July 12, 2004

US 2004 All-Wheat Output Seen Lower On The Year

U.S. 2004-05 all-wheat production is expected to be down 11% on the year due to fewer acres and less than ideal growing weather for hard red winter, the largest U.S. wheat class.
 
A survey of 11 analysts showed the U.S. wheat crop at 2q.079 billion bushels, which compares to 2.337 billion in 2003. Estimates ranged from 2.047 billion to 2.154 billion.
 
But following the U.S. Department of Agriculture's recent upward adjustment made to its initial 2004 spring wheat acreage figure, the trade's all-wheat projection is actually higher than the current USDA 2004 wheat output estimate of 2.061 billion bushels used within the June 2004 balance sheet.
 
The USDA is scheduled to release updated 2004 winter wheat production figures, its first official 2004 spring wheat output estimates, as well as the July U.S. and world supply and demand balance sheets Monday at 0730 CT (1230 GMT).
 
US WINTER WHEAT
 
The average trade estimate put 2004 winter wheat output at 1.501 billion bushels, which is 30 million below the current USDA forecast and 206 million below the 2003 total.
 
Nearly all of this reduction is seen stemming from the HRW wheat class, after Kansas, the largest producing HRW wheat state, was hit with overly dry conditions late season and then damaging rain at harvest.
 
"The heavy rain in the hard and soft winter wheat areas, knocked the top end off of production," said Shawn McCambridge of Prudential Securities in Chicago.
 
The unfavorable weather is not only seen lowering yield, but also the number of harvested acres in Kansas. The USDA recently lowered its projection for Kansas harvested acres by 300,000. Forecasts for harvest area were cut by 190,000 acres in South Dakota and by 50,000 acres each in Nebraska, Montana and Colorado.
 
But at the same time, harvest area was also forecast to increase by 300,000 acres in Oklahoma and another 100,000 in Texas.
 
"We are going to pick up some acres and lose some acres," summarized Sid Love of Kropf & Love Consulting in Overland Park, Kan.
 
Even though analysts report that the wet weather during harvest has lowered the overall quality of this year's winter wheat crop in both HRW and soft red winter wheat areas, the wheat is still expected to be counted as such.
 
"We've had some ups and downs, but wheat is wheat even if it's feed (quality)," added Love.
 
The U.S. winter wheat crop was 60% harvested as of July 4.
 
U.S. SPRING WHEAT
 
The average trade guess indicates other spring wheat output of 490 million, which is down from the 533 million harvested last year. Durum production was shown by the average trade estimate at 89 million, down just slightly from the 2003 crop of 97 million.
 
However, analysts point out that these figures are not as low as many had been penciling in earlier this year.
 
In the June 30 acreage report, the USDA pegged other spring wheat plantings at 13.7 million. While this figure was down slightly from the 2003 area of 13.8 million, it was still a jump from the USDA's March planting intentions report that had initially seedings at 13.3 million.
 
"The extra acres are going to show up," said Love, pointing mostly to the U.S. supply and demand table where a higher implied spring wheat figure was being used.
 
As of Sunday, the USDA rated the 2004 spring wheat crop at 66% good to excellent, down from 75% good to excellent for the same time last year. For the same date, the crop was 51% headed, down from 61% for the same time last year and 53% for the five-year average.
 
Despite the fact that the spring wheat crop is not showing the top conditions as it was this time last year, McCambridge contends that so far the spring wheat crop is still showing true production potential. "It has had decent conditions, but its still has a ways to go," he added.
 
US SUPPLY AND DEMAND
 
Even though most analysts are looking for a larger 2004 U.S. all-wheat production figure than the USDA has currently factored into the 2004-05 balance sheet, trade ideas are still mixed as to whether or not the USDA will trim or raise its 2004-05 carryout forecast.
 
The average analyst estimate put 2004-05 U.S. wheat ending stocks at 494 million bushels, which is nearly unchanged from the June USDA forecast of 495 million. But trade estimates range from 450 million to 530 million. In the survey, four analysts look for higher ending stocks, two see a near steady figure and two anticipate lower supplies.
 
Those looking for a higher figure point to the larger production, increased competition this marketing year from the European Union and the former Soviet Union on the world trade front and a slightly higher USDA June 1 stocks figure.
 
Recently the USDA pegged U.S. June 1 wheat stocks at 546 million bushels, which was above the June balance sheet that put 2003-04 ending stocks for the year ending May 31 at 541 million.
 
On the other side, Bill Nelson, associate vice president for A.G. Edwards & Sons in St. Louis, is one of the analysts looking for a further decline in 2004-05 ending stocks. He projects the carryout figure at 450 million.
 
Nelson said he mainly looks for higher feed usage with this year's increased amount of lower-quality, rain-damaged grain and added that so far, sales on the books for 2004-05 are quite generous.
 
Currently the USDA forecast 2004-05 U.S. wheat exports at 975 million bushels, down from 1.155 billion in 2003-04. At just four weeks into the 2004-05 marketing year, U.S. wheat sales are running 38% ahead of the last year's pace.