High prices and growing supplies have cut into U.S. wheat exports, according to USDA’s December World Agricultural Supply and Demand Estimates (WASDE) report.
USDA estimates wheat’s global ending stocks for 2012/13 to be 176.95 million metric tons—up from November’s 174.18 million metric tons. The forecast for Australian wheat production was increased by 1 million metric tons to 22 million. This surprised analysts because the Commonwealth Bank of Australia lowered its forecast for 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 to 4.8 million.
"What surprised me is that Argentina wheat production was left unchanged," says Louise Gartner of Spectrum Commodities, Beavercreek, Ohio.
China’s wheat production was upped by 2.6 million metric tons to 120.6 million metric tons (a record high) and Canadian wheat estimates were increased by 500,000 metric tons to 27.2 million metric tons.
The increased global production means fewer U.S. wheat exports. USDA shaved 50 million bushels from exports, which can be added to U.S. ending stocks, rounding out at 754 million bushels.
"Until the last couple of weeks, U.S. wheat has been overpriced relative to other parts of the world," says Charles Soule, CHS Hedging market analyst. "But that’s changed; world prices have come up to ours."
The U.S. stocks-to-use ratio for wheat is 32%. A stocks-touse ratio below 10% is considered very tight, while anything above 30% means plenty of wheat is available.
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," Gartner says.