October 10, 2008

 

 

Strong demand for wheat from the livestock feeding and export sectors should prompt the USDA to trim its estimate of domestic wheat ending stocks this week, said analysts.

 

The use of wheat as livestock feed was higher than expected during the summer months, based on analyst readings of USDA's Monday, 1 September 2008, grain stocks report.

 

Analyst Shawn McCambridge with Prudential Bache Commodities said the quarterly stocks report showed that more wheat was used through the first quarter and there's been a good start to the export season.

 

However, with a large world wheat crop replenishing supplies and the threat of a global recession distracting traders, USDA's October supply/demand reports, set for release on Friday, 17 October 2008 are not expected to give wheat prices much of a jolt.

 

The report is unlikely to make much impact given the financial turmoil that the market is facing currently.

 

Wheat futures on the Chicago Board of Trade have plunged more than 50 percent since hitting an all-time high spot price of US $13.34-1/2 per bushel in February, reflecting both big world wheat harvests and a broad sell-off in commodities overall. Front-month December wheat futures at the CBOT settled Wednesday, 8 October 2008 at US $6.08 a bushel.

 

For Friday's, 17 October 2008 report, the average estimate of US 2008/09 wheat ending stocks among analysts surveyed by Reuters was 558 million bushels, down from USDA's September figure of 574 million. Estimates ranged from 507 to 600 million.

 

The ending stocks figure, which is closely monitored by the trade, represents the amount of grain left over at the end of the marketing year on Sunday, 31 May 2009.

 

A few analysts predicted USDA might raise ending stocks, due to a larger wheat harvest that could compensate for an increase in usage.

 

USDA's Tuesday, 30 September 2008 small grains report upped its US wheat production estimate to 2.500 billion bushels, from a previous estimate of 2.462 billion, due mostly to a bigger crop of spring wheat in the northern Plains.

 

Charlie Sernatinger, analyst with Fortis Clearing Americas said the feed and residual (use) will not be raised as much as the production.

 

USDA is also expected to raise its estimates of world wheat production and ending stocks, reflecting larger crops in the US, Canada and possibly western and eastern Europe.

 

USDA's current world wheat production estimate of 676.3 million tonnes for 2008/09 is already a record high, while world ending stocks, currently forecast at 139.9 million tonnes, are up from 118.5 million in 2007/08, a 26-year low.