November 11, 2008

US wheat price suffers on high inventory expectations

Wheat prices fell to a new low after the US increased its inventory estimate, as less wheat will be used to seed new crops after harvest delays for corn and soy.

About 603 million bushels will be in storage by May 31, 2009, nearly double from last year's 306 million bushels, according to the USDA.

Last month's USDA forecast was 601 million bushels, while analysts expected 589 million bushels. Wheat prices have plunged 61 percent from a record in February as farmers planted more.

Supplies may also be higher as overseas buyers prefer Russian or Ukrainian wheat due to cheaper shipping costs, said analysts.

Wheat futures for December delivery fell 0.2 percent or 1 cent to US$5.20 a bushel on the CBOT.

Farmers will use 82 million bushels of wheat from storage to plant new crops, down 2 million bushels from October's forecast, the USDA said. Wheat for feed usage remains at 260 million bushels, despite analysts' expectations for an increase.

Corn and soy harvests were delayed as wet weather slowed planting and rain disrupted harvesting. About 55 percent of US corn was harvested as of Nov 2, down from last year's 83 percent. Soy fared much better at 86 percent, down slightly from 90 percent in the previous year.

Due to the delay, some US farmers who usually plant wheat after harvesting corn and soy would not be able to plant winter varieties this year, which would lower the usage of seed wheat and boosting supplies.

Wheat prices are also expected to decline after the USDA increased its world production forecast by 3.2 percent to a record of 682.4 million tonnes.

Wheat is the fourth-largest US crop, valued at US$13.7 billion in 2007. Corn, soy and hay are the top three US crop.