World Wheat-Surplus Estimate Raised on Eastern Europe Output

(Bloomberg) – World wheat inventories will be 0.1 percent larger than forecast a month ago as producers in the former Soviet Union and Eastern Europe boost output, while U.S. supplies may decline, a government report showed.

Global stockpiles will total 202.6 million metric tons by the end of May, up from 202.37 million forecast in October, the U.S. Department of Agriculture said today. The average estimate of 14 analysts in a Bloomberg survey was 202 million. The USDA said domestic supplies will be 828 million bushels, down from 837 million estimated in October. Analysts expected 819 million.

The report was “fairly neutral all the way around,” Jason Britt, the president of brokerage Central States Commodities Inc. in Kansas City, Missouri, said in a telephone interview. Smaller domestic inventories were “a little bit friendly,” while prices still came under pressure because of rising world output and global economic concerns, he said.

Wheat futures for December delivery fell 2.1 percent to settle at $6.43 a bushel at 1:15 p.m. on the Chicago Board of Trade, after climbing 2.9 percent yesterday. The most-active contract is down 19 percent this year.

A group of 12 countries that were part of the former Soviet Union may produce 112.45 million tons this year, or 1.8 percent more than estimated last month, the USDA said today. Russia, once the world’s second-largest exporter, lifted a ban on shipments in July, and Ukraine eased exports restrictions, as production in both countries rebounded from last year’s drought.

U.S. Supply

The U.S., the world’s largest seller of wheat, is “definitely going to see a depressed export campaign for the remainder of the year,” as competing shippers boost output, Terry Reilly, an analyst at Citigroup Global Markets Inc. in Chicago, said in an interview before the report.

U.S. production in the year that began June 1 will total 1.999 billion bushels, down from 2.008 billion estimated in October, the USDA said. Spring wheat output may reach 455.2 million bushels, while the durum harvest may be 50.5 million.

The USDA revised its production estimate after it resurveyed some producers in the northern states where wet weather left crops unharvested at the time of the previous review. Excessive rains delayed planting and slowed crop development this year.

To contact the reporter on this story: Whitney McFerron in Chicago at wmcferron1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.