Wheat futures received a bump up last week following the release of U.S. Department of Agriculture’s (USDA) October World Agricultural Supply and Demand Estimates (WASDE) report.
For the second time in two weeks, USDA’s production estimates for wheat came in below industry expectations and provided support for futures markets.
USDA lowered estimated 2012/13 global wheat production to 653 million metric tons (MMT), down 1 percent from its September estimate and 6 percent below last year’s production.
A 3.0 MMT reduction in projected Australian production accounted for nearly half of the reduction from last month’s report. USDA expects Australian output will reach 23.0 MMT, citing ongoing dryness during the flowering stage that has hurt yield potential. USDA reduced Russian wheat production estimates by 1.0 MMT to 38.0 MMT based on spring wheat harvest reports indicating lower harvested area and yield. Combined with significantly lower winter wheat output, Russian production is expected to fall 33 percent below last year’s level and 30 percent below the five-year average.
USDA also lowered the EU production forecast by nearly 1.0 MMT because of excessive harvest time rain in the United Kingdom. If realized, the European Union’s 132 MMT output will fall 4 percent below both last year’s production and the five-year average.
USDA lowered its total global wheat consumption estimate by 2.4 MMT to 678 MMT, despite a 2.4 MMT increase in estimated feed wheat usage. USDA increased estimated U.S. feed wheat usage by 2.6 MMT to 8.57 MMT. If realized, it would be the most wheat used as feed in the United States since 1998/99 and nearly double the amount fed last year.
But higher estimated wheat feeding in the United States, Canada and European Union is offset by lower food use in India and lower total consumption in Thailand and Vietnam.
Estimated 2012/13 exports from Australia fell 3.0 MMT to 18.0 MMT, which would be 28 percent lower than last year. That accounts for the majority of the 4.0 MMT reduction in total global exports, now estimated at 131 MMT. USDA’s projected U.S. exports decreased 1.4 MMT and estimated Canadian exports by 500,000 MT based on the pace of sales to date.
Despite speculation by some that Russia might impose some form of export restriction, USDA increased estimated Russian exports by 1.0 MMT to 9.0 MMT.
The estimate of 2012/13 global carry out stocks decreased 3.7 MMT to 173 MMT, nearly 13 percent lower than last year and 3 percent below the five-year average. The global ending stocks-to-use ratio of 25 (carryover stocks/total use) is the lowest since 2007/08 when the ratio fell to 21.
Tight world supply is a bullish factor and helped spur futures prices up on Thursday.