USDA Increases Estimate Of US Wheat Production

USDA did slightly increase its estimate of U.S. wheat production from 1.903 bb in June to 1.921 bb in July and pegged HRW wheat production at 804 million bushels (mb), up from 662 mb a year ago. However, USDA's estimate of U.S. ending wheat stocks dropped from 1.072 bb to a lower-than-expected 1.000 bb, thanks to an increase in old-crop feed demand and a 50 mb increase in the new-crop export estimate. It is fair to be suspicious of an increase in the export estimate as the new season is still young. However, with U.S. wheat shipments currently up 49% from a year ago, a 50 mb increase doesn't seem like much of a stretch. Yes, 1.0 bb of U.S. wheat surplus is still a lot of wheat, but the larger share of Thursday's bullish surprise was in USDA's world estimates. Glancing down the column of wheat crop estimates, we quickly see small or modest reductions for Australia, Canada, Europe, Russia and Ukraine -- all the major exporters other than the U.S. USDA's estimate of world wheat production fell from 780.83 million metric tons (28.69 bb) to 771.46 mmt (28.35 bb), a 344 mb drop in one swoop. Granted the new production estimate is still a record high and represents almost a 6% increase from a year ago. Likewise, USDA's lower ending world wheat stocks estimate of 286.46 mmt (10.53 bb) also remains a record high, but Thursday's trade revealed a lightening of wheat's bearish mood. For one day, wheat's frown was turned upside down and short sellers were caught off guard as September KC wheat closed up 20 cents and Chicago was up 16 3/4 cents. Where wheat goes from here remains dependent on weather, and the overall fundamental outlook for prices remains bearish at this point.