An analysis of U.S. and World wheat supply-demand factors and 2014 price prospects following the USDA’s January 10th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports and the market actions that have followed those 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
When the USDA released its Winter Wheat Seedings Report, Quarterly Stocks Report, 2013 Annual Crop Summary and World Agricultural Supply and Demand Estimates (WASDE) reports on January 10, 2014, wheat futures prices initially responded negatively due to what was viewed mainly as negative towards wheat market prospects. Although U.S. winter wheat seeded acres were projected to be below the range of pre-report trade estimates (long term price positive), negative market news of both December 1st Quarterly Stocks of U.S. wheat and “current” 2013/14 marketing year U.S. wheat ending stocks being larger than the top end of pre-report trade estimates caused prices to fall. Since then KC wheat futures prices have alternatively trended up and down before climbing higher through February 6th. The first USDA supply-demand and price projections for U.S. wheat in MY2014/15 will be made at the USDA Agricultural Outlook Forum on February 20-21.
USDA U.S. Wheat “Current” MY 2013/14: The USDA left unchanged its forecast of “current” 2013/14 marketing year total supplies of 3.008 billion bushels (bb) – down from 3.131 bb the previous year – based on imports of 160 mb, beginning stocks of 718 mb, and 2013 production of 2.130 bb. With food use of 950 million bushels (mb), exports of 1.125 bb (up 25 mb), seed use of 74 mb up 1 mb), and feed and residual use of 250 mb (down 60 mb), total use is projected to be 2.399 bb (down 34 mb). Projected ending stocks are 608 mb (up 33 mb) – down from 718 mb in “last year” MY 2012/13, and 743 mb in MY 2011/12. Projected U.S. wheat % ending stocks-to-use of 25.3% is down from 29.7% and 33.3% the last two marketing years. The USDA projected U.S. average wheat prices for “current” MY 2013/14 of $6.60-$7.00 /bu (midpoint = $6.80 /bu), down from the record high of $7.77 in “last year” MY 2012/13 and from $7.24 in MY 2011/12.
Kansas Winter Wheat with Snow Cover – January 2014 (Source: http://kansasagnetwork.com)
KSU U.S. Wheat Forecast for “Next Crop” MY 2014/15: KSU projections of “next crop” MY 2014/15 supply-demand balances and prices are as follows: a) “Likely Production” Scenario: 60% prob. of 56.3 million acres (ma) planted, 47.4 ma harvested, trend yields of 45.8 bu/ac, 2.171 bb 2014 U.S. wheat production, 2.939 bb U.S. wheat supplies, 1.120 bb exports, 150 mb wheat fed, 2.433 bb total use, 640 mb ending stocks, 27.8% S/U, & $6.00-$7.00 /bu; b) “Low Production” Scenario: 20% prob. of 55.3 million acres (ma) planted, 46.6 ma harvested, low yields of 40.0 bu/ac, 1.864 bb 2014 U.S. wheat production, 2.652 bb U.S. wheat supplies, 1.000 bb exports, 100 mb wheat fed, 2.124 bb total use, 528 mb ending stocks, 24.9% S/U, & $6.50-$7.50 /bu; and c) “High Production” Scenario: 20% prob. of 56.3 million acres (ma) planted, 48.3 ma harvested, high yields of 47.5 bu/ac, 2.294 bb 2014 U.S. wheat production, 3.042 bb U.S. wheat supplies, 1.150 bb exports, 170 mb wheat fed, 2.3394 bb total use, 703 mb ending stocks, 30.1% S/U, & $5.60-$6.60 /bu.
USDA World Wheat: World wheat total supplies of 889 mmt in “current” MY 2013/14 are up 33 mmt from “last year” MY 2012/13, but down from 896 mmt in MY 2011/12. Projected World wheat ending stocks in “current” MY 2013/14 of 185.4 mmt (26.4% S/U) are up from 176.1 mmt (25.7% S/U) in “last year” MY 2012/13, and down from 198.9 mmt (28.5% S/U) in MY 2011/12. The recent historic World wheat stocks minimum of 129.6 mmt (21.1% S/U) occurred in MY 2007/08.
Western Australia Wheat Harvest – 2007 (Source: http://tractor-trac.blogspot.com/2012/07/harvest-glenvar-2007-wheat-australia.html)
Market Perspective: With a) growing quantities of competitive, exportable foreign wheat supplies, b) moderately lower supplies of U.S. wheat in the current MY 2013/14 marketing year, c) more abundant U.S. corn and grain sorghum supplies through the fall of 2013 and a large amount unsold feedgrain supplies “hanging over the market” in early 2014, and d) a “weaker-moderating” pace of U.S. wheat exports through the fall-winter, current “old crop” U.S. wheat price prospects are moderate at best. However, if 2014 U.S. winter wheat production prospects turn poor in March-April as the crop breaks dormancy in the spring period – possibly due to dry conditions, damage from cold temperatures, widespread disease issues, a late killing frost, etc., U.S. wheat market prices could respond sharply higher.
A snowy day at Anderson Hall, Campus of Kansas State University (Source: http://www.city-data.com)