Wheat Shortage Unlikely, Says USDA’s Vilsack – for Aug. 16, 2010

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Wheat production in the United States and other countries is “robust” enough to avoid a world wheat shortage despite crippling drought in Russia, U. S. Agriculture Secretary Tom Vilsack said Aug. 10.

Wheat futures surged to two-year highs this month as Russia banned exports on concerns about its crop. Some analysts have said index funds fueled the rally, but Vilsack said speculative buying is not the main cause.

“I think that it’s always wise to keep a wary eye on it, but I haven’t seen any indication at this point that speculation is driving prices up or down. I think the market has obviously reacted to the Russian announcements,” Vilsack told reporters in Ottawa.

Speculators were blamed for helping wheat prices reach record highs in 2008, when global stocks were low, triggering shortages and panic-buying around the world.

But Vilsack said that situation was unlikely to repeat itself.

“There are other countries, including the United States, where wheat production is steady and relatively robust enough not to put us in a situation where we were several years ago when there was a potential shortage globally,” Vilsack told reporters. “Working with our Canadian friends and others in the (European Union) we’ll be able to deal with the difficulties Russia’s situation created.”

Russia’s worst drought in a century has sharply reduced crop prospects for the world’s No. 3 wheat exporter, leading it to halt shipments from Aug. 15 through the end of the year.

Vilsack is visiting Canada as part of President Obama’s plan to double overall exports within five years.

Opportunities

The drought presents some opportunity to U. S. farmers for exports, Vilsack said, but he said the most recent figures he’s seen still peg U. S. 2010-11 wheat exports in the neighbourhood of one billion bushels, the U. S. Department of Agriculture’s July forecast.

“Fortunately, for the United States and the rest of the world, the United States and other countries are prepared to provide the wheat that is necessary to meet the needs of the globe… so we don’t face serious shortages.”

Vilsack declined to identify countries that may show additional demand for U. S. wheat.

Excess spring rain has also cut into forecasts for Canadian crops.

Vilsack said he does not expect current high wheat prices to have a dramatic impact on U. S. corn plantings.

“Corn prices have been pretty healthy the last couple of weeks and I think you’re going to continue to see a commitment to biofuels, so I wouldn’t anticipate a dramatic impact one way or the other,” he said. “What you are going to see is wheat farmers that have been struggling in the Plains states for the last several years finally have some relief.”

The U. S. Department of Agriculture releases much-anticipated new projections for global and domestic crops on Thursday.

In a separate issue, Vilsack said the U. S. government continues to urge Moscow to live up to the terms of a recent deal that would allow imports of U. S. poultry, banned by Russia since January.

U. S. President Barack Obama and Russian President Dmitry Medvedev agreed in June that shipments could resume if U. S. chicken companies agreed to use nonchlorine treatments on chicken bound for Russia.

But last week, Russian officials said they wanted to inspect U. S. plants – something Vilsack told reporters was not part of the agreement.

“We are hopeful that this gets worked out, and that whatever misunderstanding there was about the agreement from the Russian perspective is cleared up,” Vilsack told reporters.

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