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Russian wheat crop could fall further

USDA significantly reduced the size of the projected wheat crop in the Former Soviet Union, knocking 13.5 million tons off production in the region. Russia went from 53 million tons to 45 million tons; Ukraine, from 20 million to 17 million; and Kazakhstan, from 14 million to 11.5 million.

If USDA’s August 12 World Agricultural Supply and Demand Estimates prove true, the world wheat stocks-to-use ratio would fall to 26 percent “which is significantly lower than where we were last year,” said grain analyst Brian Liedl, from Country Hedging, speaking at a press briefing at the Minneapolis Grain Exchange.

Liedl says USDA may have been conservative on the FSU numbers for wheat, given the weather there. “I’ve heard Russian production of as low as 40 million tons. It’s possible. There’s no rain predicted in the immediate future, and we’re getting close to what would be their winter wheat seeding.

“If the weather continues, the damage to the spring wheat crop is probably done at this point. The big threat now is getting the winter wheat crop in the ground.”

Liedl was cautious about the potential for another top in the wheat market, however. Barring production problems in Australia or problems getting the U.S. winter wheat crop seeded, “it’s hard to see us pushing through previous wheat futures prices of around $8.”

The 2010-11 season-average farm price is projected by USDA’s at $4.70 to $5.50 per bushel, up 50 cents on both ends of the range.

Projected U.S. wheat ending stocks declined on an increase in expected exports of 200 million bushels, according to USDA. U.S. ending stocks are projected 141 million bushels lower from last month, and down 21 million from 2009-10.

EU-27 wheat production was lowered 4.3 million tons with yields reduced for northwestern Europe on untimely heat and dryness. Yields were lowered for southeastern Europe as heavy rains from the same weather pattern that affected Ukraine reduced output. Production was also lowered for Algeria, Brazil, Uruguay, Belarus, and Croatia.

Exports were lowered 12 million tons for Russia partly reflecting the recent announcement banning exports through December. Also limiting Russia export prospects is higher expected wheat feeding with drought-reduced forage and coarse grain crops and policy goals aimed at increasing domestic meat production.

Exports for Kazakhstan and Ukraine were lowered 2 million tons each Exports were raised 1.2 million tons for China, 1 million tons each for Australia and EU-27, and 900,000 tons for Turkey. The 5.4-million-ton (198 million bushels) increase projected for U.S. exports is expected to offset the largest share of the decline from FSU-12.

Global wheat ending stocks are projected 12.3 million tons lower. At 174.8 million tons, world stocks are projected 49.9 million tons higher than in 2007-08 when prices soared to record levels.

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