June 12, 2007

 

US wheat prices seen to reach all time highs on strong usage

 

 

Thanks to a strong global demand for wheat and harvest shortages in former Union Soviet states, wheat farmers from the US may sell this year's crop for a record of US$4.80 a bushel, the government said on Monday (June 11).

 

The projection could make wheat join US corn in setting record-high farm-gate prices during the 2007/08 marketing year. Corn is forecast for US$3.40 a bushel while soybeans are expected to fetch a lofty US$7.15 a bushel.

 

Private analyst John Schnittker said wheat prices will be bolstered by concern that it can be used as a feed substitute as US corn crop might not be large enough for the livestock feed sector.

 

Schnittker said the combination of uncertainty of corn weather and relatively low wheat stocks will elevate wheat prices.

 

Corn and soybean prices have soared due to the boom in fuel ethanol, distilled from corn (corn), and interest in biodiesel made from soybean oil.

 

In a monthly update of its crop output and usage forecast, the US Department of Agriculture (USDA) said surging soybean oil prices will be reduced over biodiesel production. It said 2.4 billion pounds of soyoil will be used for biodiesel this marketing year, 6 percent less than forecast last month, and 3.5 billion pounds in 2007/08, down 8 percent.

 

The USDA said US wheat growers will reap 2.168 billion bushels (59 million tonnes) of the grain this year, including 1.61 billion bushels of winter wheat, down 6 million bushels from the May estimate.

 

Exports are seen to reach 1 billion bushels (27.2 million tonnes), up 25 million bushels from the May forecast, "as production shortfalls in key exporting countries lower world supplies," according to the USDA.

 

The hot weather in the former Soviet Union will reduce harvests by 7.3 million tonnes as exports will decline by 3 million tonnes from Ukraine and by 2 million tonnes from Russia, USDA said.

 

At present, the record US wheat price is US$4.55 a bushel and the corn record is US$3.24 a bushel, both set in 1995/96. The soybean record of US$7.83 a bushel, set in 1983/84.

 

Futures prices for wheat for delivery in July hit the daily 30-cent limit at the Kansas City Board of Trade and the Chicago Board of Trade at mid-morning. At the CBOT, July corn sold for US$3.93 a bushel, up 11 cents and July soybeans were US$8.26-1/4, up 4-3/4 cents a bushel.