High prices and growing supplies have cut into U.S. wheat exports, according to USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) released Tuesday, Dec. 11.
USDA increased its estimated 2012-13 global ending stocks of wheat to 176.95 million metric tons, up from November's 174.18 million metric tons.
USDA increased its forecast for Australian wheat production by 1 million metric tons to 22 million, which surprised analysts. Recently, the Commonwealth Bank of Australia lowered its forecast for Australian wheat production to 20.8 million metric tons, which is more in line with trade estimates.
USDA left wheat production in Argentina unchanged at 11.5 million metric tons, but lowered production in Brazil from 5 million metric tons in November to 4.8 million metric tons this month.
"What surprised me is that Argentina wheat production was left unchanged," says Louise Gartner, Spectrum Commodities, Beavercreek, Ohio. Gartner was the commentator on a post-report MGEX press briefing. "I would have expected USDA to be more aggressive in taking production down."
USDA increased production of wheat in China by 2.6 million metric tons to a record-high 120.6 million metric tons and upped Canadian wheat production by 500,000 metric tons to 27.2 million metric tons.
Lower exports add to stocks
USDA also expects lower U.S. exports than previously anticipated. In the December report, USDA shaved 50 million bushels from estimated exports of 1.05 billion bushels. USDA added the additional 50 million bushels of wheat, which will remain in the United States, to U.S. ending stocks of 754 million bushels.
"If you watch weekly exports, the increased carryout should not have been a surprise," says Charles Soule, market analyst with CHS Hedging, Saint Paul, Minnesota. "Up until the last couple of weeks, U.S. wheat has been overpriced relative to other parts of the world. But that’s changed somewhat. World prices have come up to ours."
The U.S. stocks-to-use ratio for wheat is 32%. A stocks-to-use ratio below 10% is considered very tight, while anything above 30% means plenty of wheat is available. "We do have ample supplies of wheat," says Soule.
USDA left U.S. wheat production and yield unchanged. At the beginning of the production year, USDA estimated U.S. ending stocks at close to 600 million bushels. "Now estimates are for 754 million bushels. That’s a pretty comfortable ending stocks number," says Gartner.
U.S. wheat futures traded sharply lower in the wake of the report.