October 11, 2004

US Wheat Ending Stocks Seen Up On Larger Crop

The U.S. Department of Agriculture is mostly expected to raise U.S. 2004-05 wheat-ending stocks in Tuesday's supply/demand report due to the larger U.S. crop outlook projected in the recently released small grain summary, analysts indicated.
 
USDA is scheduled to released the data at 0730 CT (1230 GMT) Tuesday.
 
In a Dow Jones Newswires industry survey, the average analyst estimate came in at 588 million bushels, up from the USDA September forecast of 578 million. This is also up from 2003-04 carryout of 546 million.
 
Still, there is a fairly sizeable range between the estimates of 549 million to 620 million bushels. The estimates varied due to export ideas.
 
The report comes on the heels of the annual USDA small grains summary released Sept. 30. In the summary, USDA pegged the U.S. 2004-05 wheat crop at 2.164 billion bushels, up from the 2.123-billion-bushel figure used in the September supply/demand tables. Of that upward adjustment, 29 million bushels stemmed from the other spring wheat class.
 
Bill Nelson of A.G. Edwards and Sons in St. Louis and Dale Gustafson of Citigroup in Chicago both put their carryout figure at 620 million bushels, taking the high end of the range. Both analysts look for the USDA to add on the 42-million-bushel increase to the current supply situation with no changes made to the export column.
 
On the other end of the spectrum, Dan Cekander of Fimat in Chicago forecasts 2004-05 U.S. wheat ending stocks at 549 million bushels. This is an actual reduction from the current carryout figure.
 
Cekander points to the drop in Canada's wheat quality this year, following lengthy damp conditions during the harvest season. Thus, with less quality hard spring wheat available for export out of Canada, Cekander looks for an increase in both U.S. hard red winter and hard red spring wheat exports.
 
Currently, the USDA projects 2004-05 Canadian wheat exports at 16.0 million metric tons, which is up 200,000 tons from the previous marketing year.
 
Likewise, Shawn McCambridge of Prudential Securities in Chicago forecasts the increase in production to be offset by an increase in exports and looks for U.S. wheat carryout of 569 million bushels.
 
McCambridge expects U.S. wheat exports to be raised by 25 to 50 million bushels. In addition to the lower-quality wheat seen this year in Canada, he cites a good start for export sales in the 2004-05 marketing year, solid inspections as well as some reduced quality in Australia.
 
As of 18 weeks into the 2004-05 marketing year, U.S. wheat commitments are running 1% ahead of last year's pace. For the same time frame, U.S. wheat shipments inspected for export are running 1.5% behind last year's pace.
 
So far, the USDA looks for a sizeable drop in U.S. wheat demand this season. Last month the USDA forecast 2004-05 U.S. wheat exports at 950 million bushels, down 209 million bushels from the 2003-04 campaign.
 
On the world balance sheet, the USDA currently forecasts a world record wheat crop of 610.6 million metric tons. This has boosted 2004-05 world wheat ending stocks by 10 million tons to 142.3 million.
 
Recently, Statistics Canada pegged the crop there at 24.5 million tons, but this matches the current USDA official estimate.
 
On Thursday, the USDA attache in Brazil pegged the 2004-05 crop there at 5.7 million tons, up from the current USDA estimate of 5.0 million.