March 2, 2009

Analysts are sceptical about the US Department of Agriculture's prediction that US wheat exports will fall in the next marketing year amid a drop in global production.

 

The USDA, at its annual Agricultural Outlook Forum, estimated Friday that US wheat exports will slip to 950 million bushels in 2009-10 from 1 billion bushels in 2008-09. The 2009-10 marketing year begins June 1.

 

"I think it will be up," Sid Love, analyst for Kropf & Love Consulting, said about exports. "I'd have a hard time believing we're not going to have better exports."

 

Love estimated 2009-10 exports at 1.1 billion bushels. AgResource Company, meanwhile, expects exports to total about 1.05 billion to 1.1 billion, said senior commodity analyst Greg Wagner.

 

Export demand should increase because a decline in world production next year will push importers to buy more wheat from the US, Wagner said. Production and plantings are expected to drop due to a decline in prices.

 

"You're going to have less total production, which is ultimately going to bring business to the United States," Wagner said.

 

However, the government said US exports should drop 5 percent in 2009-10 because other countries will have ample supplies. Global carryout is expected to increase this marketing year due to record world production.

 

"Large carryout stocks in most competitor countries will pressure the market as the harvest begins in the Northern Hemisphere," the USDA said.

 

Production set a record in 2008-09 due to favourable weather and an expansion of plantings by farmers looking to take advantage of high prices. However, an increase in world supplies and the global credit crunch have pulled prices well off their highs.

 

In the US, wheat production is expected to fall 15 percent in 2009-10 to 2.12 billion bushels, according to the USDA. Plantings are seen at 58 million acres, down about 4 percent from 2008-09.

 

The USDA will release its first estimate on 2009-10 world wheat production in May. Plantings are seen down in Europe, Canada and countries in the Black Sea region, such as Russia.

 

Export demand has been a focus of US wheat futures markets lately amid stiff competition for business from Russia. Russia has excess supplies and has undercut the US in sales to key importers, such as Egypt.

 

Total US wheat export commitments for 2008-09 were 89 percent of the USDA's target as of February 19, which is 38 weeks into the marketing year. That's a bit below the five-year average of 92 percent, according to the USDA.

 

"Eventually we're going to get some business," Love said. "The Russians are dumping wheat right now. That cheap price is eventually going to go away."