Wheat Outlook Dismal on Supplies

Wheat Inventory High

Stockpiles of wheat are leaving the industry reeling even more, as the largest inventory in over 20 years is emerging from the heavy wheat harvest.

Projections are there will be close to 1 billion bushels of wheat in the warehouses and bins when the harvest comes in; 20 million bushels beyond the estimates of the USDA.

The already low prices will drop even lower, as farmers continue to plant the grain based on prices from several years ago, rather than prevailing market conditions.

This is expected to finally correct the over-planting of wheat as farmers look to other areas to generate profits, as wheat hasn't been doing it for a few years.

The reasons for wheat being so abundant is lower exports as many countries are planting wheat and getting good results, and American consumers aren't consuming as much, driving domestic demand down. That and just too much wheat being planted is the issue driving the huge wheat inventory.

Wheat Inventory High

Wheat Rises as Australian Harvest Delayed by Drought

Wheat rose today on news in a statement from the Australian Bureau of Agriculture and Resource Economics which said drought conditions could significantly delay the Australian wheat harvest, and also could have a detrimental effect on the quality of the grain produced.

This seems like it's only a upward blip in the road, as there's so much wheat available for export this year, any news will cause a slight upward movement for wheat.

The December crop report from the Australian Bureau of Agriculture and Resource Economics shows wheat exports for the country are expected to reach 12.3 million tons, a significant increase from the 7.5 million tons exported last year.

With Australia attempting to compete in the premium wheat market of Taiwan, this probably couldn't have come at a worse time.

At 10:30 a.m. today on the Chicago Board of Trade, wheat futures for March delivery rose 2.5 pecent to $4.93 a bushel.

Australia Aiming to Compete in the Lucrative Taiwanese Premium Wheat Category

With record-setting wheat production this year, prices have been plummeting, putting pressure on the U.S., the world's largest exporter.

If that's not enough, the high-end wheat market is now receiving potentially more competition, as Taiwanese wheat importers are visiting Australia to get a first-hand look at how they produce, handle and transport their wheat.

AgFarm, an Australian grain trading specialist, is hosting the event, where seven flour millers from Taiwan observe the practices.

In a trial run last year, the Taiwanese flour mills imported 8,000 metric tons of high protein wheat.

Taiwan is known for its fickleness concerning quality standards of wheat, and the exercise is for the purpose of learning how Australian wheat producers can meet those rigid standards.

The reward is a premium price paid for meeting their specifications.

Historically, the U.S. has been the dominating force in this premium market, and it could signal a significant new competition if Taiwan is convinced Australia can consistently deliver the high quality, high protein wheats.

At this time there is no commitment from the Taiwanese, but after the tour AgFarm is hoping to secure orders for the wheat.

Wheat Drops to Lowest Level in Three Weeks

The price of wheat in the U.S. fell to its lowest level in three weeks as traders aren't optimistic about the comming Department of Agriculture report on export sales data.

Expectations are the global crop will dampen the demand for American wheat, as production has increased in emerging countries.

Wheat that was inspected for export from the U.S. came in at about 13.2 million bushels for the week ending October 30, a drop of about 40 percent from the week ending October 23.

India is especially making an impact on exports this year, as it announced it will probably make about 2 million tons available on the export market. India could end up with a record wheat crop this year of 78.5 million tons.

Worldwide wheat production through June 30 is projected to leap by 12 percent to a record 683 million metric tons. That's the equivalent of about 25.1 billion bushels.

Wheat for December delivery dropped to $5.372 a bushel today on the Chicago Board of Trade.

Wheat Prices in European Union Fall on Recession Fears

Wheat prices in the European Union fell today, largely tracking the global markets and U.S. grain futures.

The emotional boost from the central banks' PR machine around the world is largely over, and even if bankruptcy on a global scale has been avoided, the fundamentals underlying the problem remain, and most commodities, including wheat, continue to feel the downward pressure as a result.

In Europe, November milling wheat futures dropped by 4 euros to 143.00 euros a ton, as of 1500 GMT on the Euronext.

Wheat futures in London fell as well, as the strength of the British pound against the U.S. dollar and euro is slowing down exports from the country. Wheat exports from Britain are down a huge 42 percent from last year, as competition, along with the stronger sterling hammers the export market.

Italy also experienced a significant drop in wheat prices, as they have fallen between 5-10 euros from last week's close.

There is an abundance of wheat, and that surplus, along with weaker demand, is pushing down prices.

Australia Should Still have Bumper Wheat Crop in Spite of Drought

Even though some areas in Australia may experience a drop in wheat production because of an ongoing drought, overall the country is expected to enjoy a huge increase in exports in contrast to previous years.

The USDA projects about a 25 million ton harvest in 2008-09, in comparison to 13 million tons in 2007. That amount (25 million tons) is expected to be revised down in the next USDA report. Even so, Russell Phillips, general manager, Australian department of agriculture, fisheries and forestry, said he thinks the country could end up exporting about 16 million tons this year.

The new Australian export regulator, Wheat Exports Australia (WEA), has accredited five companies for exports so far, as Cargill Australia Ltd, Elders Toepfer Grain Pty Ltd, Goodman Fielder Consumer Foods Pty Ltd, Grain Pool Pty Ltd and OzEpulse Pty Ltd made the first cut.

Former export regulator Australian Wheat Board (AWB) was replaced after a scandal caused them to be replaced. Still, they have applied to the WEA for accreditation this week and are waiting for a reply. The AWB was cited for taking illicit payments from the former Iraqi government of Saddam Hussein.

Globally, wheat is expected to reach record levels of 670.8 million tons by May 31, 2009, up by 9.9 percent over last year. Stockpiles could surge by 18 percent to 136.2 million tons, according to the USDA.

Nations Continue to buy Domestic Wheat to Combat Inflation, High Food Prices

Nations continue to acquire domestic wheat from their farmers in an effort to boost reserves as food prices wreak havoc across the world.

India has bought 7 percent more wheat than usual from its domestic farmers, in an effort to combat inflation, which has reached a three-year high in the country. A number of state firms bought a combined 3.1 million metric tons of wheat from farmers since April 1. Eventually the figure may reach as high as 15 million tons, according to Food Corp. Chairman Alok Sinha.

Inflation for India has climbed to 7.14 percent over the same week a year ago.

Kazakhstan also announced today that they have instituted a four-month ban on wheat exports, also in an attempt to curb inflation and social unrest. While that would help Kazakhstan, it could hurt other nations in the region which have traditionally relied on Kazakh wheat.

U.S. Wheat Closes Mixed - Weather, Nearby Markets Key Factors

U.S. wheat borrowed from its commodity neighbors corn and soybeans on the CBOT, helping it to gains, even though it was the "the weakest link in there, of all the grains," said Larry Glenn, owner of Glenn Commodities. "It's been following."

On the Chicago Board of Trade, May wheat remained at $9.34 a bushel. Minneapolis Grain Exchange May wheat ended at $13.20, a 5 cent increase, and May Wheat on the Kansas City Board of Trade settled 1 cent higher.

Continued forecasts of rain for the U.S. plains dampened expectations for a large, new crop, causing wheat to pull back from its borrowed surge earlier in the day.

According to the U.S. Department of Agriculture, expected supply and demand continues on course U.S wheat carryout, and remains at 242 million bushels; the same as in March.

Some analysts said the data from the USDA had no significant impact on the wheat markets, as weather, along with nearby markets are the what's affecting the wheat market more than anything else.

Another key factor is the expected huge global harvest this year, which could also hinder prices. Others think importers may keep old wheat inventory minimized, while waiting for the new crop to enter the market.