Friday, July 30, 2010

No World Wheat Shortage Seen

DTN's Bryce Anderson reports that although some wheat-growing areas in the world have had challenges, the world wheat supply outlook does not expect a shortage, thanks to weather in the U.S.

Bountiful U.S. and Europe wheat harvests are offsetting fears of lower production in Russia and Canada going into late summer. (DTN file photo)The result is a generally bearish market weather factor going into late summer.

"Production losses are being seen overseas, which is cutting into global supplies. However, stocks remain cumbersome," said DTN market analyst John Sanow.

The challenges in other countries included Canada's wheat acreage slashed from spring flooding and Russia's wheat harvest prospects diminished because of summer drought.

But the U.S. winter wheat crop harvest was large; the U.S. spring wheat harvest may match record yields; and the wheat harvest in Europe outside of Russia is going much better than some analysts had expected.

For U.S. hard red winter wheat areas, May rainfall set the tone for harvest success. In Kansas -- the top hard-red-winter-wheat-production state -- May rainfall totaled from 3 to 5 inches over most of the wheat-growing areas. June was drier than normal, which allowed wheat to ripen, and harvest to proceed with few major interruptions.

The final harvest was a good one: the Kansas Agriculture Statistics estimates the 2010 Kansas wheat crop at around 369 million bushels, with a yield of 43 bushels per acre -- the fifth-highest yield on record.

Spring wheat areas also see a good harvest shaping up. Reports from the 2010 North Dakota spring wheat crop tour indicate that yields this year may approach last year's record 39 bushels per acre.

Late-summer drought in Russia puts a bit of a crimp in world wheat supplies. Russia's drought began in April, and has been called the most serious drought since 1880, back to the days of the czars.

"I see no sign in the next two weeks of a change of more rainfall," said Telvent DTN ag meteorologist Joel Burgio. He has tracked and forecast international weather patterns for more than 20 years.

"Early July, we had the drought centered in central Russia and western Kazakhstan," he said. "Now, it looks like the hottest weather is shifting west into the Volga Valley and as far (west) as eastern Ukraine."

But, will even such a historical calamity goad the grain market into a true-blue weather-premium mode? Sanow doesn't think so -- more to the point, he said the market doesn't think so, either.

"The ending stocks-to-use ratio domestically is just shy of 50 percent (the highest level since the 1987-88 marketing year), while the world number is at a strong 28 percent," he said. "With weather remaining a factor in the Black Sea Region, the market could continue to find support, although at some point bearish fundamentals should take control once again."

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