US 2009-10 carryout wheat seen to expand

 

 

Lacklustre export demand and an increased production estimate should prompt the US Department of Agriculture to hike its forecast for US wheat ending stocks, analysts said.

 

The USDA is slated to issue updated ending stocks estimates in its October supply and demand report, due out at 8:30 a.m. EDT Friday.

 

The average of analysts' pre-report estimates for 2009-10 carryout is 798 million bushels, up from the USDA's September estimate of 743 million, according to a Dow Jones Newswires survey of 14 analysts. Of those surveyed, all but one analyst predicted an increase.

 

The USDA will likely raise its projection because export demand has been sluggish and the agency increased its US production estimate in a recent small grains report, said Bryce Knorr, analyst for Farm Futures. The USDA last week pegged all-wheat production at 2.22 billion bushels, up from its August estimate of 2.184 billion.

 

"You have kind of a two-pronged thing going on," Knorr said. "Overall, you've got to think demand, particularly exports, are weaker, and supplies are bigger."

 

The US has struggled to make big sales on the global export market amid stiff competition from other countries that have plenty of wheat to sell. Total commitments as of September 24 were down 36 percent from last year and 30 percent from the five year average, according to the USDA.

 

 

"They seem to have been extremely resistant to that, perhaps because they don't want to get that carryout above 800 million, which is perhaps psychologically bearish," he said.

 

The USDA could reduce feed use a bit, based on data in the small grains report, said Sid Love, analyst for Kropf & Love Consulting. It pegged US wheat stocks as of September 1 at 2.215 billion bushels, up from 1.858 billion a year earlier and above the average pre-report analyst estimate of 2.131 billion.

 

Citigroup was the one firm that predicted the USDA will cut carryout Friday. Analyst Terry Reilly said exports could potentially rise, as the US has the potential to ramp up sales during the second half of the year.

 

However, the USDA may not make that adjustment if it significantly raises the forecast for global production, Reilly said. Production could jump three million to six million tonnes from last month, when the USDA pegged the global crop at 663.7 million tonnes, he said.

 

The USDA's forecast for Canada's crop is expected to expand after Statistic's Canada pegged all-wheat production at 24.58 million tonnes, analysts said. The USDA in September projected the crop at 22.5 million.

 

"You've got a lot of wheat out there," Love said.

 

Reilly said the USDA may increase its forecast for Australia's crop by 500,000 tonnes and trim its forecast for Argentina's crop by 500,000 tonnes. In September, the USDA pegged Australia's crop at 23 million tonnes and Argentina's crop at eight million.