December 10, 2007

 

USDA seen trimming US wheat carryout

 

 

The US Department of Agriculture will likely trim domestic ending stocks in its December supply and demand report due to solid demand, analysts said.

 

The report, due out at 8:30 a.m. EST Tuesday, is expected to show 2007-08 US wheat carryout at 296 million bushels, down from 312 million in November, according to a Dow Jones Newswires survey of 13 analysts. The range of analysts' estimates was 262 million to 319 million.

 

Solid export business and strong domestic use of wheat will draw down stocks, said Joe Victor, vice president of marketing for Allendale Inc., which had the lowest estimate in the survey.

 

There are not many alternatives to wheat, needed for pasta, bread and other food products, so demand is largely inelastic, Victor said. The US also has tight supplies in all classes of wheat, so "it's not like one variety has a surplus over another."

 

"It's just a huge drawdown that starts with the exports and then free falls into the domestic use," Victor said about the reason for dwindling stocks. "You just don't have a whole lot of alternatives."

 

Victor predicted the USDA will raise its export projection by 10 million to 25 million bushels in the December report due to solid demand. The pace of export business this year has been faster than usual because poor weather lowered production in global growing areas, leaving the world with a limited supply of grain.

 

As of Nov. 29, 26 weeks into the wheat marketing year, export commitments were 84 percent above a year ago, according to the USDA. Commitments had already reached 90 percent of the USDA's target for the marketing year, which began June 1.

 

"The USDA, we believe, is going to be forced to increase" its export forecast, Victor said.

 

Jerry Gidel, analyst for North America Risk Management Services, pegged stocks at 287 million bushels. He expects the USDA to raise its export projections by 25 million.

 

As for world supplies, analysts were split on whether the USDA will tinker with its forecast for Argentine production. Parts of Argentina's wheat belt were hit by frosts last month, and the local government is assessing the damage.

 

The USDA may take a wait-and-see attitude on Argentina before lowering its crop estimate, an analyst said. The agency in November pegged the crop at 15.5 million  tonnes.

 

The USDA will likely increase its estimate for Australia's crop a bit after the Australian Bureau of Agricultural & Resource Economics, or Abare, raised its estimate, Victor said. Abare this month put the crop at 12.7 million tonnes, up from its estimate of 12.1 million in late October. In November, the USDA put Australia's crop at 13 million tonnes.

 

The USDA will likely shave down its estimate for Canadian production to bring it in line with the latest projection from Statistics Canada, analysts said. Statistics Canada on Thursday pegged all-wheat production at 20.054 million tonnes, down from its October estimate of 20.641. The USDA in November put Canada's crop at 20.6 million tonnes.