Thursday, August 12, 2010

World Wheat-Surplus Estimate Cut as Drought Hurts Russia Crop

Bloomberg business reporter Jeff Wilson writes that World wheat stockpiles before next year’s Northern Hemisphere harvests will be 6.6 percent smaller than forecast a month ago after adverse weather decimated crops in Russia, Kazakhstan and Ukraine, according to the Department of Agriculture.

World output will total 645.7 million metric tons in the year that began June 1, down from 661.1 million forecast in July and 680.3 million in the previous year, the USDA said today in a report. Global inventories on May 31 will fall to 174.8 million tons from 187.1 million estimated last month and 194 million this year. The average estimate of 17 analysts surveyed by Bloomberg News was for 178.8 million.

“The drop in wheat production will help to boost sales of U.S. wheat and corn,” said Roy Huckabay, the executive vice president of the Linn Group in Chicago. “It’s going to be a very active shipping season” from October to March, he said.

Wheat prices have surged 70 percent since reaching a three-year-low on June 9 amid dry conditions in Russia, Kazakhstan and the European Union and flooding in Canada. Russia, the world’s third-biggest producer, last week banned exports of grain through the year’s end to conserve supplies for domestic food production and animal feed.

The USDA slashed its production estimate for Russia by 15 percent, to 45 million metric tons from 53 million in July. Its Ukraine forecast was cut 15 percent to 17 million tons. Kazakhstan’s estimated production is 11.5 million tons, down 18 percent from last month. The European Union, also affected by drought in some areas and heavy rains in others, will produce 137.5 million metric tons this year, down 3 percent from the July prediction, the USDA said.

December futures in Chicago jumped to a 23-month high of $8.68 a bushel on Aug. 6. Since then, they have plunged 16 percent to close at $7.25 yesterday, as investors slowed bets on further price gains.

Unsold supplies of U.S. wheat on hand on May 31 will total 952 million bushels (25.9 million tons), down from 1.093 billion forecast last month and down from 973 million on May 31, 2009, the USDA said. Twenty-four analysts and traders surveyed by Bloomberg News expected 965 million bushels, on average.

Total U.S. production in the marketing year that started June 1 is forecast at 2.265 billion bushels, compared with 2.216 billion estimated in July and 2.216 billion bushels in the previous year.

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