Some agricultural commodities were feeling downside pressure recently and wheat was among the losers. The Wheat Outlook, released by the US Department of Agriculture, suggested that the grain will continue to remain in a bearish trading environment.
The USDA estimated that both US supply and demand was unchanged in February from a month ago. On an annual basis, output increased by 168 million bushels, while domestic consumption grew 218 million bushels. Such estimates are not that bad for wheat prices. At the same time, US exports are predicted to fall 25 million bushels in the 2012/13 period from the 2011/12 season. Inventories are expected to grow by the same amount to 716 million bushels in March from February as imports increased while exports were falling.
The global estimates were much more bearish. World production is expected to increase 1.9 million tons in March to 655.5 million, driven by growth of output from India, the European Union and Nepal. At the same time, the expected increase for global demand is just 0.3 million tons. The global stocks are projected to go up 1.5 million tons to 178.2 million this month, mainly due to increase of US reserves, caused by falling exports.
The signs that supply will exceed demand will likely be negative for wheat in the near term. The agency revised its average estimate for the price down by $0.1. Still, the predicted price range of $7.65 to $7.95 per bushel in 2012/13 is higher than the last year’s record of $7.24 per bushel and higher than the current price.
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