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Wheat fights off debt crisis -Louise Gartner

08/15/2011 @ 7:21am

Despite the carnage happening in the financial markets this week, grains managed to hold their own. Wheat in particular held up well despite the aggressive selling from the Black Sea and world production that appears to be better than expected. 

Corn continues to be a major supporter for wheat as we see wheat becoming a common feed component; and price rises in corn quickly translate into wheat rallies as well.

USDA released the August supply/demand report on Thursday, with a bullish surprise for beans and corn. The re-surveyed acreage results were included in this report. Spring wheat was lowered by 950,000 acres across Montana and North Dakota, taking total wheat acreage down 1.2 million. Hard red spring wheat production was projected to be down 95 million bushels from last year at 475 million, a drop of 17%.

Durum production was projected at just 57 million, down 10% from last month, and down a whopping 47% from last year. Hard red winter wheat production was pegged at 794 million bushels, down 22% from last year. Soft red winter wheat was 452 million, up 90% from last year. White wheat was up about 8% from last year at 251 million bushels. 

World production numbers were impressive to say the least with total production up 10 MMT from last month at 672 MMT; ending stocks were up almost 7 MMT at 188 MMT. Europe’s late rains saved their season and added another 1.3 MMT to their total, taking it to 133 MMT, down only 1.5% from last year despite drought in the key regions of northern France and Germany and southern England. Germany this week reported that their wheat will grade about 82% milling quality, down a bit from last month’s estimate but certainly better than the dismal 43% from last year’s rain plagued crop.

China pulled a rabbit out of hat this year with wheat production actually higher than last year by 2 MMT at a record 117 MMT; and that was after drought across their major wheat producing region early this spring. USDA left Chinese wheat imports unchanged at only 1 MMT, but that number will likely be much higher as they’ve been importing large quantities of feed wheat. 

India also had a stellar season with a new record production of 86 MMT, a remarkable 5th year in a row of record wheat crops. Their ending stocks are roughly double their target and they’ve removed some export restrictions, but it’s unlikely they will sell much as their domestic prices are much higher than world prices. 

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