USDA hit U.S. wheat with a major surprise in its Oct. 9 World Agricultural Supply and Demand Estimates, increasing projected U.S. ending stocks for wheat to 864 million bushels. That was a 121 million-bushel increase over the previous month.
“Wheat ending stocks haven’t been that high since 2001,” said Joe Victor, vice president, Allendale, speaking at a Minneapolis Grain Exchange press briefing on the USDA report.
“More concerning is the stocks-to-use ratio,” Victor said. “Last month, we were at 33.5 percent. According to this report, we are now at 40.6 percent. You’d have to go back to 1987 to find higher stocks-to-use at 47 percent.”
Global wheat usage does temper the U.S. numbers somewhat, Victor noted. “As long as wheat is being used globally, we can find some support (for prices). The stocks-to-use ratio globally is now at 24.15 percent. So there is some usage out there, but it’s just not coming to the United States.”
USDA dropped projected domestic feed use for wheat by 45 million bushels and U.S. exports by 15 million bushels. “We were not surprised by the drop in exports because of the poor start we’ve had in exports. But when you see the end stocks increase on hard winter, hard spring and soft red, along with the reduced exports and feed use, wheat is the most abysmal out of the three major crops, even when you add in the reduced harvested acres.”
USDA dropped its estimate of the season average farm price on wheat from $5.10 a bushel to $4.85 a bushel. USDA also adjusted harvested acres for wheat, dropping them by 300,000 acres.
Victor says early returns on harvests indicate stronger than anticipated yields for both corn and soybeans. “However, as much at 100 million bushels of corn could be lost due to a frost/freeze.”
Corn production, estimated by USDA at 13 billion bushels, is near the record set in 2007 of 13.38 billion bushels. USDA adjusted harvested acres for corn, dropping them by 700,000 acres. The corn stocks-to-use ratio is projected at 12.8 percent, versus 12.6 percent last month. Yield, projected at 164.2 bushels, would be a new record, a significant increase over the previous high of 160.3 bushels in 2004.
USDA is neutral on their season average farm price for corn, at $3.35. “Globally, we’re looking at a 15 percent stocks-to-use ratio versus 15.7 percent last month. USDA increased feed use for corn, and there is some optimism in the poultry market.”
Ethanol use was unchanged from last month. “We’re going to need 4.2 billion to 4.25 billion bushels of corn to meet the EPA mandate for ethanol production this calendar year. Profitability has returned to the sector,” Victor said.