US wheat oversupply to get even worse

By Joanna Newman

WHEAT prices have plummeted in the wake of a recent report pointing to worsening oversupply because of slow exports.

The US Department of Agriculture now expects the USA to be carrying 980 million bushels of stocks at the end of the 1999 season, up sharply from a previous forecast of 900 million and well ahead of last years carryover of 722 million bushels. Many analysts privately peg the likely 1999 carryover at over 1 billion bushels.

Faced with this glut, wheat prices have dropped sharply. The Chicago March futures contract closed on Tuesday (16 February) at 252.25¢/bushel, down from 264.5¢ a week earlier.

At these levels, down roughly 20% from November, wheat is becoming competitive as a substitute animal feed grain for maize.

However, analysts warn that it will take more than extra feed to redress the supply/demand imbalance in wheat, especially as Americas herd of feedlot cattle is expected to shrink in coming months.

Meanwhile an excellent US winter wheat crop will be ready for harvest in three months to add to the supply.

On the export front, producers were cheered by news that Egypt bought 300,000 tonnes of US wheat last weekend.