An analysis of U.S. and World wheat supply-demand factors and 2013 price prospects following the USDA’s November 8th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports is available 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 at this web location: http://www.agmanager.info/marketing/outlook/newletters/Wheat.asp
On November 8, 2013 the USDA released its Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports. A number of changes were made in the U.S. wheat “new crop” 2013/14 marketing year supply-demand balance sheet – with increases in projected 2013 U.S. production, imports, total supplies, feed and residual use, and total use, accompanied by a decline in food use. These changes lead to a small adjustment in “new crop” 2013/14 ending stocks, and % ending stocks-to-use. With the 2013 U.S. wheat harvest completed and the 2014 winter wheat seeding done, market dynamics through this winter into early spring 2014 are most likely to be impacted by changes in export prospects and/or domestic livestock feed usage – with domestic food usage assumed to be steady.
A Kansas Wheat Field (source: http://kansaswheat.org/)
USDA U.S. Wheat Forecast: The USDA raised its projection of 2013 U.S. wheat production by 16 million bushels (mb), up 2.130 billion bushels (bb) – down from 2.269 bb in 2012. This forecast was based on a combination of lower planted and harvested acreage of 56.2 (down 0.3) and 45.2 (down 0.5) million acres (ma), respectively, and record high U.S. wheat yields of 47.2 bu/ac. The USDA raised its forecast of “new crop” MY 2013/14 total supplies (2.998 bb – up 26 mb), based on imports of 150 mb (up 10 mb), beginning stocks of 718 mb, and 2013 production of 2.130 bb (up 16 mb). With food use of 950 mb (down 8 mb), exports of 1.100 bb, seed use of 73 mb, and feed and residual use of 310 mb (up 30 mb), total use is projected to be 2.433 bb (up 22 mb). Projected ending stocks are 565 mb (up 4 mb) – down from 718 mb in “old crop” MY 2012/13. Projected % ending stocks-to-use of 23.2% are down from 29.7% and 33.3% the last two marketing years. The USDA projected U.S. average wheat prices for “new crop” MY 2013/14 of $6.70-$7.30 /bu (midpoint = $7.00 /bu), down from the record high of $7.77 a year ago.
KSU U.S. Wheat Forecast: KSU projections of “new crop” MY 2013/14 supply-demand balances and prices are as follows: a) “Likely” Scenario (same as USDA): 70% prob. of 2.998 bb U.S. wheat supplies, 1.100 bb exports, 2.433 bb total use, 565 mb ending stocks, 23.2% S/U, & $6.70-$7.30 /bu; b) “High Exports” Scenario: 15% prob. of 2.998 bb U.S. wheat supplies, 1.175 bb exports, 2.508 bb total use, 490 mb ending stocks, 19.5% S/U, & $7.25-$8.25 /bu; and c) “Low Exports” Scenario: 15% prob. of 2.998 bb U.S. wheat supplies, 1.025 bb exports, 2.358 bb total use, 640 mb ending stocks, 27.1% S/U, & $6.00-$7.00 /bu.
USDA World Wheat: World wheat total supplies of 882 mmt in “new crop” MY 2013/14 are up 27 mmt from September, up from 855 mmt in “old crop” MY 2012/13, but down from 896 mmt in MY 2011/12. Projected World wheat ending stocks in “new crop” MY 2013/14 of 178.5 mmt (25.5% S/U) are up 2.2 mmt from September, up from 175.6 mmt (25.6% S/U) in “old crop” MY 2012/13, and down from 199.4 mmt (29.0% 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 – down closer to the historic stocks-to-use minimum of 21.0% in MY 2007/08.
Australian Wheat Harvest (source: http://www.theaustralian.com.au/….farming)
Market Perspective: Strong U.S. wheat exports and demand for wheat feeding through June-November have provided support for U.S. wheat prices in the first half (6 months) of the “new crop” 2013/14 marketing year. However, with a large 2013 U.S. corn crop and markedly lower feedgrain prices at fall harvest, wheat prices will lose some degree of the cross market arbitrage support they have benefitted from over the last two marketing years. In addition, although some declines in projected wheat exports have occurred for a number of major World wheat exporters since the September WASDE report (i.e., Argentina, Russia, and Kazakhstan), still overall projected foreign wheat exports of 123.8 mmt in “new crop” MY 2013/14 are 11.6% larger than a 110.9 mmt in “old crop” MY 2012/13. It is likely that when the bulk of World wheat export supplies eventually become available to the market, U.S. wheat export demand may slow and provide less support for U.S. wheat markets in the winter months and on into the spring of 2014.