An analysis of U.S. and World Wheat supply-demand factors and 2013 price prospects following the USDA’s June 12th World Agricultural Supply Demand Estimates (WASDE) report will be up shortly on the KSU AgManager website (http://www.agmanager.info/default.asp).
A full summary – with the full analysis-article for Wheat will be found at this web location: http://www.agmanager.info/marketing/outlook/newletters/Wheat.asp
Winter Wheat Crop: In the June 12th USDA Crop Production report, 2013 U.S. Winter Wheat production was forecast at 1.509 billion bushels (bb) – down from 1.645 bb in 2012 – based on an average yield of 46.1 bu/ac (up from 45.4 bu/ac in May) and harvested acreage of 32.709 million acres (ma). Hard Red Winter wheat production was projected to be 781 million bushels (mb), down from 1.004 bb a year ago. Soft Red Winter (SRW) wheat production was projected to be 509 mb, up from 420 mb last year. White winter wheat production was projected at 219 mb, down from 221 mb in 2012.
A county/district K-State Wheat Test Plot in 2013 (Source: https://www.facebook.com/kstate.wheat)
WASDE Forecasts: In the June 12th World Agricultural Supply and Demand Estimates (WASDE) report the USDA forecast of U.S. 2013 total wheat production to 2.080 bb – up 23 mb. The USDA raised its projection of “new crop” 2013/14 marketing year (MY 2013/14) total supplies to 2.956 bb – up 39 mb from May, but down from 3.137 bb a year ago. These changes combined with a 50 mb increase in projected MY 2013/14 U.S. wheat exports led to a projections of 2.297 bb in total use (up 50 mb), and 659 mb (down 11 mb) in U.S. wheat ending stocks. Percent ending stocks-to-use was projected to be 28.7% for MY 2013/14, down from 29.8% in May, and from 31.2% for “old crop” MY 2012/13. This level of U.S. wheat % ending stocks-to-use of is still markedly larger than the record low of 13.2% in MY 2007/08. Projected U.S. wheat prices for MY 2013/14 of $6.25-$7.55 per bu (midpoint of $6.90) are up $0.10 / bu from May, but down from the record high of $7.80 in MY 2012/13. This decline in projected U.S. wheat prices is due to increased World wheat and projected “new crop” U.S. corn supply-demand balances from a year ago.
KSU Projections: In assessing the uncertainties associated with 2013 wheat growing conditions in the western U.S. Corn Belt (particularly for hard red winter wheat), and the Northern Plains hard red spring wheat regions, it is estimated for “new crop” MY 2013/14 that there is a 75% chance of yields in the range of 43.0-45.2 bu/ac (“likely” or “trend” scenarios), with production of 2.008-2.111 bb projected for 2013, with U.S. wheat % ending stocks-to-use in the range of 26.7%-29.2%, and prices in the range of $6.75-$7.10 per bu. There is also a 25% chance of a short U.S. wheat crop in 2013 with U.S. yields of 38.6 bu/ac, production of 1.779 bb, with % ending stocks-to-use of 25.8%, and U.S. average wheat prices in the range of $7.50-$8.50 / bu (midpoint = $8.00).
World Wheat production in MY 2013/14 is projected to be 696 mmt, down 5 mmt from May (due to lower production forecasts in Russia, Ukraine, and EU-27), but up sharply from 656 mmt in MY 2012/13. Total supplies of 876 mmt in MY 2013/14 are up from 881 mmt in MY 2012/13, but less than 896 mmt in MY 2011/12. World wheat % ending stocks-to-use for MY 2013/14 are forecast to be 26.2% – down from 26.5% for “old crop” MY 2012/13, and from 29.0% in MY 2011/12, 30.5% in MY 2010/11, and 31.0% in MY 2009/10, and 26.5% in MY 2008/09. The historic record low World wheat supply-demand balance was 21.0% in MY 2007/08.
Wheat Price Prospects for 2013: Given that at this time World wheat production prospects for the coming year are positive for most of the World’s major wheat exporters, the USDA has projected that World wheat supplies and ending stocks will grow in “new crop” MY 2013/14. However, much uncertainty still exists regarding what final harvested 2013 World wheat production will be over the June 1, 2013 through May 31, 2014 period. U.S. wheat prices in 2013 are likely to continue to find support through at least late spring-early summer 2013 due to a) cross market support from extremely tight U.S. feedgrain supplies and wheat’s potential substitutability for feedgrains in domestic and foreign livestock rations, and b) short and possibly declining U.S. hard red winter wheat production prospects. In the broader picture, these trends indicate that outside or non-wheat market influences are impacting wheat prices – with the most likely causal factor being cross market / arbitrage impacts from historically tight U.S. and World feedgrain supplies and associated strong feedgrain market prices through the summer months.
KSU Wheat Plots at Tribune, Kansas in 2013 (Source: http://www.wkarc.org/p.aspx?tabid=81)