Friday, 1 July 2011
Wheat futures down on supply pressure
Wheat prices fell by Rs 10 to Rs 1,178 per quintal in futures trade today on adequate supply against reduced offtake.
Adequate supply following increased arrivals of new crops mainly put pressure on wheat futures prices.
At the National Commodity and Derivatives Exchange, wheat for delivery in July fell by Rs 10, or 0.84%, to Rs 1,178, with an open interest for 32,690 lots.
Similarly, wheat for delivery in August lost Rs 10, or 0.82%, to Rs 1,205 in 14,710 lots.
Analysts said supply pressure in the spot market following new crop arrivals mainly influenced wheat futures prices. In addition, reduced offtake from flour mills also influenced the trading sentiment to some extent, they said.
Source: http://www.business-standard.com/india/news/wheat-futures-downsupply-pressure/139987/&tp=on
Russia’s Wheat Harvest May Be 56 Million Tons, Grain Union Says
Russian farmers may harvest as much as 56 million metric tons of wheat this year, the country’s Grain Union President Arkady Zlochevsky said, a third more than in 2010.
The new grains harvest may reach as much as 90 million tons if favorable weather continues into July, he told journalists today in Moscow. The harvest was 60.9 million tons last year after drought damaged crops, according to the Federal State Statistics Service. The harvest will include between 52 million and 56 million tons of wheat, Zlochevsky said. The wheat harvest was 41.4 million tons last year, the statistics service said.
Russia will produce more feed grain in the new season because it sowed seeds of “not very good” quality this year, Zlochevsky said. Milling wheat has traditionally comprised between 67 percent and 68 percent of the harvest, and the share will drop to about 62 percent this year, he added.
Russia has the potential to export between 20 million and 25 million tons of grains. Still, between 15 million and 16 million tons may be exported as demand weakened after the country banned shipments last year following the drought, Zlochevsky said. The restrictions end tomorrow.
The barley harvest is estimated at between 15.5 million and 16 million tons, and the sunflower seeds harvest is expected to reach between 7.5 million and 8 million tons. Corn is seen at between 5 million and 6 million tons, he said.
Russia’s grain reserves are estimated at 21 million tons before the new marketing season that starts tomorrow, the Grain Union president said. Stockpiles exceeded 26 million tons a year earlier, he added.
Thursday, 30 June 2011
Corn Plunges Most Since November, Wheat Falls as U.S. Reports Acreage Gain
Corn futures tumbled the most since November and wheat had the biggest plunge since January 2009 as the U.S. government reported grain acreage and inventories that topped estimates by analysts. Soybeans fell, and rice rose.
U.S. farmers planted 92.282 million acres of corn this year, 1.8 percent more than projected by analysts in a Bloomberg News survey, and the second-highest since 1944, the Department of Agriculture said today.Stockpiles as of June 1 were 3.67 billion bushels, 12 percent higher than forecast.
“The USDA again surprised the market,” said Chad Henderson, a market analyst for Prime Agricultural Consultants Inc. in Brookfield,Wisconsin. “Rising acreage will add 200 million bushels to this year’s corn crop. Demand rationing has taken place, and supplies are much more comfortable for 2012.”
Corn futures for December delivery, the most-active by open interest, slid by the exchange limit of 30 cents, or 4.6 percent, to settle at $6.205 a bushel at 1:15 p.m. on the Chicago Board of Trade, the biggest drop since Nov. 16. The grain has jumped 66 percent in the past year on surging demand from ethanol makers and livestock farms.
Corn futures for July delivery, the contract closest to expiration, fell 69 cents, or 9.9 percent, to $6.29.
Food, Fuel
Declining corn prices may reduce expenses for meat producers including Tyson Foods Inc. and makers of grain-based ethanol such as Poet LLC. Bigger grain supplies might ease global food-inflation concerns after prices measured by the United Nations climbed to a record in February.
Worldwide wheat and corn harvests will be bigger than expected because of an improving outlook in the U.S. and China, the International Grains Council said today in a report.
Increased U.S. acreage “helps to ease the global grain supply shortage on paper,” said Michael Swanson, a senior agricultural economist at Wells Fargo & Co. in Minneapolis. “Physically, we have to harvest those acres and have good growing weather the remainder of the season.”
The U.S. is the world’s leading exporter of wheat, corn and soybeans.
U.S. farmers boosted corn seeding even as wet weather delayed fieldwork from Ohio to North Dakota. On June 10, corn futures for July delivery, the most-active at the time, rose to a record $7.9975, spurring growers to plant through June, instead of switching to soybeans, which have a shorter season. Corn sowing typically is finished in May.
Four-State Review
The USDA said today in a statement that it plans to survey farmers next month in Montana, Minnesota and North and South Dakota on acreage planted for corn, soybeans and durum and spring wheat.
“A large percentage of acres remained to be planted” in those states following the survey in the first half of June, the USDA said.
“If anything, we might see acreage come down a little from here,” said Mike O’Dea, a risk-management consultant at INTL FCStone in Kansas City, Missouri. “Today, the market is reacting to what’s in front of us.”
Farmers planted 13.627 million acres of spring wheat, 2.6 percent above estimates by analysts, the USDA said. U.S. inventories as of June 1 totaled 861 million bushels, topping forecasts by 4.6 percent.
Wheat futures for September delivery tumbled by the CBOT limit of 60 cents, or 8.9 percent, to $6.1425 a bushel, the lowest for a most-active contract since July 29. The decline was the biggest since Jan. 12, 2009. The grain has climbed 28 percent in the past year after adverse weather reduced global crop prospects.
‘Wild Ride’
On the Kansas City Board of Trade and the Minneapolis Grain Exchange, wheat futures dropped as much as the exchange limits of 60 cents.
Futures had “a wild ride,” said Carolyn Farndell, a senior commodity associate at RBC Wealth Management in Minneapolis. Wheat “stocks were higher than expected, they did lower the spring-wheat acreage, and there’s also been some talk circulating that the winter crop is coming in better than expected,” she said.
Soybean futures for November delivery dropped 29 cents, or 2.2 percent, to $12.94 a bushel on the CBOT. The price has climbed 43 percent in the past year.
Planting dropped to 75.208 million acres, less than analysts expected and below the 76.609 million estimated in March, as farmers switched to corn, the USDA said. Stockpiles as of June 1 were 619 million bushels, 4.6 percent more than forecast and above year-earlier supplies.
‘Stocks Trump Acres’
“The acreage numbers are positive, but we think the stocks trump acres,” sending futures lower, said Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa.
Rice futures for September delivery rose by the CBOT limit of 50 cents, or 3.5 percent, to $14.845 per 100 pounds. The price has gained 53 percent in the past 12 months.
U.S. rice planting totaled 2.676 million acres, down 26 percent from a year earlier, the government said today.
In the second quarter, wheat in Chicago dropped 20 percent, corn was down 10 percent and soybeans declined 8.2 percent. Rice gained 6.1 percent.
The Thomson Reuters/Jefferies CRB Index of 19 raw materials dropped almost 6 percent in the quarter, the most since the end of 2008. A faltering global economy has damped demand for commodities. Today, a government report showed more Americans than forecast filed applications for unemployment benefits last week, indicating little progress in jobs recovery.
The U.S. Federal Reserve’s second round of quantitative easing, also known as QE2, concludes today.
Corn is the largest U.S. crop, valued at $66.7 billion in 2010, followed by soybeans at $38.9 billion, government figures show. Wheat is the fourth-largest at $13 billion, behind hay.
Monday, 30 May 2011
Russia Lifting Grain-Export Ban May Fail to Alleviate Global Crop Shortage
Russia, once the second-biggest wheat exporter, will let a grain-shipment ban expire on July 1, a move that may fail to ease a global shortage caused by drought and flood damage to European and the U.S. crops.
Futures climbed 79 percent in the past year in Chicago, the global benchmark, helped by Russia’s export ban in August after the worst drought in at least 50 years. Poor weather from Canada to Europedestroyed harvests and Ukraine imposed shipment quotas. Rising prices drove global food costs tracked by the United Nations to a record in February.
“Whether they actually have major exports from that time or not remains to be seen,” said Michael Pitts, commodity sales director at National Australia Bank. The ban’s removal doesn’t necessarily mean there will be enough supply to offset losses in Europe and the U.S., he said in an interview from Sydney today.
Increasing food costs have contributed to faster inflation around the world, spurring at least two dozen central banks and the European Central Bank to raise interest rates this year, data compiled by Bloomberg show. Higher interest rates may curb global economic growth the Organization for Economic Cooperation and Development said May 25 would increase to 4.6 percent next year from 4.2 percent this year.
Milling wheat for November delivery dropped as much as 4.7 percent to 239.25 euros ($341.62) a metric ton on NYSE Liffe in Paris before trading at 243.25 euros at 6:50 p.m. Singapore time. The Chicago markets are closed today for a holiday.
Plantings Climb
The export ban won’t be extended, Prime Minister Vladimir Putin said during a meeting with First Deputy Prime Minister Viktor Zubkov outside Moscow on May 28. Russian grain plantings climbed 10 percent to 24 million hectares (59 million acres) and the government has more than 6 million tons of grain in reserves, Zubkov, who oversees the agricultural sector, told Putin.
Russia can export 2.5 million tons a month, said Arkady Zlochevsky, president of Russia’s Grain Union. Traders have already started to deliver small amounts to ports in the past two weeks and the main customers are countries in North Africa and the Middle East, he said in Moscow today.
Farmers worldwide will reap 667 million metric tons of wheat in 2011-2012, trailing demand of 669 million tons, the International Grains Council said May 26. The agency pared its production estimate from 672 million tons in April, cutting stockpiles to 185 million tons, the lowest since 2008-2009.
Slump Unlikely
The harvest prediction was reduced because of unfavorable weather in a number of countries, especially the European Union and the U.S., it said. Traders are expecting Russia to lift the embargo, it said May 26, two days before the announcement.
Prices are unlikely to slump as the market has already anticipated Russia’s return, said Vijay Iyengar, managing director of AgroCorp International Pte in Singapore, who correctly predicted in February that corn would be the best- performing agricultural commodity in the first half.
In the U.S., the world’s largest wheat shipper, about 45 percent of the winter wheat crop was in very poor or poor condition as of May 22, compared with 44 percent a week earlier, and 9 percent a year earlier, the USDA said May 23. About 54 percent of the U.S. spring-wheat was planted, behind last year’s pace of 89 percent, also the average in the past five years.
France’s soft-wheat crop, the European Union’s largest, will drop 12 percent, and German output will slide 7.2 percent, local forecasters said May 18.
High-Grade Shortage
While Russia’s exports may add to the supply of global feed wheat, there will still be a shortage of the higher-grade grain used for making bread, pasta and noodles, said Ric Pinca, executive director of the Philippine Association of Flour Millers, in a phone interview from Manila today.
About 124 million tons of the 670.5 million tons of wheat demand in 2011-2012 is intended for feed and the rest for food, the U.S. Department of Agriculture said May 11.
Buyers in Asia including Japan, South Korea, Taiwan, China and the Philippines are unlikely to rush to the market to buy Russian wheat, considered to be lower quality than that from the U.S.,Canada and Australia, said Pinca. The Philippines is the second-largest buyer in Southeast Asia.
In Canada, planting was also delayed by excessive rains. About 53 percent of the crop was planted, trailing the normal pace of 75 percent, the Canadian Wheat Board said May 24. By contrast, Russia’s Agriculture Ministry estimates the total grain harvest may be 85 million to 90 million tons, up from 60.9 million tons last year.
Ukraine Quotas
Russia will export 10 million tons of wheat in the 12 months ending June next year, up from 4 million tons in the current year, according to the USDA. That’s less than the 18.6 million tons sold a year earlier. Corn shipments will increase to 1 million tons from 25,000 tons and barley cargoes to 800,000 tons from 300,000 tons, the USDA estimates.
Ukraine President Viktor Yanukovych said in an interview May 24 he would lift export quotas because of forecasts for a 15 percent increase in the harvest. Ukraine, once the world’s biggest barley exporter, set shipment quotas on corn, wheat and barley in October after drought ruined crops.
Wheat for July delivery advanced 0.6 percent to $8.1975 a bushel on the Chicago Board of Trade on May 27, while corn jumped 1.7 percent to $7.585 a bushel.
India: Wheat tumbles on global cues
Wheat yesterday traded with the negative node and settled -0.5% down at 1199. The International Grains Council said it has cut its forecast for the 2011/12 global wheat crop by 5 million tonnes to 667 million, citing adverse weather in the European Union and the United States.
Procurement by government agencies has reached a record this year at 25.47 million tonnes as against the previous record of 25.38 million tonnes achieved during 2009-10.
In Delhi wheat prices dropped -4.1 rupee to end at 1187.5 rupees per 10 kg. In yesterday's trading session Wheat has touched the low of 1197 after opening at 1205, and finally settled at 1199.
For today's session market is looking to take support at 1195.7, a break below could see a test of 1192.3 and where as resistance is now likely to be seen at 1203.7, a move above could see prices testing 1208.3.
Trading Ideas:
Wheat trading range is 1192.3-1208.3.
IGC said it has cut its forecast for the 2011/12 global wheat crop by 5 million tonnes to 667 million
Wheat is having resistance at 1203.70 and support at 1195.70 level.
NCDEX accredited warehouses wheat stocks rose by 50 tonnes to 6573 tonnes.
In Delhi wheat prices dropped -4.1 rupee to end at 1187.5 rupees per 10 kg.
Courtesy: Kedia Commodities
Source: http://www.commodityonline.com/futures-trading/tradingtips/Wheat-tumbles-on-global-cues-13211.html
Sunday, 22 May 2011
India: Wheat procurement up 11% on increased arrivals
Wheat procurement during the rabi marketing season 2011-12 has gone up by 11% to 24.44 million tonne (MT) so far as compared to the year-ago period on account of increased arrivals. Food Corporation of India (FCI), the nodal agency for procurement and distribution of foodgrains, had procured 22.02 MT of wheat in the corresponding period of the previous year.
The arrivals at various FCI godowns has gone up by 7.41% to 26.36 MT as compared to 24.54 MT in the year-ago period.
Punjab, the largest contributor to the centre's kitty of the major rabi crop last year, has so far procured 10.84 MT of the foodgrain crop against 10.16 MT in the corresponding period of the previous year.
Haryana, the second largest contributor to the buffer stock last year, crossed last season's procurement. Total procurement from Haryana in the 2009-10 rabi season stood at 6.34 MT. The state purchased 6.78 MT of wheat so far compared to 6.33 MT in the same period a year-ago.
Similarly, Madhya Pradesh (MP), another key contributor to government's wheat purchase, has crossed the last season's total procurement. Its entire procurement in the 2009-10 season stood at 3.53 MT.
MP has so far purchased 4 MT of wheat compared to 3.36 MT in the same period a year-ago. In the entire 2010-11 marketing year (April-March), Punjab and Haryana had together procured about 73.53 per cent of the total purchase of 22.51 MT of wheat.
The government is targeting a procurement of 26.2 MT in 2011-12 marketing year on the back of projected record wheat production of 84.27 MT in 2010-11 crop year (July-June).
The government is paying Rs 1,170 per quintal to farmers this season, including a bonus of Rs 50.
Source: http://www.business-standard.com/india/news/wheat-procurement11increased-arrivals/135909/on
Wheat, Corn, Soybeans Called to Open Lower on Speculation Demand May Slow
What follows are opening calls for U.S. grain and oilseed markets.
-- Wheat futures are called to open 8 cents to 10 cents a bushel lower on the Chicago Board of Trade, the Kansas City Board of Trade and the Minneapolis Grain Exchange on speculation that recent price gains may slow demand, while rain in the next week may improve growth prospects for dry crops in Europe, said Jason Britt, the president of brokerage Central States Commodities Inc. in Kansas City, Missouri.
-- Corn futures may open steady to 3 cents a bushel lower on the CBOT on concern that price gains this week may slow purchases by investors and processors, Britt said.
-- Soybean futures may open 3 cents to 5 cents a bushel lower in Chicago on speculation that consumption of U.S. supplies will ease, Britt said. Soybean-oil futures are expected to open steady to 0.5 cent a pound higher, while soybean-meal futures may open down $1.50 to $2 per 2,000 pounds, he said.
Wheat price spike spells trouble for reliant Middle East states
Already fragile Middle Eastern governments are bracing themselves for the fallout of increased costs for wheat, The Wall Street Journal reports.
The grain had shot up at least 17 percent this week as of Wednesday evening, largely as a result of inclement weather. U.S. crops endured soggy weather while Western European fields suffered from drought conditions, which force up prices and add tension to an already pressurized situation.
Kansas, the largest winter-wheat crop in the U.S., is suffering from drought conditions that threaten the supply, Bloomberg reports. Approximately half of Kansas is in the throes of a dire drought, which is almost three times as much as the 18 percent from two weeks prior.
"Some of the wheat areas, especially in south-central and southwest Kansas, are seeing the same type of problems that Oklahoma and Texas are, as far as damage to the winter-wheat crop," Brian Fuchs, a climatologist at the U.S. Drought Monitor, told Bloomberg. "There's been quite a bit of acres that are being abandoned, meaning they are not going to even try and harvest because of the lack of a viable crop.”
This year has seen popular revolutions sack the leaders of Tunisia and Egypt, which were partially influenced by mass opposition to rising food prices. Those anti-government protests spread to Yemen, Bahrain, Syria and Libya, among other states reliant on the grain to feed their nationals.
On Wednesday, wheat futures scaled in price by 53 cents, a 7 percent rise to $8.17 per bushel. That lift represents the largest single-day price increase since late last year. The commodity has risen 91 percent in less than 12 months.
Wheat markets last spiked in Summer 2010 when Russia endured a severe drought. Since then, the price has remained elevated and this year's weather issues threaten to push prices even higher by slashing supplies.
Though some farmers are enthused about the money-making opportunity when it comes to exports, a threat exists to consumers, like those in the Middle East. The grain is considered the geographic area's most significant dietary staple, given its nutritional contribution to bread, pasta and couscous, all of which are considered cheap nutrition.
"It is a situation that a lot of countries in the region are concerned about," Julian Lampietti, the leader of a World Bank Arab food security study, told the publication. "This system is not very sustainable."
The globe's top consumer of the grain is Tunisia as its nationals eat more wheat than any other nation per capital. Each person eats 478 pounds annually, more than twice as much as the 177 pounds eaten by Americans.
Algerians and Egyptians also consume more than twice as much wheat as Americans, according to the United Nations Food and Agriculture Organization.
Also plaguing many Middle Eastern nations is the inability to grow wheat. Thus they are forced to purchase the commodity from other countries and then apply discounts when passing it on to their respective poor, malnourished communities.
For that reason, Egypt - who sacked 30-year autocratic leader Hosni Mubarak in February after 18 days of protest - has informed donor nations that it will require $13 billion in developmental aid during the next year-plus.
The expected population growth also will push up imports to Middle Eastern nations. The study led by Lampietti noted that by 2030, the Middle Eastern region's imports of cereals could increase 55 percent higher than amounts from 2000.
Unless they take preventative or preparatory steps, "Arab countries will become more and more vulnerable to global food-price shocks," the World Bank report stated.
Wheat prices to soar as drought deepens
The food industry is on red alert again over wheat - and this time it's wheat used in food, rather than feed, that's most at risk.
This spring's dry weather is threatening wheat crops in Europe's key growing regions, with some growers in the east of the UK reporting yields down 25% on 2010.
On the Continent, French wheat is forecast to be down 11.5% year-on-year, with German output down 7.2% [Agritel]. Planting has been delayed in the US, with Canada also suffering from bad weather.
Crucially, the dry spell has the potential to reduce quality as well as overall yields, meaning wheat meant for food production could end up good enough only for use as feed. As a result, food companies and bread makers in particular should brace themselves for further price hikes, experts warned.
"Bread prices will continue to go up because high-protein wheat prices will continue to rally," said Tom Vosa, European head of market economics at Clydesdale Bank. "Stocks are low and weather patterns globally have been incredibly unhelpful. Even in America, which was supposed to be the big saviour this year, stocks have been revised down."
One major UK food manufacturer said the next few weeks would be critical. "If there is virtually no rainfall in the next month, you can expect a price impact to come through," he said. "If there is some rain, the impact may be limited."
Duncan Rawson at EFFP agreed food companies should be "pretty concerned" about the drought. "There are big concerns about shortages worldwide, so if the UK crop suffers as a result of the drought, companies can't easily import wheat from elsewhere," he said.
Spring droughts are not unusual in Europe, but this year's are especially problematic as wheat prices were already sky-high and global stocks down following the droughts in Russia and Ukraine last year.
"Everyone is anxious to see a good harvest to avoid another price spike," said Ignacio Pérez Domínguez at the OECD. Prices had been recovering more slowly than expected from last year's price shocks even before the new scare. "A few months ago, prices were expected to fall below $300 a tonne for wheat by the summer, but now wheat prices are expected to continue to be around $300 or higher over the summer."
Even if food-grade wheat steals the limelight this summer, feed wheat isn't off the hook. BOCM Pauls, the UK's biggest animal feed supplier, said feed wheat prices had risen by 10% over the past few days as the market became jittery about the lack of rain, and farmers now faced further price increases in August and September, it predicted.
Source: http://www.thegrocer.co.uk/articles.aspx?page=articles&ID=218183
Wheat crop could be lowest yield since 1996
MANHATTAN – Two recently completed tours of the Kansas wheat crop confirm what farmers have suspected for some time: the 2011 crop could be one of the worst in many years.
Earlier this month, more than 70 participants of the Wheat Quality Council’s Hard Wheat Tour pegged the Kansas crop to total 256.7 million bushels, averaging about 37 bushels per acre. That is well shy of last year’s 334 million bushel estimate, despite the fact that farmers planted 800,000 more acres of wheat last fall.
On May 11, Kansas Agriculture Statistics released its own forecast of the 2011 wheat crop. It estimates farmers will grow 261.8 million bushels, down 27 percent from last year and the lowest production since 1996. The KAS predicts farmers will harvest 7.7 million acres, down 300,000 acres from last year and the smallest area harvested since 1957. The agency forecasts an average yield of 34 bushels per acre, down 11 bushels from last year and the lowest yield since 2007.
Dean Stoskopf, a Hoisington farmer on his 10th Hard Wheat Tour, says this year’s crop is the most difficult to estimate in the last five years. “With ideal weather, the crop could increase dramatically,” he says. “However, if dryness persists, the crop could decrease significantly, too.”
Kansas Wheat Chief Executive Officer Justin Gilpin, who participated in the Wheat Quality Council tour, said this year’s tour is notable because of dramatic differences of crop yield potential within the state. He says areas of central, north central and eastern Kansas seem to be faring the best at this point; southwest and west central Kansas farmers are facing difficult harvest prospects.
“I anticipate farmers may abandon as much as 50 percent of the dryland wheat in extreme southwest Kansas,” Gilpin says. “Statewide, I expect a 20 percent abandonment rate.”
David Schemm, president of the Kansas Association of Wheat Growers from Sharon Springs, expects to abandon nearly 40 percent of his wheat crop due to drought. Insurance adjusters have estimated the yield in those acres at two to three bushels per acre.
A below-normal Kansas wheat crop exacerbates similar weather difficulties in key wheat growing regions throughout the world.
“Dryness in the wheat crop in France and Germany is being watched closely by grain traders,” Gilpin said.
However, Russia’s wheat region - which last year suffered through one of its worst dry spells in decades - appears to have recovered.
“Russian wheat prospects are expected to improve, and it appears as if the Russian wheat export ban may go away in August,” he said.
The USDA released its estimate for the entire U.S. winter wheat crop on May 11. It is forecast at 1.42 billion bushels from 32 million acres, down 4 percent from 2010. The yield forecast is 44.5 bushels per acre, down 2.3 bushels from last year.
Tuesday, 17 May 2011
U.S. Wheat Harvest May Be Worse Than Forecast
Wheat crops in the U.S. Great Plains are showing signs that production may plunge even more than the government forecast last week as hot weather and a lack of rain erode plant quality and force farmers to harvest early.
As of May 15, U.S. winter-wheat was in the worst condition since 1996, with 44 percent of fields rated poor or very poor by the government. The National Weather Service estimates rainfall in the past two months was less than half of normal in much of Texas, Oklahoma and Kansas, where insurance adjuster David Reed said he’s had 300 farmer claims for drought damage in his area this season, already 10 times more than last year.
“I went out to look at fields, and it looked like the tips of the heads were burnt” after temperatures last week topped 100 degrees Fahrenheit (38 degrees Celsius), said Reed, an area claims supervisor in Stockton, Kansas, for Rural Community Insurance Services, a unit of Wells Fargo & Co. “It’s kind of scary. I would think that the abandonment numbers probably are going to be fairly high.”
After a Russian drought led to a drop in global output in 2010, the prospect of smaller crops in the U.S., the world’s largest exporter, has sent wheat futures up 56 percent in the past year. Goldman Sachs Group Inc. on May 11 raised its price forecast, citing “persistent adverse weather” in many growing areas. Dry spells in Europe and excessive rain in the northern U.S. and Canada also fueled prices, boosting costs for food makers including General Mills Inc. (GIS)and Panera Bread Co.
Declining Output
The U.S. Department of Agriculture forecast on May 11 that hard, red winter-wheat output will drop 25 percent to 762 million bushels, the smallest since 2006. Mark McMinimy, a Washington-based agribusiness analyst with MF Global, said the USDA will likely cut that estimate by 4.9 percent to 725 million because of the dry spell. Hard, red winter wheat, the most common U.S. variety, is grown primarily in the Plains and is used to make bread.
Further downgrades to Great Plains supplies would be “supportive” to futures, especially if planting delays are prolonged in North Dakota and Canada, McMinimy said. Wheat futures for July delivery closed yesterday at $7.365 on the Chicago Board of Trade. Prices reached a two-year high of $9.1675 on Feb. 14.
“It’s getting to the point where, across a large section of the wheat belt, it’s too late for rain to do any good,” McMinimy said. “Crop conditions continue to decline. I don’t think it would be too surprising to see production figures decline again.”
Last week, Goldman Sachs raised its three-month wheat forecast to $8 from $7.75, while the six-month and 12-month forecasts were increased to $8.35 from $7.50.
Dry weather already is forcing farmers to harvest two weeks ahead of normal in Texas and Oklahoma, according to Stillwater, Oklahoma-based wheat marketer Plains Grains Inc.
Reduced Output
Kansas, Texas and Oklahoma produced 608.4 million bushels of wheat last year, or 28 percent of the total U.S. supply, according to the USDA. Those states are the biggest growers of the hard, red winter variety. This year, the USDA expects production to drop 63 percent in Texas, 38 percent in Oklahoma and 27 percent in Kansas, compared with 2010.
About 8 percent of crops in Texas had been collected as of May 13, and harvest began last week in Oklahoma, said Mark Hodges, the executive director of Plains Grains, a nonprofit group that takes wheat samples from elevators to determine the quality of the U.S. crop.
The early harvest “is a very strong indicator that the crop was under severe stress,” Hodges said. “Since we’re two weeks ahead of normal, that tells you immediately that we’re going to have less-than-average yields.”
Kansas Decline
Kansas, the biggest winter-wheat grower, may produce 261.8 million bushels this year, the least since 1996, the USDA said. The Wheat Quality Council, a Pierre, South Dakota-based trade group, estimated Kansas production at 256.7 million, based on a survey of 55 analysts following a three-day tour of fields.
The USDA’s “wheat report is pretty backward looking at this point,” said Mike Zuzolo, the president of Global Commodity Analytics & Consulting in Lafayette, Indiana. “The USDA is going to have to square up some issues with the European wheat crop and the U.S. wheat crop. It doesn’t seem like, to me, that they factored in enough supply reductions.”
About 52 percent of the hard, red winter-wheat growing area from South Dakota to Texas received less than half of the normal amount of rainfall in the past 30 days, said Mike Tannura, the president of T-Storm Weather in Chicago. Areas of Nebraska and Kansas may get up to 1.5 inches (3.8 centimeters) of rain from storms beginning May 19, while southwest Kansas, Texas and Oklahoma will be “mostly dry over the next week,” he said.
Rain Too Late
“You can begin harvesting wheat at the end of May in the southern Plains, so even if you get an inch of rain now, it’s way too late,” Tannura said. “They needed it weeks or months ago.”
The USDA estimates that U.S. wheat exports in the year ended May 31 will be 45 percent higher than a year earlier. If reduced grain supplies send prices higher, demand from food processors and livestock feeders will likely slow, said Diana Klemme, a director at Grain Service Corp., a consulting company and brokerage in Atlanta.
“For hard wheat, we will not be able to have the same pace of consumption we had this year, because we would have zero left,” Klemme said. “Wheat feeding will have to dial back, because the wheat just isn’t there.”
French Wheat Crop to Slide Below 35 Million Tons, Adviser Says
France’s soft-wheat harvest will drop below 35 million metric tons, the smallest crop in at least four years, as a drought in the country devastates yields, farm adviser Offre et Demande Agricole said.
Production will drop below last year’s 35.6 million tons, even as farmers planted the most soft wheat in three years, Alexandre Marie, a wheat analyst at Bourges, France-based Offre et Demande, said via telephone late yesterday.
“It’s already clear we have irreversible damage due to the drought,” Marie said. “We’ll have a catastrophe.”
Soils in France’s northern half, which grows 80 percent of the country’s wheat, were the driest in half a century at the end of April, the Environment Ministry said yesterday. France’s wheat crop, the European Union’s largest, is in a “danger zone” because of the drought, the national crops office said May 11.
Soft-wheat planting in France for harvesting this year climbed 2 percent to 5.02 million hectares (12.4 million acres), crops office FranceAgriMer estimates.
A lack of rain since the start of the year means nitrogen fertilizer hasn’t been washed into the soil, resulting in “very bad” absorption of the nutrient by wheat plants, according to Marie. French deliveries of nitrogen fertilizer from July to February rose 18 percent to 1.61 million tons, France’s fertilizer-industry association said last week.
Dry April
France just had its second-hottest April since 1900 and one of the driest since 1953, according to the Agriculture Ministry. The heat and lack of rain mean wheat crops are now about three weeks ahead of normal development, Marie said.
“What is certain is that there are people who will receive harvest insurance because of the drought,” the analyst said.
Marie said some French farmers with mixed production of livestock and grains have started cutting their immature grain for use as silage, green fodder that’s stored in silos or stacks foranimal feed.
French livestock farmers face a shortage of forage for their animals as drought threatens to reduce production of straw and grass, farm lobby FNSEA said last week.
“There are already livestock breeders that will use wheat as silage,” Marie said. “The farmers are saying, ‘I won’t go to the end because I could lose my wheat crop, when I need to feed my livestock now.’”
Russian Milling Wheat Led Price Gains Last Week, SovEcon Says
Russian fourth-grade milling wheat rose 1.4 percent to 5,550 rubles ($197) a metric ton last week, leading price increases among grains, researcher SovEcon said.
Milling rye gained 0.8 percent to 6,300 rubles a ton and third-grade milling wheat climbed 0.4 percent to 5,675 rubles a ton, SovEcon said on its website. Feed wheat was unchanged and offered at 5,100 rubles a ton. Feed barley declined 0.4 percent to 6,150 rubles a ton and sunflowers fell 1.3 percent to 17,600 rubles a ton, the Moscow-based researcher said.
Bulgaria Estimates 2011 Wheat Harvest at 3.9 Million Tons
Bulgaria expects to harvest 3.9 million metric tons of wheat this year, as the area sown with the crop is less than in 2010.
Bulgarian farmers have sown 2.58 million acres (1.04 million hectares) with wheat, down from 2.78 million acres last year, when the harvest was 4 million tons, the Agriculture Ministry said in a statement yesterday.
The country has sown 445,000 acres with barley, compared with 625,000 acres last year, when the crop was 830,000 tons, the ministry said.
Sugar Rises on Speculation Surplus May Be Reduced; Cocoa Falls
Sugar rose for a fourth day in New York, the longest streak in more than three months, on speculation plunging output in top producer Brazil may help reduce the world surplus. Cocoa fell.
Output in Brazil’s main producing region fell 69 percent to 795,000 metric tons between the start of the harvest in mid- March and the end of April, industry group Unica said May 12. Global sugar production will exceed demand by 779,000 tons for the 2010-11 season that started in October, the International Sugar Organization estimated the next day.
“The tight spot supply situation in Brazil is acting as a counterweight to the expected onslaught of world sugar supplies in the second half of the year,” Luis Rangel, vice president of commodity derivatives at ICAP Futures LLC in Jersey City, New Jersey, wrote in a report e-mailed today.
Raw sugar for July delivery rose 0.12 cent, or 0.6 percent, to 21.89 cents a pound by 7:56 a.m. on ICE Futures U.S. in New York. That is the fourth consecutive gain for that contract, the longest gain since Feb. 2. White, or refined, sugar for August delivery climbed $6.90, or 1.1 percent, to $613.90 a ton on NYSE Liffe in London.
Demand has increased as buyers seek to rebuild stocks, Heloisa Lee Burnquist, an analyst at Cepea, a University of Sao Paulo research group, said in a note yesterday. “An apparent increase in the demand prevented prices from dropping,” she said.
Rising Production
Sugar production is expected to “increase rapidly as we move through May, which should see increased domestic and export availability,” broker C. Czarnikow Sugar Futures Ltd. said in a report e-mailed on May 13.
Mills have stepped up sugar production as the harvest advances, reducing prices for crystal sugar in the Brazilian domestic market, according to Burnquist. Still, the price of crystal sugar within Brazil remains 18 percent more profitable than exports, she wrote in the note.
Cocoa for July delivery slipped $7 to $2,999 a ton on ICE. Cocoa for July delivery fell 14 pounds, or 0.8 percent, to 1,855 pounds ($3,015) a ton on NYSE Liffe.
Arabica coffee for July delivery was little changed at $2.6395 a pound in New York. Robusta coffee for July delivery dropped $6, or 0.2 percent, to $2,467 a ton in London.
