August 20, 2011

 

USDA lifts forecast for 2011-12 world wheat output

The USDA revised up its 2011-12 global wheat production outlook by 9.7 million tonnes to 672 million tonnes, in its August World Agricultural Supply and Demand Estimates (WASDE).

 

The new estimate would be 23.9 million tonnes more than last year's output and the third largest global wheat crop on record if realised.

 

The bulk of the increased production forecast was due to greater estimates for the Russian and Ukrainian wheat crops. USDA increased its outlook for both countries by 3.0 million tonnes from last month to 56.0 and 21.0 million tonnes respectively.

 

World export forecasts also increased, jumping 1.29 million tonnes since July to 131.3 million tonnes. The production numbers for Russia and Ukraine, coupled with Russia's re-entry into the market after shutting out importers last year, were significant enough to offset reduced export projections for three major wheat producers.

 

USDA lowered Argentinean, Canadian and US export forecasts by more than one million tonnes each from July's report.

 

Projected 2011-12 US production dropped 0.8 million tonnes from July to 56.6 million tonnes. USDA reduced estimated planted area by 960,000 acres for spring wheat and 249,000 acres for durum.

 

Those estimates exceeded trade expectations -- bullish news that helped move prices higher last week.

 

Wheat futures gained 2.3% on the report's release date, August 11, with Chicago Board of Trade (CBOT) soft red winter (SRW) futures closing at US$7.01 per bushel to overcome early week losses following the Standard & Poor downgrade of the US bond rating.

 

Probably more influential on wheat prices is the spillover from bullish corn markets. USDA reduced the US corn production outlook by 14.1 million tonnes from last month and projected US 2011-12 ending corn stocks at their lowest level in the past 15 years.

 

Higher corn prices have boosted demand for feed wheat and, in turn, pulled up wheat prices.

 

USDA projected 6.5 million tonnes of wheat will be used for feed in the US for 2011-12, an 86% increase from last year's 3.5 million tonnes.

 

Globally, projected use for feed wheat jumped from 123 million tonnes last month to a record 128 million tonnes this month.