By James Barnett, BridgeNews
CHICAGO, July 12 -- Analysts at a Chicago Board of Trade press briefing said that increased world wheat production and larger domestic ending stocks estimates by the U.S. Department of Agriculture in Wednesday's supply/demand reports should pressure wheat prices.
Burdensome ending stocks and a near-record U.S. crop outlook also should pressure corn. According to the USDA, the U.S. 2000-01 corn crop is expected to total 10.013 billion bushels, up from the 9.74 billion estimated in June. Estimated U.S. corn ending stocks for 2000-01 rose well above the 2-billion-bushel mark.
The USDA's corn crop forecast fell just shy of some expectations that the government would unveil a number larger than 1994's record 10.051 billion bushel output, as detailed in this story: http://www.farmbid.com/newsandweather/nw_news_view.asp?NewsCode=2574
"Today's world wheat production numbers really changed the structure of the world wheat market," said Terry Roggensack, analyst with the Hightower Report.
December CBT wheat futures settled 4-1/4 cents per bushel lower at $2.69-1/2 on Wednesday, after falling as low as $2.63-1/4. December corn futures fell to a contract low of $1.92-3/4 early Wednesday, but bounced back to end 3/4 cent higher at $1.97-1/2. November soybeans gained 5-1/4 cents to $4.63.
Dan Cekander, an analyst with FIMAT Futures Inc. in Chicago, concurred, stating, "World supplies are beginning to get away from us."
World ending stocks of wheat for 2000-01 were pegged at 114.06 million metric tons (MT) in Wednesday's report, almost 8 million, or 7.4%, higher than USDA's June estimate of 106.25 million, but still down from 1999-2000 ending stocks of 126.65 million. There were substantial increases in production estimates for the European Union, India, Pakistan and Canada, more than outweighing a decline in Chinese production.
The global wheat stocks-to-use ratio for 2000-01 has widened to 19.2% from 17.8% projected a month ago. Production of wheat by the world's major exporters -- Argentina, Australia, Canada, the EU and the United States -- is forecast to be 171.56 million MT in 2000-01, up from 162.84 million a year earlier.
Traders said that although global supplies remain tight by historical standards, the large stockpiles held by exporting nations continue to foster the hand-to-mouth attitude among buyers.
A slight increase in U.S. production also should weigh on the market, as many analysts had been expecting a flat to slightly lower production estimate.
More problematic was a sharp increase in projected ending stocks of U.S. wheat for 2000-01, which surged to 947 million bushels, compared with 809 million in the June supply/demand report. This came despite a downward revision to the USDA's forecast for U.S. winter wheat production. The USDA now projects the 2000-01 U.S. winter wheat crop at 1.588 billion bushels, down from a prior estimate of 1.622 billion.
Total U.S. wheat production for the 2000-01 marketing year is now estimated at 2.243 billion bushels, down from 2.302 billion in 1999-2000.
"We had been expecting at least a slight drawdown in stocks this year, but it looks as if we are back to ending stocks around last year's level," said Roggensack.
Cekander summarized, "The bottom line is a stagnant market continuing, at least for the short term, to test contract lows, pressured by burdensome ending stocks.":
