May 11, 2009

The US Department of Agriculture is expected to fine-tune its estimate for 2008-09 wheat carryout, following sluggish old-crop sales activity amid ample US and global supplies, analysts said.

An updated carryout and production forecast is expected in the USDA's May production and supply and demand report, due out at 8:30 a.m. EDT (1230 GMT) Tuesday.

The average of analysts' estimates for the 2008-09 carryout is 687 million bushels, down 9 million bushels from April, according to a Dow Jones Newswires survey of 12 analysts. In 2007-08, carryout was 306 million.

Of the 12 analysts surveyed, four expected no change, two expected an increase and six expected a decrease. The range of estimates was 655 million to 700 million.

Overall, the trade expects little change in the old-crop balance sheet, but the bottom line is ending stocks are heavy, said Joe Victor, analyst with Allendale Inc. in McHenry, Ill.

End users have been content to sit back on purchasing old-crop supplies, particularly with no scarcity of world inventories. In fact, global wheat stocks are up 29.5 percent on a year-over-year basis, Victor said.

The new crop year for wheat begins June 1.

The average estimate among 12 surveyed analysts for 2009-10 ending stocks was 653 million bushels.

Despite, the reduction in carryout on a year-over-year basis, inventories will remain ample, said Shawn McCambridge, senior grains analyst with Prudential Bache in Chicago.

Meanwhile, 2009-10 winter wheat production is seen dropping from 2008's strong production output.

The average production estimate among 10 surveyed analysts for all winter wheat production was 1.526 billion bushels. This is down from 1.868 billion bushels in 2008, according to the USDA. The average 2009 hard red winter wheat estimate is 881 million bushels, down from 1.035 billion bushels in 2008. The average 2009 soft red winter estimate is 434 million bushels, down from 614 million bushels in 2008. The average 2009 white winter estimate is 211 million bushels, down from 219 million bushels in 2008.

"Last year's dramatic decline in wheat prices from their record levels during the winter and spring of 2008 led to a 7 percent decline in US winter wheat seedings last fall," said North American Risk Management Services' analyst Jerry Gidel.

Overall, this year's US winter wheat seedings decreased by 3.4 million acres to 42.9 million last fall.

Low moisture amounts in Texas and Oklahoma hurt those crops as did an early April freeze that penetrated all the way into central Texas, cutting yields of late jointing and heading wheat in both states, Gidel said.

An average crop in Kansas provides only limited ability to offset the losses in Texas and Oklahoma, McCambridge said.

Nevertheless, "I don't really see much potential in dropping down ending stocks significantly on the production setbacks," McCambridge said. "We've got good global production potential. Even China came out Friday saying that rainfall really turned the crop around."

"Other than Texas and Oklahoma in the US, most areas have real good production potential. Even with decent demand, we're still going to have very comfortable supplies of wheat," McCambridge added.