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Corn+Soybean Digest

Wheat Stocks On The Rise, But So Is Demand For U.S. Wheat

USDA’s World Agriculture Supply and Demand Estimates (WASDE) report for September concludes that, while demand for U.S. wheat should increase, world wheat stocks for the 2010-2011 marketing year also will be on the rise.

The report, issued last week, says U.S. wheat exports will jump from 32.6 million metric tons (mmt) (1.2 billion bushels) in August to 34 mmt (1.25 billion bushels). While the increase is somewhat below what some analysts expected, the new forecast is about 40% higher than USDA's initial 2010-2011 export estimate.

U.S. wheat exports the past four weeks have generally exceeded trader expectations, including three weeks with sales of more than 1 mmt (about 36.7 million bushels). USDA's forecast of average farmgate prices for wheat also increased slightly to $4.95-5.65/bu., compared with $4.70-5.50 last month.

The report draws its conclusions from more information about the impact of the Russian drought and harvest rains in central and eastern Europe. Production for Russia is lowered 2.5 million tons (about 92 million bushels) based on the latest harvest results for the drought-affected central growing areas on top of the government's announcement it plans to extend its export ban at least until the 2011-2012 Russian crop is harvested.

EU-27 production is lowered 2.4 million tons, with the largest reductions for Hungary and Romania, where heavy summer rains reduced yields and smaller production drops in other member countries. Although the reduction for Germany is small, the report says persistent rain in August reduced high quality milling wheat supplies, which should also increase demand for U.S. and Canadian wheat. USDA's forecast for higher Canadian wheat exports (up 2 mmt) also factors in new information about higher-than-expected carry-in stocks and production.

USDA projected global wheat production will decline by 2.72 mmt to 643.01 mmt, an improvement on the average estimate by traders who saw a total harvest of 641.44 mmt. The report estimated world wheat stocks-to-use ratio at 26.8%, noted by Reuters to be "well above 20.3% seen during 2007-2008 when food short shortages and record prices sparked unrest globally."

Wheat stakeholders should also be watching the U.S. corn supply and demand analysis carefully because bullish reports in the current situation could also pull U.S. wheat prices up. USDA's forecast appeared somewhat more bearish than some analysts expected. USDA predicted lower stocks (1.1 mmt or 40 million bushels) based on increased ethanol use and slightly higher exports and a 1.5% drop in its production forecast. However, at 334.3 mmt, this would still be the largest corn crop ever produced in the U.S.

The full WASDE is available online at

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