Global glut of wheat seen pressuring prices

A global glut of wheat will weigh on wheat and corn prices while tighter stocks of soybeans should provide life to the soybean market, a CME Group panel of grains analysts said Nov. 10.

“There is plenty of wheat around. The world estimate is more interesting and it shows ample supplies,” said Jack Scoville, analyst for The Price Futures Group.

The U. S. Department of Agriculture (USDA) early on Nov. 10 released its November crop production report. Other than a big global boost to wheat output, the report held few surprises.

USDA said global 2008-09 wheat production would total a record 682.4 million tonnes, up 2.2 million from the estimate in October. Increases in Europe and Russia more than offset reductions for Argentina, Australia and China.

“There is too much wheat around so wheat prices will remain under pressure” and the big supply of feed wheat will weigh on corn prices, too, said Gavin Maguire, analyst for EHedger.

Maguire and Scoville said USDA’s forecast for 2008 U. S. corn production at 12.02 billion bushels and soy at 2.921 billion were about as expected, since the government had corrected its October report on Oct. 28.

USDA, in its October revision, pegged U. S. corn production at 12.033 billion bushels and soy at 2.938 billion.

In its November report on Nov. 10, USDA forecast the ending stocks or supply of U. S. corn for the 2008-09 marketing year at 1.124 billion bushels, up from 1.088 billion forecast in October, and soy ending stocks at 205 million, unchanged from October.

The 2008-09 marketing year for corn and soy will end Aug. 31, 2009.

“I would agree with the corn stocks because corn exports will be down” due to the big supply of feed wheat but “we’re a bit more bullish on soy than the USDA numbers suggest,” Maguire said.

Maguire and Scoville said the good demand for soybeans would keep a floor under the soybean market while corn and wheat would struggle to follow soybeans higher.

They also said outside markets such as the stock market, crude oil and the dollar would continue to play a big role in the direction of wheat, corn and soybean prices.

“We feel we’re stuck in a range and we’ll trade in that range for a while with soybeans near the top of the range and corn near the bottom,” Maguire said.

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