Milling & Baking News - April 7, 2009 - 24

Roundtable

Wheat futures prices
per bu

$20
Minneapolis
$16
$12
$8
$4
Jan.
2008

Kansas City
March

Chicago
May

July

June 1, 2009, the beginning of the
2009-10 marketing year, was projected by the U.S.D.A. at 712 million bus
in the March WASDE report, up 133%
from 2008 and up 56% from 2007.
Exports for 2008-09 were projected
at 980 million bus, down 22% from a
year earlier.
In addition to a growing U.S. supply, world wheat stocks were plentiful,
rebounding quickly from historically
low levels last year. The International
Grains Council in March projected
2008-09 global wheat ending stocks at
160 million tonnes, up 39% from the
previous year, largely as a result of
record-large world wheat production
for the current year.
Mr. Meyer cited an Egyptian tender
last week in which U.S. wheat prices
were $20 a tonne (or 50@60c a bu)
higher than Russian wheat, which was
selected by Egypt.
"U.S. wheat is not competitive," he
said, adding, "I don't expect export
business to pick up." He noted several
countries "still have pretty good-sized
stocks they need to export."
"We still have big stocks of wheat,"
Mr. Meyer said, predicting nearby
wheat prices have 50@75c a bu downside potential going into summer on
all three futures exchanges. He noted
some weather risk premium remained
and prices "can't get too far out of
line with corn and soybeans" because
spring wheat still must compete for
acreage with the other crops.
"Just looking at supply/demand,
wheat prices should move lower into
harvest," Mr. Freed said, adding that
"demand stinks." He said Kansas City
24 / April 7, 2009

Milling & Baking News

Sept.

Nov.

Jan.
2009

March

December futures may fall to $5.75
a bu through the end of the year unless "weather doesn't cooperate." He
noted the market hasn't been trading
demand, which has contributed to
making U.S. wheat prices uncompetitive on the world market.
Mr. Basse called wheat "the tail of
the dog" as it follows other markets.
Kansas City May wheat futures prices
may slip to $5 a bu, July futures to
$5.10 and December futures to around
$6, he suggested, again citing the
"heightened importance of weather."
Weather in the hard red winter region has been of special concern so far
this season, with much-needed moisture finally arriving during the past
couple of weeks. Still, much of the area
remained drier than desired, especially
in Texas and Oklahoma, where poor to
very poor condition ratings were 63%
and 46%, respectively, as of March 29.
"Western Kansas, eastern Colorado and the panhandles of Texas and
Oklahoma are still dry," Mr. Salmon
said, while moisture in the northern
hard red winter states was "looking
pretty good."
"Hard red winter wheat still needs
moisture," Mr. Meyer said. "We still
have a way to go with less than ideal
conditions."
The analysts also noted fewer total acres (all crops reported by the
U.S.D.A. combined) were expected to
be planted in 2009 than in 2008.
"It's bothersome farmers decided
to plant 5 million less acres because of
poor returns and profits," Mr. Freed
said. "When the economy turns around,
there may not be enough supply." Total

wheat area was expected to be down
4.5 million acres from 2008.
In addition to weather, outside
markets were expected to have an
ongoing impact on soybean, corn and
wheat prices.
The global economic recession will
continue to play a major role in dictating commodity values, analysts said.
Although they noted the influence has
been greater for corn and soybean meal
demand, because of reduced livestock
and poultry numbers, than for wheat
demand. They also suggested demand
of all commodities could take a sudden surge once the economy bottoms
and begins to improve.
"Wheat futures have followed the
Dow Jones Industrial Average," Mr.
Freed said, suggesting the impact of
outside markets on commodity futures prices.
At the same time, Mr. Freed noted
the reemergence of buying by commodity funds may have a strong
upward price bias. Commodity futures open interest is about half of
what it was when fund involvement
peaked, he said.
"Funds still have a lot of ammunition to buy," he said. "If they want to
step in, we can't stop it."
Crude oil, another key influence on
agricultural commodities because of
its impact on the use of corn to make
ethanol and on the use of soybean oil
to produce biodiesel, appeared to be
less influential than the general economy ever since crude oil prices plummeted from record highs last year
and have been more stable around
$50 a barrel.
The last of the "major" outside influences, the value of the U.S. dollar,
tended to have a depressing effect on
commodity prices since it strengthened from lows a few months ago.
A stronger dollar makes U.S. exports
more expensive and less competitive
against foreign products. This was especially evident in wheat, where even
regular U.S. customers have selected
wheat from other origins over U.S.
supply in many recent tenders.
U.S.D.A. soybean, corn and wheat
supply and use projections will be revised in its April 9 WASDE report. The
first 2009 U.S.D.A. survey-based winter wheat production estimate will be
released in the May 12 Crop Production report. MBN
- Ron Sterk
bakingbusiness.com / world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - April 7, 2009

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