Wheat
From IntFX
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[edit] Overview
Wheat is a domesticated grass from the Levant that is cultivated worldwide. Globally, wheat is an important human food, its production being second only to maize among the cereal crops; rice ranks third. Wheat grain is a staple food used to make flour for leavened, flat and steamed breads; cookies, cakes, pasta, noodles and couscous; and for fermentation to make beer, alcohol, vodka or biofuel. Wheat is planted to a limited extent as a forage crop for livestock, and the straw can be used as fodder for livestock or as a construction material for roofing thatch.
[edit] Supply/Demand
Global 2007/08 wheat production is raised 0.6 million tons this month with increases forArgentina and FSU-12 more than offsetting a reduction for Afghanistan. Production forArgentina is raised 0.5 million tons based on higher harvested area. FSU-12 output israised 0.9 million tons with increases for Belarus, Kazakhstan, and Ukraine, all based onpost-harvest revisions to yields. Production is lowered 0.6 million tons for Afghanistan.World imports, exports, and consumption are all raised this month. Imports are raised 0.5million tons for Afghanistan on indications of higher flour imports from neighboringcountries. Imports are raised 0.2 million tons for Libya based on strong demand to date. Exports are raised 0.5 million tons each for Kazakhstan and Russia. Higher expectedshipments from Kazakhstan reflect higher production and the strong pace of sales to date. Higher exports from Russia reflect increased export opportunities for flour. World wheatfeeding is raised 0.9 million tons with higher feeding in Canada and FSU-12 more thanoffsetting a reduction for EU-27. Wheat feeding for Canada is raised 1.0 million tons asindicated by recent stocks estimates by Statistics Canada. Wheat feeding for EU-27 islowered 0.2 million tons, but the decline is partly offset by higher expected sorghumimports and feeding.[1]
[edit] Pricing Structure
Wheat prices have gained 20% in just three weeks, returning to highs hit in late October. The rally has been fuelled largely by trade expectations of a drop in 2007/08 U.S. wheat ending stocks. On Tuesday, the U.S. Department of Agriculture (USDA) did not disappoint wheat bulls with its supply/demand report for grains.
The USDA lowered its estimate for 2007-08 U.S. ending stocks by 32 million bushels to 280 million bushels, a 10% drop, which would be the lowest level in 60 years. Inventories in storage will fall 32% from a year ago to 8.49 million tonnes by May 31. U.S. wheat exports are now expected to total 1,175 million bussels, but the U.S. has already sold at least 88% of that figure.[2]
[edit] Production
Northern hemisphere weather problems, including a severe frost in US winter wheat areas and very dry conditions in most of Europe, parts of North Africa and in China, have not yet significantly affected forecast total production. It is now projected at 623m. tons, 1m. less than last month’s forecast, but 32m. tons more than in 2006. The biggest increases compared with last year are in the EU, the CIS, the US, India and Australia.
[edit] Consumption
World wheat consumption is forecast at 622m. tons, unchanged from last month’s initial projection. Half of the 13m. tons increase over this season’s estimate will be in feed use, encouraged by high feed grain prices and likely greater availabilities of wheat, particularly in the EU and the CIS. There will also be significant growth in industrial use as new plants to produce ethanol from wheat are opened in the EU and Canada. With expected total production and use evenly matched, there is little chance of a significant recovery in global stocks during 2007/08. The new projection of the end-year carryover is 117m. tons, 1m. tons down from last month’s, and only 2m. more than this season’s 26-year low. Exporters’ stocks, in particular, are expected to remain tight. No change is made to the world wheat trade forecast of 107m. tons, which is close to the estimate for 2006/07. Compared with this season, increased requirements are expected by Morocco and Iraq, and the EU will likely buy more feed wheat from the Black Sea exporters, but India’s milling wheat imports should be much lower.
[edit] Price forecast
- Goldman Sachs has raised its outlook for Chicago wheat futures by 47 percent to $13.50 a bushel after the U.S. Department of Agriculture cut projected 2007/08 U.S. wheat ending stocks.[5]
- USDA World Ag Outlook Board estimates the prospects for a $5 wheat price in 2007/08 which is further revised at $5.10 right now.That's up about 30 cents from our previous forecast.[6]
[edit] External References
- ↑ http://cottonusa.files.cms-plus.com/economicData/WASEDC-Feb-08.pdf World Agricultural Supplyand Demand Estimates
- ↑ http://images.google.co.in/imgres?imgurl=http://www.resourceinvestor.com/MediaLib/Images/Home/Sections/Softs/wheat.png&imgrefurl=http://www.resourceinvestor.com/pebble.asp%3Frelid%3D38651&h=313&w=515&sz=8&hl=en&start=272&um=1&tbnid=2-LmSaaqnaAHoM:&tbnh=80&tbnw=131&prev=/images%3Fq%3Dwheat%26start%3D260%26ndsp%3D20%26um%3D1%26hl%3Den%26client%3Dfirefox-a%26rls%3Dorg.mozilla:en-US:official%26sa%3DN
- ↑ http://econ.sdstate.edu/Extension/MMACHARTS/S&D_Wheat.pdf
- ↑ http://www.commodities-now.com/content/research/includes/assets/igcapril.pdf
- ↑ http://www.reuters.com/article/fundsFundsNews/idUSSYD3360420080211
- ↑ http://www.abc.net.au/rural/news/content/2007/s1978020.htm
