August 11, 2004

 

 

US 2004-05 Wheat Output, Carryout Seen Lifted Slightly

 

U.S. 2004-05 wheat production and carryout are seen to rise slightly when the U.S. Department of Agriculture releases its updated figures Thursday, according to the average trade estimate.

 

The USDA is scheduled to issue its August production and supply and demand reports at 0730 CT (1230 GMT).

 

The average analyst guess puts the U.S. 2004 wheat crop at 2.072 billion bushels, which is 13 million bushels above the July estimate. This compares to the 2003 crop of 2.337 billion bushels.

 

The bulk of the added supplies is seen spilling over into the 2004-05 U.S. wheat ending stocks figure. The average analyst estimate pegged U.S. carryout at 505 million bushels, or 11 million more the July USDA forecast. In 2003-04, ending stocks came in at 546 million bushels.

 

U.S. WHEAT OUTPUT

 

While 88% of the U.S. winter wheat crop had been harvested by early August, cutting of the spring wheat crop had just begun.

 

Following favorable July weather conditions and high crop ratings, analysts say the potential is there for the USDA to raise its average spring wheat yield forecast. The average analyst estimate looks for a 2004-05 other spring wheat crop of 511 million bushels, up just slightly from July's figure of 501 million. Trade guesses were fairly narrow at 498 million to 520 million.

 

The late July Wheat Quality Council tour through the prime spring wheat regions of the northern Plains discovered yield counts to be similar or close to last year's top yields. Currently, the USDA forecast U.S. other spring wheat yields at 37.9 bushels per acre, down from 39.7 bushels last year when they were the second highest on record.

 

But Dale Gustafson of Citigroup in Chicago looks for spring wheat output to come in nearly unchanged at 498 million bushels. He based his analysis on August 1 crop ratings compared to their relationship to production seen over the past six to seven seasons.

 

As of August 1, the USDA rated the U.S. spring wheat crop at 65% good to excellent, which is near unchanged from the early July rating of 66% good to excellent.

 

In early August 2003, the crop was rated 57% good to excellent.

 

Nevertheless, acreage remains a debated figure after overly wet conditions limited plantings in northwest North Dakota, and a poor hay crop in southwest area of the state prompted a few more farmers to abandon poor wheat fields and bale them for cattle forage.

 

Already due to fewer planted acres this year, output is still seen below last year's crop of 533 million bushels

 

Even though rain damaged hard red winter wheat fields late season, Jerry Gidel of North American Risk Management in Chicago says only very modest winter wheat changes are expected after last month's hefty 71 million bushel cutback.

 

The average trade estimate figures U.S. winter wheat output at 1.473 billion bushels, nearly steady from 1.470 billion reported in the July USDA report.

 

BALANCE SHEETS

 

Any changes made to U.S. production are seen moving directly into the 2004 - 05 ending stocks total.

 

Gustafson said while there is reason for the USDA to lower its U.S. export projection amid growing world competition, it will still be hard for the USDA to fundamentally justify a further decline in demand from 2003 in the August report. He points out that both U.S. wheat export sales and inspections are currently running ahead of last year's pace.

 

Gustafson looks for the USDA to raise Ukrainian output and says there is also the potential for wheat production in the European Union, Russia, Australia and Canada to go up.

 

Taking a similar stance, Gidel also said Europe and the former Soviet Union have the potential for an additional 2 million to 3 million metric tons of output.

 

"Recent competition from the E.U. and Ukraine in the world markets has raised some concerns, but this situation is probably more a problem for corn exports. This year's strong early sales with China suggest that the USDA's export projection of 975 million bushels is still attainable," said Gidel.

 

Other world wheat numbers being eyed recently, the Canadian Wheat Board late last week estimated the 2004-05 western Canadian wheat crop at 24.3 million tons, which is a hefty jump from the 22.1 million originally forecast in June due to improved weather. Currently, the USDA estimates the entire Canadian wheat crop at 23.5 million tons, which is unchanged from last year. Trade sources say that eastern Canada normally produces about 1.1 million to 1.2 million tons of wheat annually.

 

In July, the USDA raised world wheat ending stocks by nearly 6 million tons to 132.2 million, which is up 2 million from 2003-04. This would be the first year-to-year increase in ending stocks since 1999-2000.