August 11, 2008

USDA seen to trim US all-wheat crop, carryout estimates

No major fireworks are expected for wheat from the US Department of Agriculture's August crop reports, with analysts forecasting minor shifts in production estimates.

Analysts predict the USDA will drop its estimate for 2008-09 US all wheat production slightly from last month. The agency also is expected to trim its forecast for US ending stocks when it releases updated crop data at 8:30 a.m. EDT Tuesday (August 12).

The average of analysts' estimates for 2008-09 US all wheat production was 2.459 billion bushels, down from the USDA's July estimate of 2.461 billion, according to a Dow Jones Newswires survey of 14 analysts. The range of guesses was 2.422 billion to 2.537 billion.

The lower production forecasts is expected to reflect losses in the durum crop, which has suffered from hot, dry weather, analysts said. The average of analysts' estimates for durum production was 84 million bushels, down from the USDA's July estimate of 90 million.

The USDA could take as much as 20 million bushels off its durum estimate from last month, said Jerry Gidel, analyst for North America Risk Management Securities, who had the lowest estimate in the survey. Of 13 analysts surveyed about durum production, 12 predicted a decline in the USDA's estimate and one said the government's estimate would remain unchanged.

The Wheat Quality Council's annual Hard Spring & Durum Wheat Tour - which last week surveyed hundreds of fields in North Dakota, South Dakota, Minnesota and Montana - showed that the durum crop was struggling, said Sid Love, analyst for Kropf & Love Consulting. The tour estimated the average durum yield at 23.7 bushels per acres, down from 29 bushels in 2007.

The tour pegged the average hard red spring wheat yield at 37.7 bushels per acre, up slightly from 37.3 bushels in 2007. Participants said poor wheat in western areas that were hit with hot dry, weather was offset by better wheat in eastern areas, which received more rain.

The average of analysts' estimates for spring wheat other than durum is 510 million bushels, up slightly from the USDA's July estimate of 507 million. Seven of the analysts polled predicted a decrease in spring wheat production, while one predicted the USDA would keep its estimate unchanged and six predicted an increase.

The range of other spring wheat estimates was 485 million to 570 million bushels. Love left his estimate unchanged at 507 million bushels.

"The crop tour up there wasn't that excited about it," he said of the spring wheat crop. "I don't think it's down but I don't think it's up either."

The average of analysts' estimates for all winter wheat production was 1.873 billion bushels, up from the USDA's July estimate of 1.864 billion. Strong yields support an increased estimate, an analyst said.

As for carryout, the average of analysts' estimates for 2008-09 wheat ending stocks was 525 million bushels, down from the USDA's July estimate of 537 million bushels. The range of guesses was 489 million to 578 million.

Gidel said his forecast for a smaller overall crop prompted him to cut his projection for wheat ending stocks. He put carryout at 499 million. Export demand also has been stronger than expected, analysts said.

"It's still not an extremely friendly number," Gidel said of his estimate. "It's basically a scenario of the fact that we have just a little bit less crop around and that's just tightening things up."

Love, who predicted an increase in carryout to 562 million, said he expected to see the USDA lower feed usage of wheat because a drop in corn prices has made it more competitive as a feed ingredient. The USDA in July put wheat feed and residual use at 285 million bushels.

On the world balance sheet, analysts said they didn't expect many major changes. The USDA in July raised its forecast for Australia's production by 1 million metric tonnes to 25 million tonnes, which "may be a little too high," Love said. The agency might wait before adjusting it again amid reports of beneficial rains in growing areas, some analysts said.

"I don't see any major reason to change things too much," Love said. "Basically, we're still looking at a record world crop in the wheat."

The world is expected to produce more wheat in 2008-09 than ever before because producers expanded plantings after prices climbed to record highs. Weather also has been mostly favourable around the world.

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