Washington, DC
September 18, 2008
Source:
U.S. Wheat Associates (USW)
Wheat Letter - September 18, 2008
by Ian Flagg, USW Market Analyst
The U.S Department of Agriculture (USDA) raised its projection
of global wheat production by 5.5 million metric tons (MMT) last
week, but its analysis gives an indication that supplies of high
quality milling wheat remain tight. The September
World
Agricultural Supply and Demand Estimates (WASDE) included
upward revisions to production forecasts for the EU-27, Russia
and Ukraine as increased harvested area and plentiful rains
improved yields. Much of the increase in production was
attributed to off-quality wheat, though. As a result, USDA
projects global feed use will reach a record 124 MMT.
While the Russian and Ukrainian projections are up this month,
crop quality is in question. USDA projects Russia’s 2008/09 crop
3.0 MMT higher than it did last month to 60 MMT, up 11 MMT from
last year and 35 percent above the five-year average. Of this
month’s increase, 1.5 MMT is expected to be consumed in the
domestic feed market bringing total feed use to 18 MMT, the
highest level in 20 years. Quality issues in Ukraine appear to
be even more severe as rains at harvest and sunni bug
infestation have damaged end-use functionality. Ukraine’s
Department of Agriculture reported only 46 percent of the
harvest was graded milling quality compared to 80 percent in
2007, while 54 percent was classified as feed quality against 20
percent a year earlier.
This does not mean that there is no milling-quality wheat
available from the Black Sea region. Yesterday, Egypt’s General
Authority for Supply Commodities announced a purchase of 200,000
MT originating from the region. Based on the USDA analysis and
indications from other sources, the question remains how much
more milling-quality wheat will be available from the region the
rest of 2008/09.
Global supply watchers are now turning their eyes to production
in the southern hemisphere and USDA lowered its projection for
major exporters Argentina and Australia. Dry weather through the
fall, winter and into spring resulted in sharply lower plantings
in Argentina and has reduced yield prospects enough for USDA to
drop its projection to 12.5 MMT, a 22 percent decline from last
year. Australia is still expected to rebound from two
consecutive drought seasons, but excessive dryness in Western
Australia and parts of New South Wales have reduced yield
prospects. Production is projected at 22 MMT or 3.0 MMT lower
than last month, which is still well above 13 MMT in 2007/08.
Export projections this month were lowered 1.0 MMT for both
countries.
Once again, U.S. producers have grown the kind of crop that
helps ensure the world has a reliable supply of high quality
milling wheat. If net U.S. commercial sales of 657,300 MT for
the week ending Sept. 17 are an indication, buyers are
responding to the opportunity. Those sales represent an increase
of 44 percent from the previous week and 21 percent from the
prior four-week average.
USDA kept U.S. production unchanged at 67 MMT, up 19 percent
from last year and 17 percent over the five-year average. Ending
stocks are projected to nearly double to 15.6 MMT and recover
from last year’s record drawdown. U.S. wheat exports are
projected at 27 MMT, with 16.1 MMT accounted for through the
first quarter of the marketing year. Domestic consumption was
unchanged at 35 MMT, but that is up from 29 MMT last year as the
feed-use component is set to increase from less than one MMT to
6.8 MMT. |
|
