countries, which have been scrambling to secure new supplies after Moscow banned all grain exports last week.
“There is no question this is an opportunity for us and we’re going to take advantage of it,” said Tom Vilsack, US agriculture secretary, on Wednesday.
The US wheat belt extends from Texas and Kansas to Montana and North Dakota.
US wheat futures jumped more than 5 per cent to $7.34½ a bushel, although they remained below the two-year peak of $8.41 hit last week in the aftermath of Russia’s decision to ban exports.
The USDA cut its forecast for global wheat output by a hefty 2.3 per cent to 645.7 million tons in its closely watched monthly report, but said the world was not facing a repetition of the 2007-08 food crisis. There was “no global shortage of food grains”, it said.
The boom for US farmers is lifting the outlook for the country’s agribusiness companies. Shares in Archer Daniels Midland , the trading house, have rallied 15 per cent since mid-June. John Deere, the manufacturer of tractors and combines, is up 10 per cent, while Monsanto and DuPont , which sell seeds, have also risen.
Falling wheat production outside the US would make the country’s crop “competitive in key Middle East and North Africa markets”, the USDA said.
The region imports about a quarter of the world’s cereal, and countries such as Egypt, the world’s biggest wheat buyer, have already made large purchases of US wheat.
The USDA raised its forecast for international wheat sales from the US by 20 per cent to 32.6 million tons.
Apart from a surge during the 2007-08 food crisis, that would be the highest level of US exports since 1995-6. At current prices, the value of those wheat exports could reach $8 billion.
The world’s reliance on the US to supply its staple agricultural commodities could put pressure on the country’s export facilities.
The country is set to produce bumper harvests for other crops, with farmers predicted to bring in the largest ever hauls of soyabeans and corn.
At the same time, China will import record amounts of soyabeans this year, according to the USDA’s forecasts. It is also expected to import significant amounts of corn for the first time in more than a decade.
Dan Basse, president of AgResource, a Chicago-based consultancy, said US export infrastructure would feel the strain: “It is going to be a struggle and at some point it will limit the ability of the US to supply the full demand.”