Washington, DC, USA
August 18, 2011
Source: U.S. Wheat Associates newsletter
By Casey Chumrau, USW Market Analyst
In its August World Agricultural Supply and Demand Estimates (WASDE), the U.S. Department of Agriculture (USDA) increased its 2011/12 global wheat production outlook by 9.7 million metric tons (MMT) from last month’s projection. USDA now estimates this year’s global wheat production at 672 MMT, which would be 23.9 MMT more than last year’s output and the third largest global wheat crop on record if realized.
The bulk of the increased production forecast was due to greater estimates for the Russian and Ukrainian wheat crops. USDA increased its outlook for both countries by 3.0 MMT from last month to 56.0 and 21.0 MMT respectively. World export forecasts also increased, jumping 1.29 MMT since July to 131.3 MMT. The production numbers for Russia and Ukraine, coupled with Russia’s re-entry into the market after shutting out importers last year, were significant enough to offset reduced export projections for three major wheat producers. USDA lowered Argentinean, Canadian and U.S. export forecasts by more than 1.0 MMT each from July’s report.
Projected 2011/12 U.S. production dropped 0.8 MMT from July to 56.6 MMT. USDA reduced estimated planted area by 960,000 acres for spring wheat and 249,000 acres for durum. Those estimates exceeded trade expectations — bullish news that helped move prices higher last week. Wheat futures gained 2.3 percent on the report’s release date, August 11, with Chicago Board of Trade (CBOT) soft red winter (SRW) futures closing at $7.01 per bushel to overcome early week losses following the Standard & Poor downgrade of the U.S. bond rating.
Probably more influential on wheat prices is the spillover from bullish corn markets. USDA reduced the U.S. corn production outlook by 14.1 MMT from last month and projected U.S. 2011/12 ending corn stocks at their lowest level in the past 15 years. Higher corn prices have boosted demand for feed wheat and, in turn, pulled up wheat prices. USDA projected 6.5 MMT of wheat will be used for feed in the United States for 2011/12, an 86 percent increase from last year’s 3.5 MMT. Globally, projected use for feed wheat jumped from 123 MMT last month to a record 128 MMT this month.
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