Wheat Falls as Report Signals Waning Demand for U.S. Grain
By Tony C. Dreibus
March 13 (Bloomberg) – Wheat fell the most this month after the U.S. said export sales plunged 51 percent last week, reviving speculation that importers have enough on hand until the next harvest begins in June.
Sales dropped to 210,100 metric tons in the week ended March 6 from 431,900 tons, the U.S. Department of Agriculture said. Citigroup Global Markets in Chicago had forecast sales of 450,000 to 650,000 tons. Wheat has more than doubled in the past year and reached a record last month as global inventories fell.
Everybody spent the winter getting themselves covered and trying to figure out how to make it to the new crop,'' said Tomm Pfitzenmaier, a partner at Summit Commodity Brokerage in Des Moines, Iowa. Unless the new crop is a disaster, there’s going to be wheat all over the world.’’
Wheat futures for May delivery fell 38.5 cents, or 3 percent, to $12.44 a bushel on the Chicago Board of Trade, the biggest drop for a most-active contract since Feb. 29. The decline halted a three-day rally in which wheat gained 16 percent.
The price reached a record $13.495 on Feb. 27, as demand increased and adverse weather curbed global production. Drought hurt plants in Australia and Canada and excessive precipitation curbed yields in the U.S., the largest exporter of the grain in the year ending May 31. The USDA says Canada will be the second- biggest shipper followed by Russia, Argentina, Kazakhstan and Australia.
U.S., World Supplies
U.S. inventories will fall to 242 million bushels, or 6.6 million metric tons, by the end of the marketing year, down from 456 million bushels a year earlier, the government said earlier this week.
Global stockpiles are expected to drop to 110.4 million tons, the lowest since 1978, and down 12 percent from the end of the previous marketing year.
As production fell, buyers scrambled to purchase wheat to ensure they would have enough to slow rising food prices. U.S. advance sales from June 1 to March 6 are up 51 percent from the same period a year earlier, the USDA said today in a report. Many importers have filled their needs and may not need to purchase more until after June 1, when supplies from the U.S. winter-wheat crop become available, Pfitzenmaier said.
Jordan said it bought 20 percent more wheat in 2007 than the prior year, replenishing its stockpiles so the country would have enough to meet demand for six months. The Middle Eastern nation bought about 900,400 tons of the grain last year compared with 750,000 the prior year, Jordan’s Trade and Industry Ministry said.
As futures climbed, some farmers planted more to capitalize on higher prices. The International Grains Council expects farmers around the world to increase seeding by about 4 percent in the year ending June 30. U.S. farmers planted 3.6 percent more winter wheat from September through November, the USDA said on Jan. 11.
Wheat was the fourth-biggest U.S. crop in 2007, valued at $13.7 billion, behind corn, soybeans and hay, government data show.
To contact the reporter on this story: Tony C. Dreibus in Chicago at Tdreibus@bloomberg.net.