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Senior Contributor

Wheat ?

     Why is it everytime I listen to some one in the grain trade localy,conversation goes,black sea,Germany,France,Pakistan,Canada,Austrailia,and so on,but the market seems more southerly.One of these days when some one adds up all of the disaster,will the trade finaly take notice.I have also heard several times that wheat levels are at the lowest for 10 years.Could this be true,and the market just is not satisfied unless they have a whipping post? I have done the math on the years dissapointment and seems that they have done a very good job at putting blinders on the producers!

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10 Replies
Senior Contributor

Re: Wheat ?

The wheat scenario is quite dramatic. Global ending stocks have been reduced over 50 MMT from initial estimates. Consumption is now greater than production. This reminds me very much of around 2005 when there had been a very good year of production and an increase in ending stocks and it was touted as "see, no problem, the market is signalling production". My reply at the time was that the trend was still intact since one year is not significant in a trend, and it was downward for ending stocks. The bump had been very good conditions, within what I call 'Normal Production Variation'. The big danger signal was that lower prices resulted in less acres and we successfully jacked ourselves down through the 'danger zone' til 2007-8.

 

The question for me is - will the corn shortage, and potential shortfall in beans in N America 'bury' wheat concerns? Looking at the current spread between wheat and corn, and the weakness of wheat prices at the moment, my conclusion is 'yes, very likely'. Anyone who can dependably raise corn is not going to opt for wheat - no way, no how. Unless it is already planted, though it could still be ripped out with little loss compared to a possible gain from corn. Beans will promote wheat in the southern regions that can DC, but there is a potential risk there as opposed to earlier planted beans in a lot of the area that DCs.

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Senior Contributor

Re: Wheat ?

    Palouser,dosen't  50MMT equate to over 1.5 Billion bu.?

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Senior Contributor

Re: Wheat ?

1.837 billion bushels

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Senior Contributor

Re: Wheat ?

     Well,wasn't the burdumsom supply last spring before any of the afore mentioned countrys harvested coind at just over one billion bu.? I have heard it said,and in print,that supplys are as low as they have been since way before pre 07!

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Senior Contributor

Re: Wheat ?

Lately, I'm having less and less faith in the reporting integrity of USDA.  And I also have less faith in the analytical skills of the brokers. 

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Senior Contributor

Re: Wheat ?

This came from the NAWG newsletter.
U.S. Wheat Stocks Remain High Despite Brisk Export SalesChad Weigand
U.S. Wheat Associates Market Analyst

The recent Russian drought and government ban on wheat exports set off a market reaction one might only imagine in a true wheat supply crisis. The lingering questions remain fixed on the supply picture in spite of the fact that world wheat production reached its third highest level for 2010/2011. Indeed, USDA’s Quarterly Grain Stocks Report this week confirmed that U.S. wheat stocks are abundant and sufficient to meet demand left after Russia closed its wheat store.

With U.S. carryover stocks from 2009/2010 reaching their highest level since 1988/1989 and another large wheat crop this year, USDA estimated U.S. wheat stocks at a level not seen since 1987. Wheat stored in all positions totaled 66.9 million metric tons (MMT) as of Sept. 1, up 11 percent from a year ago and 30 percent above the five-year average.

Commercial stocks accounted for the entire increase this year, jumping from 37.4 MMT in 2009 to 44.4 MMT this year. USDA indicated that on-farm stocks were down slightly from last year, declining by one percent to 22.5 MMT.

The largest increases in combined on- and off-farm stocks came primarily from hard red winter-producing states, with Texas and Kansas showing the greatest boost in total stocks. Texas wheat stocks stored in all positions grew by 1.6 MMT, a 77 percent increase from 2009, while Kansas stocks increased by 1.4 MMT, 14 percent above last year’s level.

With USDA now projecting 2010/2011 U.S. production at 60.4 MMT, the June-to-August 2010 indicated disappearance (combined domestic use and exports) stands at 20.0 MMT, up 12 percent from a year ago. The U.S. export pace is the main reason; exports are 1.7 MMT or 35 percent above last year, while total export sales for the first quarter of 2010/2011 were 15.0 MMT, up 62 percent from the same time in 2009/2010 and 22 percent above the five-year average.

Wheat exporters in the European Union have also benefitted from the Russian situation. The European Commission reported that export licenses were granted for 6.4 MMT of wheat from June through August, up 36 percent from a year ago. Unlike the U.S., however, greater export demand is straining EU stocks and could shift additional sales to U.S. milling wheat the rest of this marketing year.

USW Regional Director for Europe Goris van Lit said that with German milling wheat supplies down sharply from a year ago, France would have to supply more high quality wheat within the EU leaving less stocks available for export outside the EU. He believes that milling wheat will make up only a fraction of EU ending stocks for 2010/2011.

Fortunately, as USDA’s report indicated, the U.S. is stocked to fulfill additional demand throughout 2010/2011. The challenge in meeting additional demand will be logistics as U.S. exporters face tight loading capacity due to high demand not only for U.S. wheat, but also for corn and soybeans.

The full stocks report is accessible at http://usda.mannlib.cornell.edu/usda/current/GraiStoc/GraiStoc-09-30-2010.pdf.

 

 
 
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Re: Wheat ?

We have elevators in Kansas pulling wheat out of storage for soybeans and corn the second year in a row. With more row crops in our cropping rotations storage is a different challenge than it has been in the past.

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Veteran Contributor

Re: Wheat ?

Wheat drama peaked in the summer. We were looking at the highest or 2nd highest ever. Problems hit Europe, FSU and Russia reducing the crop, but ES/Use is still high vs. 7$ CBT wheat. ES will drop vs yr prior, another way of saying consumption is now greater than production. But wheat isn’t 420 it is 720. Reminds me of 07 mini version. Trend intact, we are in a secular bear phase.  The big danger signal is these prices will incite acrege expansion and quell use. And by August 201, it will be time to cover spec and hedge shorts. Corn shortage and huge bean crop may mix ration use this yr, Looking at the cC/W spread, the market is yelling we have too much wheat for 7$ price.

 

The only reason wheat isn’t 6 is corn is 580./ Once corn rations, wheat could really collapse. When Russia opens exports, cover shorts.  

 

Artifice

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Senior Contributor

Re: Wheat ?

    Artifice, I don't beleive everything that is in print. I could not even get a reasonable yield figure of of one my neighbors.The main thing I know about wheat in this area,is it is at least 75% purchaced and shipped at this time,and the deals that were made indicated some one was short. Also the basis between cbot and  the pacific NW ports is significant.Seems that the price you think is plenty high has been very tempting for some that were in a short position.$8.00 by late spring! I'll call ya on it! (How often do traders realy make mistakes!)

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