November 11, 2009

US wheat ending stocks reach 10-year high

US ending supplies of wheat are seen at their highest in 10 years as the US faces heavy competition in the export market, the government said Tuesday (Nov 10).

Ending stocks are seen at 885 million bushels, the US Department of Agriculture said in its monthly supply and demand report. This is a 21-million bushel jump from the October figure and 228 million bushels over last year at this time.

Much of the rise in ending stocks comes from a 25-million-bushel cut in the export estimate, to 875 million bushels.

"Recent gains in futures prices have supported farm gate prices while limiting export opportunities for US wheat," the USDA said in its Tuesday report. Since making its lows in early October, Chicago Board of Trade wheat prices have gained nearly 75 cents a bushel through Monday (Nov 9).

The Black Sea region is the chief competitor for US wheat sales, the USDA said. Traders expected the cut in exports and the hike in ending stocks ahead of the report, but underestimated how much ending supplies would rise. Analysts surveyed by Dow Jones Newswires on average expected ending stocks to be 869 million bushels.

The US won't be the only region feeling the competition from the Black Sea. "Abundant supplies of low-priced Black Sea wheat are expected to limit export opportunities for the traditional exporting countries including Canada, EU and the US," it said.

The USDA modestly cut total production by four million bushels, to 2.216 billion bushels, because of harvesting problems of hard red spring wheat and durum wheat production. The USDA resurveyed producers about their spring wheat harvests because many had not yet cut their crops when the last survey was done for a September 30 crop report.

Global wheat production was raised in several countries, meaning the export market is not likely to become any easier for US sellers. The USDA raised foreign production by 3.9 million tonnes, with most of the increase coming from the countries in the former Soviet Union. The USDA noted Kazakhstan, Russia and Ukraine will likely see bigger harvests. More available wheat will likely mean more wheat trade, but again USDA notes the Black Sea will likely be the low-price leader.