An analysis of U.S. and World Wheat supply-demand factors and price prospects has been placed up on the KSU AgManager website (http://www.agmanager.info/default.asp).
Following is a summary – with the full analysis-article for Wheat to be found here.
U.S. Wheat Supply-Demand: In its October 11th Crop Production report, the USDA National Agricultural Statistics Service (NASS) projected 2012 U.S. wheat production to be 2.269 billion bushels (bb) based on a combination of lower U.S. planted and higher harvested acreage, and marginally lower U.S. yields (46.3 bu/ac). In its World Agricultural Supply and Demand Estimates (WASDE) report, the USDA lowered its projection of exports by 50 million bushels (mb) to 1.150 bb, but increased its forecast of feed and residual use for the “new crop” 2012/13 marketing year by 95 mb – up to 315 mb – leading to an increase in total projected use of 45 mb up to 2.488 bb. This is the largest amount of U.S. wheat usage since the 2.684 bb in MY 1987/88.
These changes lead to a projected decrease in U.S. ending stocks of 44 mb down to 654 mb, and to a decrease in ending stocks-to-use to 26.3% for “new crop” MY 2012/13. Prices for U.S. wheat are forecast to be record high in the range of $7.65-$8.55 in the current 2012/13 marketing year.
In regards to U.S. wheat classes, projected ending stocks-to-use for U.S. Hard Red Winter wheat of 17.3% for “new crop” MY 2012/13 are less than half of 37.3% a year ago. For U.S. Hard Red Spring wheat, projected ending stocks-to-use of 32.0% for “new crop” MY 2012/13 are marginally lower than 32.3% a year ago. In the case of U.S. Soft Red Winter wheat, projected ending stocks-to-use of 35.6% for “new crop” MY 2012/13 are down from 38.9% a year ago.
World Wheat Markets: Global wheat production is projected to be 653 mmt in “new crop” MY 2012/13, down from 696 mmt in “old crop” MY 2011/12. Although consistent growth has occurred in World wheat usage over the MY 2007/08 – MY 2011/12 period, the USDA lowered its projection of World Wheat usage in “new crop” MY 2012/13 to 682 mmt. The USDA projected World wheat ending stocks in “new crop” MY 2012/13 to be 173 mmt, less than 198 mmt for both of the previous two marketing years. These changes reflect recent World wheat market dynamics, as shorter supplies of coarse grains (i.e., competing with feed wheat for livestock feed use on World export markets) and decreased Black Sea Region and Australian wheat production and export prospects have impacted market expectations of World wheat supply-demand balances and prices.
The USDA also projected that World wheat % ending stocks-to-use for “new crop” MY 2012/13 will be 25.4%, down from 28.5% for “old crop” MY 2011/12, and 30.2% for MY 2010/11. The tightest supply-demand balances in the World wheat market since at least the early 1970’s occurred in MY 2007/08, with ending stocks down to 128.2 mmt and to 20.9% in % ending stocks to use.
Key Wheat Market Factors: Just as was the case a month ago, wheat production problems in Russia, Kazakhstan, Ukraine, Australia and parts of eastern Europe have led to tighter World wheat supply-demand prospects and an improved outlook for eventual U.S. and Canadian wheat exports in “new crop” MY 2012/13. Prospects are for increased wheat feeding in the U.S., but even more so in foreign countries that would otherwise use more feedgrains in their livestock feed rations (if they were available). It is still likely that World wheat supply-demand balances will remain large enough in “new crop” MY 2012/13 to avoid extreme shortfalls and tightening of World wheat supplies such as occurred in MY 2007/08 – absent other potential World wheat production problems.