Thursday, September 30, 2010

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.

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