KSU Wheat Market Situation and Outlook (via AgManager – July 2013)

An analysis of U.S. and World Wheat supply-demand factors and 2013 price prospects following the USDA’s July 11th 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 shortly:  http://www.agmanager.info/marketing/outlook/newletters/Wheat.asp

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Summary

On June 28, 2013 the USDA released its 2013 Acreage and June Quarterly Stocks reports, followed on July 11th by the release of the July Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports.  The June 28th reports were characterized by higher than expected 2013 U.S. wheat planted acres, lower harvested-to-planted acreage, and strength in “old crop” wheat usage during the March-May 2013 period.  The July 11th reports projected higher “old crop” wheat feeding and total usage than a month earlier, along with tighter “old crop” 2012/13 ending stocks of U.S. wheat.  This forecast of lower beginning stocks of wheat for the “new crop” MY 2013/14 combined higher projected 2013 U.S. wheat production, lower feed+residual use, and sharply higher exports, combined to lower “new crop” 2013/14 ending stocks and % ending stocks-to-use, and raise the “new crop” MY 2013/14 projected U.S. wheat average price range.

https://i2.wp.com/kansasagnetwork.com/wp-content/uploads/2013/06/Kansas-Wheat-Harvest.jpg

Wheat Harvest Mostly Done Now in Kansas (Source: http://kansasagnetwork.com/2013)

USDA Wheat Forecast: The USDA projected that 2013 U.S. wheat production would be a 2.114 billion bushels (bb) – up 34 mb – but down from 2.269 bb in 2012.  This forecast was based on planted and harvested acreage of 56.5 and 45.7 million acres (ma), respectively, and U.S. wheat yields of 46.2 bu/ac –  up from 44.6 bu/ac in June, but down slightly from 46.3 bu/ac in 2012.  The USDA raised its forecast of “new crop” MY 2013/14 total supplies (2.962 bb – up 8 million bushels, ‘mb’), exports (1.075 bb – up 100 mb), and total use (2.386 bb – up 89 mb), leading to new crop projected ending stocks of 576 mb – down 83 mb from June, and down from 718 mb last year.  Projected % ending stocks-to-use of 24.1% are down from 28.7% in June, and from 29.7% in “old crop” MY 2012/13.  The USDA projected U.S. average wheat prices for “new crop” MY 2013/14 of $6.45-$7.75 bu/ac, down from the record high of $7.77 in “old crop” MY 2012/13.

KSU Wheat Forecast: KSU projections of 2013 U.S. wheat production and “new crop” MY 2013/14 supply-demand and price scenarios are:  a) “Low Yield-Production” Scenario: 15% prob. of 56.5 ma planted, 45.0 ma harvested, 44.1 bu/ac yields, a 1.983 bb U.S. wheat crop, 22.8% S/U, & $7.50-$8.50 /bu;  b) “Likely Yield-Production” Scenario: 80% prob. of 56.5 ma planted, 45.7 ma harvested, 46.2 bu/ac yields, a 2.114 bb U.S. wheat crop, 23.7% S/U, & $6.90-$7.90 /bu; and c) “High Yield-Production” Scenario: 5% prob. of 56.5 ma planted, 45.7 ma harvested, 49.1 bu/ac yields, a 2.245 bb 2013 U.S. wheat crop, 25.5% S/U, & $6.45-$7.45 /bu.

https://i1.wp.com/www.agricorner.com/wp-content/uploads/2011/03/wheat-china-import.jpg

Wheat in China (2011) (Source: http://www.agricorner.com/)

World Wheat: World wheat total supplies of 872 mmt in “new crop” MY 2013/14 are down 3.5 mmt from June, up from 855 mmt in “old crop” MY 2012/13, but down from 896 mmt in MY 2011/12.  Projected World wheat ending stocks of 172.4 mmt (24.7% S/U) in “new crop” MY 2013/14 are down 8.9 mmt from June, down from 174.5 mmt (25.6% S/U) in “old crop” MY 2012/13, and down from 199.5 mmt (28.6% S/U) in MY 2011/12.  World wheat ending stocks-to-use have declined for four consecutive years from a high of 31.0% in MY 2009/10, and are falling closer to the historic minimum of 21.0% in MY 2007/08.

Market Perspective: With a) lower supplies of U.S. wheat in “new crop” MY 2013/14, b) the near record tightness of U.S. corn supplies in “old crop” MY 2012/13 and resulting cross-market support for wheat prices for livestock feed use through at least the summer months, and c) improving prospects for U.S. wheat exports along with a projected tightening of U.S. wheat supply-demand balances in “new crop” MY 2013/14, U.S. wheat prices are likely to remain at least moderately strong from now through late summer 2013.  If a large U.S. corn crop occurs in 2013, U.S. corn prices would likely decline sharply in the fall 2013 – having a spillover effect on U.S. wheat prices in the absence of other international wheat supply-demand factors that would provide independent wheat market support.  However, if a lower than forecast 2013 U.S. corn crop is produced to the degree that U.S. corn prices remain historically high, then cross market feed-price arbitrage will likely continue to support U.S. wheat prices – maintaining wheat and feedgrain prices near parity levels.  Unforeseen volatility in financial markets may also impact wheat and other commodity prices in MY 2013/14.

https://i1.wp.com/www.seanews.com.tr/images/articles/2011_07/67067/u1_15_grain_2col-n25a.jpg

Wheat Being Loaded for Export in Black Sea Region (Source: http://www.seanews.com.tr/)

 

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