By Joanna Newman
THE US wheat market has slipped 5% this week on news of higher than expected stock levels in the country.
Wheat inventories stored on and off farms on 1 March stood at 1.4 billion bushels, a worrying 24% increase from 1998.
In reaction to the USDA stocks report, the Chicago May futures slid to 279.5 cents/bushel, from 294.0 cents/bushel a week ago.
On the bullish side, farmers intend to plant the smallest spring wheat acreage since 1988.
The USDA report on planting intentions was in line with expectations at 15.4 million acres, a 2% drop from last year.
Nevertheless analysts and producers remain concerned about oversupply. Based on current projections, the US will be burdened with over 1 billion bushels of wheat inventory at the end of the season.
Lack of elevator storage space will create a logistical problem, especially as maize and soya bean stocks are also projected to be high.
Only an increase in domestic wheat usage for animal feed or a dramatic change in export competitiveness can alleviate the glut, analysts warn.
Meanwhile the US winter wheat crop is ripening well, with 70% rated good to excellent.
War in the Balkans has had little impact on US wheat prices to date, although the market is keeping a close eye on any political developments that could hamper US food-aid to Russia.