Thursday, September 30, 2010

Wheat Production Reported Down 2% From August

USDA made some small changes in its August forecasts of wheat production in the small grains summary released in its Sept 30 Small Grains Summary Report.

All wheat production in 2010 is now estimated at 2.224 billion bushels, down 2 percent from the August forecast but still slightly above 2009 production. All winter wheat production is pegged at 1.485 billion bushels, HRW at 1.018 b bu, SRW at 238 million bushels and white wheat at 229 m bu. Other spring wheat production increased to 627 m bu, up from 584 m bu in 2009, and durum production totaled 111 m bu, compared to 109 m bu a year ago.

Barley is another small grain in production decline. USDA estimated production at 182million bushels, down 20 percent from 2009, even though average yield is projected at 73.6 bushels an acre, up slightly from last year. Like oats, the barley acres harvested were down 21 percent from 2009, the lowest level since 1882.

U.S. Wheat Exports Highest in 20 Years

USAgNet reports the 2010 crop year is turning out better than expected for many U.S. producers, due to expanding demand for U.S. wheat which is pushing prices higher. USDA is currently projecting exports to reach 1.25 billion bushels, up more than 40 percent from the very low 2009 level and similar to 2007 when exports reached 1.26 billion. Still many analysts feel the latest estimate is conservative and anticipate final exports could rival the 1992 level of more than 1.35 billion.

As of mid-September, of U.S. wheat sales have reached 570 million, up nearly 60 percent from last year, and ahead of the pace needed to reach USDA's goal. Hard red winter and hard red spring have been the biggest benefactors so far. Hard red winter sales are at 265 million bushels, compared to only 125 million a year ago, as they have gained the most by the shift in demand from the Russian export ban. Recently, more competitive prices from French wheat into North Africa and some pullback in other markets, has slowed the weekly sales pace for the U.S., but demand is expected to remain as strong as our rail and export capacity allows.

The U.S. achieved strong yields nationwide on the 2010 crop and overall grade parameters on the hard red crops are high as well, despite below average protein levels on both the winter and spring crops for a second consecutive year. Comparatively, U.S. protein levels are still at the high end of the world wheat mix. USDA's latest production estimate is 2.26 billion bushels, about 50 million bushels higher than 2009, despite nearly 2 million fewer acres. A record national yield estimate of 46.9 bushels per acre is 2 bushel higher than last year. The stronger production and large carryover supplies from 2009 will push available supplies in the current marketing year to 3.3 billion bushels, up from 3 billion last year. Imports are expected to fall to 100 million bushels, compared to 119 million last year, and are likely to drop further, on weaker demand from U.S. millers for Canadian wheat due to a stronger Canadian dollar and a sharp drop in anticipated Canadian quality.

Total demand for U.S. wheat in the 2010 marketing year could exceed 2.4 billion bushels, higher than production and imports, supporting a net decline in year-end inventories. Domestic use is expected to grow to 1.19 billion compared to 1.14 billion last year. Food use accounts for 940 million bushels, up from 917 million in 2009, and feed use should rise marginally to 170 million bushels, compared to 149 million last year.

Year end inventories at the end of May 2011 will remain large at 902 million bushels, compared to a mere 306 million at the end of May 2008, but it is certainly more supportive to prices than earlier projections which had U.S. inventories exceeding 1 billion by the end of the marketing year. Average producer prices are expected to range from $4.95 to $5.65 per bushel, compared to $4.87 last year. Higher protein hard red wheat and higher grades of durum will average more, but the rise in world wheat prices has benefitted all classes. This should make for a strong profit year for most producers, especially when combined with above average yields.

Wednesday, September 29, 2010

Chicago wheat futures Wednesday slipped to 2-month low

Xinhua News Agency reporsts that Chicago wheat futures Wednesday slipped to 2-month low thanks to improved condition for wheat planting in world's major producers. Soybeans also saw further drop while corns rallied on increased demands.

December wheat fell 0.2 cents, or 3.2 percent, to 6.835 U.S. dollars per bushel. November soybean shed 11 cents, or one percent, to 10.99 dollars per bushel. December corn gained five cents, or one percent, to 5.05 dollars per bushel.

Traders said the ongoing fundamental pressure for wheat mainly comes from improved conditions for winter planting in Russia and U. S. as well as favorable growing conditions in Australia and Argentina

According to weather forecasts, some regions in the west and south of Russia may enjoy 0.2 inch of rainfall on Thursday and eastern Ukraine may get one inch by Oct. 1

Gasoline climbed to a two-week high as a U.S. government report showed an unexpected decline in supplies while manufacturing accelerated for a second month in China, the second-biggest oil consumer. The rally in gasoline will help boost ethanol demand and usage of corn.

Hunger to Become Key Issue in Global Politics

The prices of wheat and other agricultural commodities have risen yet again, following the already significant price increases of 2007 and 2008. According to the Humboldt Forum for Food and Agriculture, these are the early indicators of a latent food crisis, which will hit the world within the next ten years.

"If no decisive action is taken, the prices of key food commodities are likely to be 50 to 100 per cent higher by 2020 than they were at the turn of the millennium. This would dramatically increase the level of hunger and malnutrition, around the world," says Harald von Witzke, president of the Humboldt Forum for Food and Agriculture, an international think tank, headquartered in Berlin, Germany.

Over one billion humans are already malnourished. Every day, 16,000 children die as a result of malnutrition. Even a moderate increase in the price of food would significantly worsen the nutritional status of the poor, who typically have just $1.25 per day or less in purchasing power, with approximately 75 percent of that dedicated to food. This serious situation is set to worsen dramatically as our food needs look set to double in the first half of the 21st century.

According to von Witzke, sustained high food prices would not only lead to food riots, as they did in 2007 and 2008. They also have the potential to significantly increase international migration away from food insecure countries with agriculture becoming a key industry. "The world is running out of time. Both the poor countries and international development assistance have to take swift and decisive action. The neglect of agriculture must end."

Von Witzke's recommendations include investing in agricultural infrastructure and education, and making mineral fertilizer, cropping protection and modern seed varieties available to farmers in poor countries.

Tuesday, September 28, 2010

Big Equipment Purchases Blessed in New Tax Legislation

DTN news reports a bill approved by Congress in late September revives the popular 50 percent bonus depreciation rule for new equipment that had been part of the emergency stimulus package in 2008 and 2009.

Farmers could harvest sizable tax write offs in a new small-business law, giving extra incentives for end-of-year equipment and truck purchases. The U.S. House approved the legislation Sept. 24, following Senate action earlier this fall, and President Barack Obama signed it into law Monday.

In an effort to jumpstart the economy, Congress raised the threshold on Section 179 expenses from the current limit of $250,000 to $500,000 for tax years beginning in 2010 and 2011. The terms apply to both new and used equipment.

In the past, this deduction phased out as eligible purchases exceeded $800,000, but the new threshold was raised to $2 million. With commodity prices rebounding, and crop yields relatively good, some farmers may be able to capitalize on the extra tax generosity. "Now a lot of grain can be reported as farm equipment on the tax return," said CPA Andy Biebl, a principal with LarsonAllen in Minneapolis and DTN's tax columnist.

The law also revived the popular 50 percent bonus depreciation rule for new equipment that had been part of the emergency stimulus package in 2008 and 2009, but the deal won't last long. The new legislation retroactively extends the 50 percent bonus back to qualified property acquired and placed in service since Jan. 1, 2010, but before Jan. 1, 2011. "This is supposed to be an incentive for taxpayers to buy equipment, but a lot of us can't figure out how effective that will be given that we are here in the last days of September," Biebl said. "It's a sign of the desperation out there."

New vehicles under 6,000 pounds also get a boost. The first-year deduction for a new auto will move from $3,060 to $11,060 and for a light truck from $3,160 to $11,160. Used vehicles purchased during 2010 continue to be subject to the lower caps.

Agricultural attorneys and accountants generally welcomed those new provisions, although with caveats. "Remember, many states do not couple with the federal government on the depreciation provisions," advised Roger McEowen, an Iowa State University agricultural law professor. "The restoration of bonus depreciation and the enhancement of expense method depreciation will further complicate return filing in those states" and may mean producers need to keep two sets of books.

One highly unpopular provision buried in the new tax law applies to landlords. Until now, owners of rental property operating as "passive" investors have been exempt from the requirement to issue a Form 1099 report on payments of $600 or more to service providers. Starting with payments made after 2010, if a landlord spends $600 or more for bookkeeping, painting, repairs or other services, he would be required to issue a Form 1099-MISC to both the IRS and the payee.

The new rules mean "taxpayers with land in the Conservation Reserve Program also would have to file information returns for payments made to farmers that, for example, provide mid-contract maintenance services on the land that totals $600 or more," McEowen said.

When several hundred tax practitioners attending a recent Iowa State University seminar heard the news, they gave a collective groan. "We may see a new industry pop up -- 1099 preparation," quipped Tom Lawler, a Parkersburg, Iowa attorney.

By Marcia Zarley Taylor,
DTN Executive Editor
Elizabeth Williams,
DTN Special Correspondent

Friday, September 24, 2010

DC Urban Wheat Field Reaches Members, Public, World Wide Web

The wheat industry came together this week to show the public and Members of Congress the wheat chain from farm to fork at the second Urban Wheat Field.

Wheat Foods Council, a NAWG sister organization, sponsored the event, supported by wheat producers from around the country who flew in to guide visitors through the exhibit.

The display included a quarter-acre of live wheat in pallets, a full-sized combine, multiple demonstration flour mills, a mobile baking laboratory and areas for trade and nutrition education. The event was staffed by more than 60 growers and 20 state organization staff who came in for the festivities, as well as D.C.-based staff from NAWG and U.S. Wheat Associates and experts in the areas of milling, baking and nutrition.

The Field opened Thursday morning with a reception sponsored by NAWG and highlighted by House Agriculture Committee Chairman Collin Peterson (D-Minn.), who cut the ribbon alongside NAWG President Jerry McReynolds, a producer from Kansas, and Wheat Foods Council Co-Chairman David Moore, a producer from Texas.

In addition to Peterson, Members of Congress in attendance included Rep. Jerry Moran (R-Kan.); Rep. Adrian Smith (R-Neb.); Rep. GT Thompson (R-Pa.); and Sen. Michael Bennet (D-Colo.).

On Wednesday, as the Field was being set up, growers and staff from NAWG-affiliated state wheat grower organizations canvassed Capitol Hill with milling and baking colleagues, holding more than a dozen meetings with Congressional staff members who don't frequently hear from wheat growers. Also on Wednesday, Peterson and House Agriculture Ranking Member Frank Lucas (R-Okla.) sent a Dear Colleague letter to their fellow Members describing the event and urging attendance.

During the day Thursday and Friday, multiple school groups visited the field, guided by wheat producers from around the country.

NAWG officers and other spokespeople also talked with members of the media who visited the Field to get the once-in-a-lifetime shot of a combine in front of the Capitol and with many radio stations and newspapers back home. Media covering the Field in D.C. have included ABC and NBC affiliates,, Agri-Pulse and others.

Thursday, September 23, 2010

What Will Happen to Estate Tax is Really Up in the Air

The Farmer Stockman reports that there's been a lot of talk in Washington about what should happen to the estate tax. But American Farm Bureau Federation Tax Specialist Pat Wolff says that has not translated into action.

"Everyone here in Washington knows that unless Congress acts the estate tax will come back on Jan. 1 with only a $1 million exemption and a top rate of 55%, that's a tax level we haven't seen in 10 years," Wolff said. "Everybody agrees that something needs to be done before Jan. 1 but the debate is over what should happen, how much estate tax relief should be provided."

Since 2001 the estate tax exemption has been increasing as the rate decreased until it zeroed out at the end of 2009. However Congress didn't finish the job 10 years ago, leaving it to this Congress to keep the tax from reverting to pre-2001 levels.

Wolff says there is nothing certain about what Congress will and won't do. However the House of Representatives have already passed a bill that would set the exemption at $3.5 million with a tax rate of 45%.

"The Senate is where everything is gummed up, but the Senate is also where we think we can do better than the House," Wolff said. "Two very important Senators, John Kyl from Arizona and Blanche Lincoln from Arkansas, have agreed and are trying to get the exemption level up to $5 million."

Wolff says Farm Bureau would like to get rid of the estate tax altogether, but there are simply not enough votes to make that happen. Farm Bureau has stressed to Congress that estate taxes can hit farm families harder than other small business owners because 84% of farm assets are real estate-based.

Meanwhile, a new study has been released by the American Family Business Foundation that indicates as many as 1.5 million additional jobs could be lost if Congress allows the Federal Estate Tax to return next year. The report's author, Douglas Holtz-Eakin, former director of the Congressional Budget Office, says with fears of a double dip recession on the horizon, the last thing America needs is for Congress to threaten family-owned businesses with a huge tax increase, an increase that could put more jobs on the chopping block.

The study concludes that if the estate tax were reinstituted at a 65% rate, more than 1.6 million jobs would be lost. If Congress takes no action and the estate tax returns to the rate of 55%, between 1.4 million and 1.5 million jobs would be lost.

Wednesday, September 22, 2010

USDA Weekly Crop Progress

Idaho Winter Wheat plantings have begun across the state. Southwest and Eastern Idaho are 36% completed while North and South-Central Idaho are about 15% completed.

Nationally winter wheat plantings were reported for the first time this growing season on Monday's USDA Weekly Crop Progress report.

Winter wheat was reported at 18 percent planted, compared to 22 percent at this time last year and a 21-percent five-year average. Spring wheat harvest increased slightly to 87 percent, 9 percentage points behind average.

"With spring wheat harvest slowly moving along and winter wheat planting behind last year's slow pace, this report should be considered slightly bullish," said DTN Analyst John Sanow.

Tuesday, September 21, 2010

Crop-killing frost hits Western Canada's wheat and canola fields

The Vancouver Sun reported frost reached major wheat and canola growing areas of the Western Canadian province of Alberta Friday, likely killing immature crops and lowering their quality, but it spared most of the country’s biggest crop areas.

The killing frost, which Environment Canada said looks to repeat in a broader area on Friday night, threatens to exacerbate market jitters about global wheat supplies due mainly to severe drought in the Black Sea region.

Even though the frost was widely expected, it pushed up ICE Canada nearby canola futures1.4 percent early on Friday, with Chicago wheat, soybean and oat futures following up 1.7, 2.2 and 3.4 percent respectively.

Killing frosts reached north-central areas of Alberta that usually produce one-sixth of Canada’s canola and almost one-fifth of its spring wheat. But while the frost devastated some crops, many of those that absorbed the coldest temperatures were already mature enough to withstand much of the damage, said Stuart McMillan, crop and weather analyst at the Canadian Wheat Board, which markets Western Canada’s wheat and barley.

“I don’t want to sound the alarm bells to all the customers yet because there’s still going to be reasonable number of (high-quality) red springs and durum produced here,” he said.

Canola crops in the worst-hit regions are also less vulnerable to damage, said Murray Hartman, oilseed specialist for the Alberta government.

“It would be significant damage but it’s not extensive.”

Frost kills plants when temperatures fall below minus 2.2 degrees Celsius (28 degrees Fahrenheit). Temperatures reached several degrees lower than that level in many parts of Alberta for several hours.

The killing frost is right on time for Western Canada, however excessive rain this summer delayed crop growth and held the harvest to its slowest pace in six years, leaving immature plants vulnerable to frost damage.

Canada is the top exporter of spring wheat, canola and rapeseed and a key shipper of oats.

Vulnerable areas of southern Alberta and most of neighboring Saskatchewan missed the killing frost, said Environment Canada meteorologist Mike Russo.

In Saskatchewan, the top crop-growing province, only Kindersley reached minus 2.2 degrees Celsius or lower. The province of Manitoba did not receive significant frost.

The reprieve in those areas is only temporary, Russo said. Most southern areas of Saskatchewan will likely see temperatures of minus 2 to minus 5 degrees Celsius on Friday night, ending the growing season there. The frost will also likely move into southwestern Manitoba, Russo said.

Canada’s lower-quality crops should support prices of top-quality spring wheat, used in baking, and canola, which is mainly crushed for its edible oil, said Brian Wittal, owner of Pro Com Marketing in southern Alberta.

“The asking price is certainly going to be higher because we’re just not going to have it.”

Monday, September 20, 2010

Fall Wheat Weather Uncertain

Bryce Anderson from DTN reports that in less than six months, the perception of world wheat supplies has reversed from abundant to borderline tight. Much of that switch is due to significant crop damage in Russia caused by historic drought this past summer.

A continued lack of moisture means that Russia's reduced wheat crop size could last another year. The Russia drought impact was twofold in wheat. First, it reduced available grain for food usage. Secondly, since much of the wheat grown in fields around the Black Sea is used for livestock feed, the drought shaved away part of the international feed grain supply as well. Thus, the Russia drought was bullish for the U.S. corn market as well as wheat.

Telvent DTN Ag Meteorologist Joel Burgio began tracking the Russia drought in April when he first identified Russia as an area of dryness. Since mid-June, Burgio saw the area turn progressively drier and hotter, which led to the sharply lower harvest.

"Just look at August," Burgio said. "Saratov in the Volga Valley had only one millimeter of rain -- 35mm below normal. Its average temperature was almost 15 degrees Fahrenheit above normal."

To make matters worse from a production standpoint, Burgio said September is bringing very little rain to the central Russia wheat belt. This lack of rain severely hinders planting of next summer's wheat crop, because of a lack of soil moisture to germinate the crop.

"We may see some scattered showers in the Volga Valley, but that's a skeptical chance," Burgio said. "Also, we have to remember that a chance for one rain event doesn't break drought, nor make the winter wheat crop. They've got a long way to go before they're out of the woods."


The Russia wheat moisture woes -- and the potential for the dry pattern to remain through the rest of this fall -- mean that the world wheat market will be on edge for a few months.

"Out of all the grains, wheat remains a true global commodity," said DTN Analyst John Sanow. "While supplies remain sufficient to meet current needs, the planting delays in Russia and the former Soviet Union will be watched closely," Sanow said.

Elsewhere in the global wheat scene, Argentina's wheat crop has benefited from some contra-seasonal rains in late August; and Australia's eastern wheat areas have benefited from a La Nina event in the Pacific Ocean. La Nina is the term used to describe an ocean temperature trend which is below normal and has a trade wind pattern blowing east to west.

"Australia has had a very typical La Nina relationship so far," Burgio said. "The eastern wheat belt is doing quite well. The only possible problem is that it's been too wet and on the cool side recently. This trend could slow down development. And West Australia could see some wheat losses due to dryness, but the eastern rains are making up for that."

Other major wheat areas are at least holding their own. Argentina's crop is benefiting from some surprising later-season rain. U.S. spring wheat harvest is going well. Canadian wheat producers have a slow harvest, but have avoided a complete crop failure despite an unfavorably wet and cool start to the season last spring. Plus some of the best hard red winter wheat production areas of the Southern Plains in the U.S. have favorable soil moisture for planting the crop which will be harvested in 2011.

Even with these countries' assistance, however, wheat supplies promise to be a question for some time.

"The commercial side of the (wheat) market seems nervous, indicated by the inverted deferred futures spreads in the Chicago, Minneapolis and Kansas City markets," said Sanow.

Friday, September 17, 2010

Farm Input Costs Going In the Wrong Direction This Year

News of improved farm income numbers also reflect a rise in inputs.

While recent farm income reports showed a definite rebound over the last year, according to USDA Chief Economist Joe Glauber one farm income related statistic that also increased should not be taken as a good sign: the price producers paid for inputs.

"Certainly as the world economy has come back we've seen oil price rise again and that's had some effect," Glauber said. "And of course on the input side if you are buying feeder cattle or other sorts of things your costs up on that side as well."

Glauber says several categories with in the 2010 input forecast reflect an opposite trend from last year, especially when it comes to oil.

"In terms of cost side I think something buried in those numbers, we see that fuel costs are up about 22% from 2009," Glauber said. "So we saw those big drops in fuel prices, that was at least the one good news in the 2009 numbers, but they are up again."

Thursday, September 16, 2010

Long-Range U.S. Wheat Export Prospects Rosy

Pat Hill, DTN Markets Editor talked with Vince Peterson, U.S. Wheat Associates Vice President of Overseas Marketing for his perspective on the prospects for this year's exports, and what may lie ahead -- important questions for producers who are deciding how much winter wheat to plant in the coming weeks.

Peterson, who is presently in Brazil, responded by email.

DTN: U.S. wheat exports have averaged 27.7 MMT in the past 10 years, and only in 2007/08 did exports total 34 MMT. Is this jump in exports this year a one-off deal or the start of stronger long-term demand?

Peterson: This is a question that actually has a little more to it than just what sits on the surface with the elevated export year's numbers. Our ability to export and substantially increase exports over time is, at its root, subject to what our long-term prospects might be for wheat production.

This year, and probably next year for that matter, we have an export ability which has been enhanced. That is because growers have not been particularly happy with wheat prices the past two years and have, in many cases, chosen to store and carry wheat, rather than sell it. That put us into a large carry-in stock position (26.5 MMT or 973.6 million bushels, more than three times what were carried into the 2008 crop) plus a larger-than-average wheat crop (62 MMT this year versus about 58 MMT on a 10-year average).

In the end, with "bonus" stocks from Canada, we started with a total supply topping 90 MMT at the beginning of the year.

We use 32 MMT (on average) for food, feed and seed each year, so for this year, we can export 34 MMT (USDA's current number) or even more and only drop our ending stocks down by about 3 MMT (more if exports exceed 34 MMT). In this case, we'd still start 2011/12 (June) with another very adequate [supply], particularly as there is an incentive for farmers to plant more wheat based on current strong prices (this is especially true with soft red winter wheat). At the moment, I'd say the odds are quite good for the U.S. to have another very good export sales pace in 2011/12.

But, in the future, if we produce ongoing "average crops" of 58 MMT, use 32 MMT domestically and want to maintain stocks at a constant level, then we can expect to export about 25 to 26 MMT per year. To do more consistently means that we have to increase production beyond our "averages." Filling unexpected supply gaps as we are helping do with the Russian export ban will draw down stocks and create price volatility that is not pleasant for our customers or our farmers.

I am absolutely convinced that the world trends will be steadily increasing: a higher total demand for wheat and a demand for higher total world trade as we move out well out into the future. That means the opportunity exists for continually expanding exports from the U.S. as far out as we might imagine.

The problem with projecting that is that the U.S. share of expanding trade will depend upon our producing wheat in ever increasing quantities to match that demand and trade growth. Our 10-year production trend might be up very slightly (1 percent to 2 percent), which has been aided by some better yields in the more recent years as opposed to some of the drier times just a few years back. The fact is that wheat land area in the U.S. (and world-wide) has been decreasing for decades. Our (and the world's) ability to keep up with world wheat demand has only been achieved due to varietal improvements from traditional plant breeding and better, more efficient, farming practices that allows growers to increase yields and maximize productivity on fewer acres.

But the answer to the future will depend upon whether the U.S. (and most other origins) are able to buy land area back from corn and oilseeds. And if so, how will we do it? Higher prices are one answer, and that one is playing out this year. But long term, advanced technology almost has to play a part. Traditionally bred wheat has produced yield gains, but those are running far behind corn and oilseed gains (and therefore profitability), which have been able to take great advantage from biotechnology.

DTN: Ahead of the report, there were news stories speculating about further increases, with some mentioning prospects as high as 37 MMT. Do you see that as possible or likely? What might it take for the U.S. to have that much business?

Peterson: Yes. Ahead of the last report, some forecasters were expecting an increase in USDA's forecast to 34 MMT -- and they hit that one right on the head. At the same time, almost from the day the Russian government imposed the embargo on all wheat exports beyond August 15, forecasters have been bantering about the potential impacts of that event. I have seen projections ranging to as much as 36 to 37 MMT, and frankly, cannot discard that as out of the range of the possible this year.

But the Russian embargo is not the only reason for looking at the potential for higher U.S. export numbers this year. Germany suffered severely from rains throughout harvest. It would appear unlikely that little more medium and higher quality (protein) milling wheats will be exported from Germany. In fact, we have seen reports of French milling wheat moving to Germany and German feed wheat moving elsewhere in the EU. German milling wheat has been sold in recent years to many Middle East and African markets -- and it's possible that some advanced sales may have to be filled from other origins. The demand for high-protein North American wheat and durum in the EU to compensate also appears to be growing daily (U.S. spring and durum sales to the EU and positioning in the St. Lawrence has already reached 900,000 MT by Sept. 10 versus 600,000 MT total in the last marketing year).

While carry-in stocks were higher than expected and USDA forecasts higher production, the Canadian crop, which was already known to suffer in volume following the wet, late planting last spring, is now being plagued by rain (which is also slowing harvest in Montana and North Dakota). One [recent] weather forecast called for rain in Saskatchewan in the next 7 of 9 days. A further loss of good-quality milling wheat in the world supply total continues to support the U.S. export position this year.

The better crop in Eastern Australia seems to be about the only other bright spot this year, and Australia's ABARE pushed up its production forecast recently.

At any rate, there are still some variables to determine and play out, but we are still very early in the year. Very early. The last time the Russians pulled out of the export market (2007/08, when the U.S. did 34-plus MMT of wheat exports) Russia didn't impose prohibitive export taxes (which effectively closed exports) before they had already sold and exported 12 MMT for the year... this year they pulled the plug after something over 3 MMT.

Tuesday, September 14, 2010

India expects record wheat crop

India, the world's second-largest wheat producer, said Friday it expects this year's wheat output to total a record 82 million tonnes as the country grapples with a grain storage problem.

India produced a record 80.71 million tonnes of wheat in the 2009-10 crop year, which runs from July to June, despite the worst drought in nearly four decades.
"If there is no terminal heat this year, output is expected to be 82 million tonnes," Agriculture Secretary P K Basu told the Press Trust of India.
Wheat output would be helped by India's bountiful monsoon, which has filled reservoirs to the brink, ensuring plentiful irrigation for the winter-sown crop, he said.

Basu did not comment on media speculation that record output could prompt the government to lift a ban on wheat exports as it grapples with problems storing the 60 million tons of wheat it already has in stock.
India's media has reported large-scale spoilage of grains due to insufficient warehouse storage space.

India had to import about seven million tonnes of wheat in 2006 and 2007 after poor harvests and has banned exports of wheat since early 2007 to boost domestic availability but now is dealing with a problem of plenty.
The Supreme Court ordered the government in August to distribute excess grain to the poor, saying it was "a crime to waste even a grain of food" as long as people were hungry.

Prime Minister Manmohan Singh replied this week the government would do all it could to provide affordable food to the poor but that it was "not possible in this country to give free food to all the poor people."
Analysts say massive investment is needed to modernise India's food supply chain and sharply reduce wastage.

Winter Wheat Harvest Coming to a Close

USDA’S National Agricultural Statistics Service (NASS) reports that Winter Wheat harvest is near completion across the state. Few pockets in higher elevations are still harvesting. Several reports in North Idaho indicate rain and humidly are slowing cereal grain harvest. Franklin and Caribou county extensions reported frost which may have damaged wheat. NASS reports Winter wheat planting is 9 percent complete at the state level.

Monday, September 13, 2010

September USDA Estimates Confirm More Export Demand for U.S. and Canadian Wheat

The United States Department of Agriculture (USDA) sees world wheat stocks for marketing year 2010/11 (June – May) increasing slightly in spite of evidence that production estimates for Russia and much of Europe fell again this month. The September USDA World Agricultural Supply and Demand Estimates (WASDE) report included another jump in U.S. wheat exports from 32.6 million metric tons (1.2 billion bushels) in August to 34 million metric tons (1.25 billion bushels). While the increase is somewhat below what some analysts expected, the new forecast is about 40 percent higher than USDA’s initial 2010/11 export estimate. U.S. wheat exports the past four weeks have generally exceeded trader expectations, including three weeks with sales of more than 1 million metric tons (about 36.7 million bushels). USDA’s forecast of average farmgate prices for wheat also increased slightly to $4.95 to $5.65 per bushel, compared with $4.70 to $5.50 last month.

The report draws its conclusions from more information about the impact of the Russian drought and harvest rains in central and eastern Europe. Production for Russia is lowered 2.5 million tons (about 92 million bushels) based on the latest harvest results for the drought-affected central growing areas on top of the government’s announcement it plans to extend its export ban at least until the 2011/12 Russian crop is harvested. EU-27 production is lowered 2.4 million tons with the largest reductions for Hungary and Romania where heavy summer rains reduced yields and smaller production drops in other member countries. Although the reduction for Germany is small, the report said persistent rain in August reduced high quality milling wheat supplies, which should also increase demand for U.S. and Canadian wheat. USDA’s forecast for higher Canadian wheat exports (up 2 million metric tons) also factors in new information about higher than expected carry-in stocks and production.

USDA projected global wheat production will decline by 2.72 million tonnes to 643.01 million tonnes, an improvement on the average estimate by traders who saw a total harvest of 641.44 million tonnes. The report estimated world wheat stocks-to-use ratio at 26.8 percent, noted by Reuters this morning to be “well above 20.3 percent seen during 2007/08 when food short shortages and record prices sparked unrest globally.”

Wheat stakeholders should also be watching the U.S. corn supply and demand analysis carefully because bullish reports in the current situation could also pull U.S. wheat prices up. USDA’s forecast appeared somewhat more bearish than some analysts expected. USDA predicted lower stocks (1.1 million metric tons or 40 million bushels) based on increased ethanol use and slightly higher exports and a 1.5 percent drop in its production forecast. However, at 334.3 million metric tons, this would still be the largest corn crop ever produced in the United States.

Friday, September 10, 2010

Russia Lowers Grain Forecast Again, May Sell From Reserves After Drought

Bloomberg reports that Russia cut again its grain-harvest forecast for this year and plans to sell from stockpiles if domestic prices rise in 2011.

The harvest will be 60 million metric tons this year or “possibly slightly more,” Deputy Agriculture Minister Sergei Korolyov told a conference in Moscow today. His estimate lowered the upper end of the ministry’s forecast, which had been 65 million tons.

Russia imposed a ban on grain exports, which Prime Minister Vladimir Putin said Sept. 2 will last at least until next year’s harvest, after the country’s worst drought in at least 50 years. The heat wave caused the government to slash the grain-crop forecast from the original estimate of 97.1 million tons, the same as last year’s output.

“If after the New Year, prices go up, the government will stamp this out through its intervention fund,” Korolyov said, referring to the 9.5 million tons of stockpiles accumulated in previous years to support farmers. “The government won’t allow prices to rise.”

The export ban, originally enforced from Aug. 15 to Dec. 31 to ensure domestic supplies, may be extended until November 2011, as the country normally completes its harvest in that month, according to Putin’s announcement.

Russian farmers are stockpiling grain, expecting higher prices, Sergei Levin, head of United Grain Co., the state-run trader, told the same conference.

‘Good Harvest’

Farmers may lose money if they hold on to their grain and the government starts selling from stockpiles, he said.

Russia’s next grain crop can’t be good when exports are banned and farmers have no incentive to plant, said Vladimir Petrichenko , an analyst at trader WJ Group.

“They have to allow exports, then there will be good sowing, then there will be a good harvest,” he said.

Russia was the world’s third-biggest wheat exporter in 2009-10 after the U.S. and Canada, according to the U.S. Department of Agriculture.

Russia may need to import as much as 6 million tons of grain in the current marketing year to meet domestic demand, according to Moscow-based researcher SovEcon.

The Agriculture Ministry said Sept. 2 the nation must produce between 85 million and 90 million tons of grain next year to ensure sufficient domestic supply.

Thursday, September 9, 2010

Russia Winter Wheat Planting Projections

According to a Wall Street Journal report, Russia is set to plant the same amount of winter grain this year as in 2009. Government officials report that farmers plan to sow up to 18 million hectares of winter grain this year, the same amount as last year.

Russia’s worst drought in decades has wiped out almost a third of its grain crop. Last week, the Agriculture Ministry said that, even under a worst-case scenario, it would sow 12 million hectares (30 million acres).

Wednesday, September 8, 2010

U.S. gives Japan assurances about adequate wheat supplies

The Japan Economic Newswire reported that Japan will have adequate supplies of wheat despite public concern about poor harvests because the United States will continue to be a reliable supplier, the United States said Tuesday.

"Traditional exporters, particularly the United States, maintain wheat stocks that are more than sufficient to compensate for any global wheat shortfall this year," the United States said in a statement issued by the Embassy in Tokyo.

Pointing out that Japan is the largest buyer of U.S. wheat, the United States stressed the importance of the two countries' relations in the field of agriculture for their overall bilateral partnership.

In August, Russia, the world's leading wheat producer, imposed a temporary ban on exports of wheat and other grains due to a serious drought that has hurt the country's agricultural production, giving rise to speculation about a rise in international wheat prices.

Friday, September 3, 2010

Fears grow over global food supply

The Financial Times reports that two days of unrest in Maputo, Mozambique, left seven people dead and 280 injured after the government decided to raise bread prices by 30%

Wheat prices rose further on Friday in the wake of Russia’s decision to extend its grain export ban by 12 months, raising fears about a return to the food shortages and riots of 2007-08.

In Mozambique, where a 30 per cent rise in bread prices triggered riots on Wednesday and Thursday, the government said seven people had been killed and 288 wounded.

Vladimir Putin’s announcement on Thursday extended an export ban first introduced last month until late December 2011, sending wheat and other cereals prices to a near two-year high. It came as the UN’s Food and Agriculture Organisation called an emergency meeting to discuss the wheat shortage.

In Maputo, trade and industry minister Antonio Fernandes told a national radio station on Friday that the riots had caused 122m meticais ($3.3m) of damage. Police opened fire on demonstrators after thousands turned out to protest against the price hikes, burning tyres and looting food warehouses.

Although agricultural officials and traders insist that wheat and other crop supplies are more abundant than in 2007-08, officials fear the food riots could spread.

Wheat prices remained high on Friday morning. Futures in Chicago were up 1.5 per cent at $6.91 a bushel, while European wheat futures remained at historically high levels above €230 a tonne, just shy of last month’s two-year high of €236. Wheat prices have surged nearly 70 per cent since January, and analysts forecast further rises after Russia’s decision and concerns about weather damage to Australia’s crop.

The crop problems in Russia, which suffered its worst drought on record this summer, and elsewhere, have heaped pressure on US farmers to supply the world’s wheat. The US Department of Agriculture has increased its estimates for US wheat exports to $8bn for the current crop year.

The 2007-08 food shortages, the most severe in 30 years, set off riots in countries from Bangladesh to Mexico, and helped to trigger the collapse of governments in Haiti and Madagascar.

The FAO said that “the concern about a possible repeat of the 2007-08 food crisis” had resulted in “an enormous number” of inquiries from member countries. “The purpose of holding this meeting is for exporting and importing countries to engage.”

Russia is traditionally the world’s fourth-largest wheat exporter, and the export ban has already forced importers in the Middle East and North Africa, the biggest buyers, to seek supplies in Europe and the US.

Mr Putin said Moscow could “only consider lifting the export ban after next year’s crop has been harvested and we have clarity on the grain balances”. He added that the decision to extend the ban was intended to “end unnecessary anxiety and to ensure a stable and predict-able business environment for market participants”.

“This is quite serious,” said Abdolreza Abbassian, of the FAO in Rome. “Two years in a row without Russian exports creates quite a disturbance.” Dan Manternach, chief wheat economist at Doane Agricultural Services in St Louis, added: “This is a wake-up call for importing nations about the reliability of Russia.”

Jakkie Cilliers, director of South Africa’s Institute of Security Studies, said there was concern over a repeat of the protests of 2008: “That certainly strengthened a return of the military in politics in Africa.”

No Global Shortage of Food Grains

Expectations that prices in the next few months will hit the record levels of 2007/08levels are not substantiated by the reality of the global supply situation. Black Sea (Russia, Ukraine, Kazakhstan) wheat exports are expect to plummet 60 percent (21MMT) on drought-reduced crops. However, traditional exporters, particularly the United States, are holding large supplies that are more than sufficient to compensate for the black sea shortfall. In fact, U.S. ending stocks at 26 million tons are three times larger than just a few years ago.
More information about grain prices can be found at

Thursday, September 2, 2010

Prices of all Classes of Wheat Increase

Domestic prices: Prices of all classes of wheat surged in July as expanding export prospects were being spurred by the severe drought in Russia and Kazakhstan and reduced crop prospects in the EU and Ukraine. Hard Red Winter (HRW) jumped 41 percent to $268/ton, and Hard Red Spring (HRS) is also up 24 percent to $312/ton, as global import demand for U.S. hard wheat is expected to expand. Soft White Wheat (SWW) surged 51 percent to $271/ton primarily due to lower available Australian supplies at the end of the season.

Wednesday, September 1, 2010

U.S. Farm Exports Could See New Records

The U.S. Department of Agriculture, with a nod toward the drought that has knocked Russian wheat farmers from the export market, said Tuesday it expects U.S. agricultural exports to increase 5.1% to $113 billion in the federal fiscal year ending in September 2011.

One of the biggest factors behind the expected rise is the likelihood that reduced competition from Black Sea farmers will allow U.S. farmers to export $8.1 billion worth of wheat in fiscal 2011, up 35% from the USDA's revised fiscal 2010 forecast of $6 billion.

In May, the USDA forecast fiscal 2010 wheat exports of $5.3 billion.

The USDA also predicted that U.S. corn exports will climb 16.5% in fiscal 2011 to $10.6 billion from its fiscal 2010 forecast of $9.1 billion. The agency also said it expects U.S. cotton exports to climb 25% in fiscal 2011 to $6 billion from $4.8 billion in fiscal 2010.

U.S. agricultural exports are climbing despite the rocky economy in the U.S. and much of developed world in part because U.S. farmers do a lot of their business with emerging Asian nations, which are generating the strongest growth.

The USDA said Tuesday it expects the U.S. to export $47 billion worth of agricultural goods to Asia in fiscal 2011, up 5.1% from its upwardly revised forecast of $44.7 billion in fiscal 2010.