Washington, DC
August 10, 2007
Source:
U.S. Wheat Associates Wheat Letter
by Joe Sowers, U.S. Wheat
Associates Market Analyst
The USDA
World
agricultural supply and demand estimates
(WASDE) released this morning showed further reductions in
global production as poor growing conditions around the world
undermine harvests and further reduce global stocks, already at
the lowest level seen in 36 years. Adverse weather has hurt
quality in parts of the U.S. HRW region and the EU, further
tightening availability of milling quality grain. Reduced
exportable supplies are keeping import demand for U.S. supplies
very strong despite the highest export values in 11 years. As a
result, USDA increased U.S. export and farm-gate price estimates
from already historically high levels.
USDA lowered expectations for global production by nearly 2 MMT
from last month’s forecast due to weather problems in the U.S.,
Canada, EU-27 and several other countries. The harvested area
estimate in top HRW-producer Kansas was reduced by nearly
162,000 hectares, from a total 3.6 million hectares, due to
freeze and flood. Kansas has harvested 40,000 hectares less than
last season, despite planting 200,000 more hectares last fall.
The total crop in Kansas is estimated at 7.8 MMT, down 100,000
MT from last year’s drought stricken crop. Extreme heat in
Canada reduced the harvest potential there by 1 MMT to 21.5 MMT,
while drought in Eastern Europe combined with persistent rains
in Western Europe to reduce the EU-27 production forecast by 1.7
MMT. Good weather in Russia and Kazakhstan was the only positive
production news, reflected in a 500,000 MT increase in expected
exports from the Black Sea region.
Although USDA expects global production to exceed 2006/07 output
by more than 17 MMT, it predicts world use will exceed
production for the third year in a row, thus reducing global
stocks to 115 MMT. The stocks-to-use ratio of 19 percent is the
lowest since USDA began keeping track in 1960.
Very Short Supplies. The supply situation has fostered price
rationing in U.S. futures markets, and pushed prices to their
highest level in 11 years. Prices for December delivery SRW at
the Chicago Board of Trade breached $7/bushel this week. The
record price for any delivery month is $7.50/bushel and
$7.17/bushel for nearby delivery, both set in 1996. USDA
forecasts that the average farm-gate price for this marketing
year will set a new record between $5.10 and $5.70/bushel.
The U.S. export pace is currently 80 percent higher than at this
time last year. Sales are up for every reported class of wheat
and USDA increased its U.S. export forecast by 680,000 MT from
last month, now 4.5 MMT above last season. Sales of SRW are
nearly three times larger than last year as Egypt has only
received offers from U.S. and Black Sea suppliers. HRW sales are
currently 167 percent higher than last year, largely on
increases to Iraq and continued strong sales to Nigeria. HRS
sales to the EU-27 are more than 10 times greater than this time
last year and durum exports are up by 27 percent. Sales of white
wheat are just above last year’s pace even though prices are 70
percent higher than they were last year at this time. |
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