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Slightly bearish news for wheat

USDA projected higher U.S. ending stocks and lower exports for wheat, higher exports for rice and lower domestic use for cotton in its Dec. 11 supply and demand estimates.

Projected U.S. wheat ending stocks for 2006-07 were raised 20 million bushels to 438 million bushels, a number higher than in November, but generally already anticipated by the trade.

Most of the jump in U.S. ending stocks occurred because of a reduction in forecast exports of 25 million bushels, reflecting the slow pace of shipments and sales and increased competition from higher world production and supplies.

According to Brian Hoops, Midwest Market Solutions, speaking during a conference call sponsored by the Minneapolis Grain Exchange, USDA “still may be a little high on their export forecast for 2006-07, unless we can see a big change in demand the last half of the marketing year.”

This is not likely, however. “Since 1982, there have been only six years in which the United States has actually increased wheat exports in the second half of the marketing year.”

Lower wheat exports were slightly offset by a 5-million-bushel increase in food use. The wheat price range is projected at $4.15 to $4.45 per bushel.

Overall, world trends are slightly bearish to wheat as well. Projected global 2006-07 wheat production was raised to 589 million tons, up 2 million tons from last month. Argentina wheat production was raised 1 million tons based on early yield reports. Production for Canada was raised 1 million tons, while Brazil production was lowered 300,000 tons because earlier frost damage curtailed yields for this year’s crop.

Global wheat ending stocks for 2006-07 were raised to 121 million tons, up 2 million tons due to larger ending stocks in Canada and the United States. Global trade and consumption were both raised slightly. Higher exports by Argentina more than offset the reduction in U.S. exports.


USDA raised projected corn production for Argentina and Brazil by 1.5 million tons and 1 million tons, respectively. Partially offsetting increases in projected corn production for Canada, Russia, South Africa, and Ukraine was a 600,000-ton reduction in Croatia. The projected increase in South Africa reflects higher prices and adequate early season moisture that is expected to boost plantings.

World ending stocks for corn are up slightly from November.

Hoops noted there have been only four other years when the average annual U.S. corn price has been above $3 as it is currently projected. “The record year was 1995-96. So we’re in some uncharted waters on our cash corn prices.”


U.S. rice exports were raised 5 million hundredweight to 102 million hundredweight, despite a reduction in exports to some markets due to the biotech rice issue (LLRice601).

Promising markets for U.S. exports include Mexico, Central America and Iraq. Rough rice exports were increased 3 million hundredweight to 38 million hundredweight, while exports of combined milled and brown rice were increased 2 million hundredweight to 64 million hundredweight (on a rough basis).

Projected long-grain exports were increased 4 million hundredweight and combined medium- and short-grain exports were increased 1 million hundredweight. As a result, ending stocks were lowered 5 million hundredweight to 29.5 million hundredweight. The season-average farm price range was raised 55 cents per hundredweight on the low end and increased 45 cents on the high end to $9.55 to $9.95 per hundredweight compared to $7.62 per hundredweight in 2005-06.

Projected global rice production declined due to smaller crop projections for Australia, Brazil, and Uruguay. Larger crops are expected in Argentina, the Philippines, and South Korea.

Global exports were raised slightly from a month ago with an increase for the United States partially offset by reductions for Australia and Uruguay. World rice ending stocks for 2006-07 are projected at 78.6 million tons, down slightly from last month, but 1.8 million tons below 2005-06.


U.S. soybean ending stocks for 2006-07 are projected at 565 million bushels, up 26 percent from 2005-06. U.S. season-average soybean prices for 2006-07 are projected at $5.70 to $6.50 per bushel compared with $5.40 to $6.40 last month.

USDA’s cotton production estimate remains unchanged from last month. Domestic mill use for cotton was reduced to 5.1 million bales based on lower than expected activity to date. Exports were reduced 200,000 bales to 16 million bales as export sales and shipments to China continue to lag the year-ago level significantly. Ending stocks were raised 5 percent to 6.3 million bales.

Global production for the current season was raised in China, Brazil, and Turkmenistan, but lowered in Australia, Syria, and Uzbekistan. Global ending stocks were raised to 51.5 million bales, an increase of nearly 1 percent from last month.


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