Milling & Baking News - April 20, 2010 - 27

Roundtable



Fundamentals weigh on wheat prices,
but outside markets bear watching
Continued from Page 1

Agriculture raised its export number
in its April World Agricultural Supply
and Demand Estimates (WASDE), our
export demand still is around 30-year
lows. It probably is too soon to take
Chicago July wheat below $4.50 a bu,
until we know more about the size of
the 2010 crop, but there is no need to
trade above $5."
Paul Meyers, vice-president of commodity analysis, Connell Purchasing
Services, Berkeley Heights, N.J., said
during the next several weeks, wheat
prices should ease.
"In part, the assumption is the corn,
soybean and spring wheat crops will
get planted pretty much on schedule,
so there won't be any significant delays
like we saw last year to rally prices,"
he said. "As long as corn and soybean
prices trend lower through the planting
season, wheat prices should come down
as well. New crop prospects for Northern Hemisphere winter wheat crops are
generally pretty good, and I look for a
third consecutive year of increasing
world and U.S. ending stocks."
The recovery of U.S. and global
wheat stocks during the past couple of
years from the lowest levels since shortly after World War II in the case of the
United States and since the early 1980s
on a world level has been astounding, a
testament to what can be accomplished
when high prices motivate producers
and weather is favorable.
The U.S.D.A. on April 12 projected
the carryover of wheat in the United
States on June 1, 2010, at 950 million bus.
It would be the largest U.S. wheat carryover since 1,261 million bus in 1988.
In the case of world wheat, the
U.S.D.A. projected 2009-10 ending
stocks at 195.82 million tonnes, up
30.59 million tonnes, or 19%, from
165.23 million tonnes in 2008-09 and
up 73.16 million tonnes, or 60%, from
a 26-year low of 122.66 million tonnes
in 2007-08. The world wheat inventory
at the end of 2009-10 was projected to
be the largest since 2001-02.
Record world wheat production in
2008-09 at 683.27 million tonnes and a
2009-10 crop nearly as large at 678.42
million tonnes refilled wheat stores in
the major exporting nations and resulted in decreased demand from key traditional importers who found their own
grain production increased as well.
bakingbusiness.com / world-grain.com

With world grain inventories replenished, world wheat exports
dropped sharply in the current year to
a projected 125.89 million tonnes from
a record 143.01 million tonnes in 200809. The U.S. share in world wheat
trade eroded as world prices were at
discounts to those asked for U.S. supply, in large part because of the recent
advance in the value of the dollar.
The U.S.D.A. in April projected U.S.
wheat exports in 2009-10 at 865 million bus, down 150 million bus, or
15%, from 1,015 million bus. It would
be the smallest U.S. wheat outgo since
850 million bus in 2002-03. With the
exception of the latter year, U.S. wheat
exports for the current year were forecast to be the lowest since 1971-72.
The U.S.D.A. projected the U.S. share
of world wheat exports in the current
year at 18.7% compared with 19.3% in
2008-09 and 29.3% in 2007-08. In the
latter year, crop shortfalls in several
exporting countries encouraged world
buyers to turn to the United States.
U.S. wheat exports weren't expected
to improve much in the coming year.
Mr. Meyers said world trade in
wheat, if it increases in 2010-11, would
do so only modestly. Meanwhile, large
carryover stocks in major exporting
countries and expectations some nations will harvest even larger crops
in 2010-11 will limit the prospects for
U.S. wheat. In addition to traditional

competitors in world wheat markets,
the United States might face new competition from nations such as India
and Pakistan that have indicated they
could become net exporters of wheat
to ease storage problems.
"Any export increase for us next
year will be fairly small, and we will
face the same issues in coming years,"
Mr. Meyers said.
"The U.S.D.A. recently put out a 10year forecast on world trade. In all three
commodities - wheat, corn and soybeans - we lose market share over the
next 10 years," Mr. Freed said. "The U.S.
share of world wheat exports drops from
around 20% to about 16%, with U.S.
wheat increasingly displaced by Black
Sea wheat. At the end of 10 years, Black
Sea nations and other European nations
grow more wheat and satisfy more of
the world's demand. South America will
be growing more soybeans and satisfying more of the world's demand. And
we're going to be planting a lot of corn.
It might be the only wheat and soybeans
we'll be growing will be that required to
satisfy domestic demand."
Anemic foreign demand for U.S.
wheat has been a major factor pushing
wheat futures prices lower with new
contract lows recently set on all three
exchanges.
The prospect of a much smaller U.S.
wheat crop in 2010 compared with
those harvested in recent years wasn't

Milling & Baking News April 20, 2010 / 27

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Milling & Baking News - April 20, 2010

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