By ANN HINCH
Assistant Editor

WASHINGTON, D.C. — Despite higher projected feed and residual use for wheat in 2008-09, thanks to high corn prices, the USDA is reporting higher expectations for June stocks.

In last week’s World Agricultural Supply and Demand Estimates report, the USDA stated ending stocks are projected at 537 million bushels, 50 million more than what it expected as of June. The desirability of wheat in the global market is reflected in unchanged projected average farm prices, however, between $6.75-$8.25 per bushel.

Jonah Ford, senior commodities analyst with Greenrush Capital Manage-ment in Oregon, said wheat is up nearly 4 bushels/acre over last year’s production; durum alone is projected up 25 percent over 2007, and there’s a 6 percent increase in spring wheat planting. He said the lowest price he predicts for wheat through the end of the year is $7.50 – but that’s still low enough that it could stimulate more substitution of wheat as livestock feed, in place of some corn and soybeans.

“The big change … appears to be the 100 million (bushels) reduction in corn (for feed and residual usage in 2007-08), and the scale-back of ending stocks in soybeans,” Ford said of the Supply and Demand report.

The USDA forecast higher ending stocks for corn, due to reductions in anticipated use for food, seed and industrial use – it put this number at 833 million bushels, or 160 million over last month’s report.

Ethanol corn use for 2007-08 was lowered 50 million bushels on “reported delays in plant startups and construction” and “lower expected plant capacity utilization.”

“It sure is looking like the trend,” Ford said of decreased corn use for ethanol, citing 16 U.S. ethanol producers “on the verge” of bankruptcy. “The economics are a disaster in several subsections of ethanol.” He speculated this is because of unprecedented high corn prices and poor hedging on the part of ethanol plants.

He also said the “next shoe to drop” could be a repeal or reduction in federal mandates for corn-based ethanol production and/or getting rid of federal subsidies for same.

Neither action is a foregone conclusion, or even imminent, but Ford said the possibility will be “definitely hanging over the market, the next six to nine months.” He also speculated this may end up being easier for the USDA than turning loose of Conservation Reserve Program (CRP) acres.

Lower projected U.S. soybean ending stocks – and yield, thanks to excessive moisture through the Midwest – showed expectations of 140 million bushels for 2008-09, down 35 million from last month (and only 15 million more than 2007-08 ending stocks).

The average seasonal projected soybean price range is up $1 on each end over June, at $12-$13.50 per bushel. Ford thinks soybean futures could climb as high as $18-$20 per bushel, which may force rationing.

“I think we’re behind the 8-ball in terms of global stocks,” he added, reiterating the refrain of grain market experts for the past few years.