An analysis of U.S. and World Wheat supply-demand factors and 2014 price prospects following the USDA’s May 9th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports have 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 at this web location: http://www.agmanager.info/marketing/outlook/newletters/Wheat.asp
When the USDA released its Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports on May 9, 2014, U.S. wheat market prices initially responded negatively after having been trending sharply higher since April 22nd. On May 9th the USDA made its first projections of “new crop” 2014/15 marketing year supply-demand and price projections for U.S. and World wheat, and also made small changes in “current year” 2013/14 marketing year supply-demand estimates. The USDA accounted for declining production prospects for 2014 U.S. winter wheat in its U.S. All Wheat production forecast, and also projected marginally larger foreign wheat production in “current year” MY 2013/14. However, “new crop” MY 2013/14 World and U.S. wheat production and supplies are forecast to be lower than in “current year” MY 2013/14.
A number of key what market factors in “new crop” MY 2014/15 are still unknown, including a) the possibility of further reductions in 2014 U.S. winter wheat production prospects, b) uncertainty regarding MY 2014/15 production prospects in Australia and else where should El Nino-related weather patterns occur in 2014 as is now forecast, c) the potential impact of ongoing and escalating geopolitical conflicts in the Black Sea Region between major World wheat exporters Russia and the Ukraine, and d) the possibility of more abundant U.S. feedgrain supplies in 2014 “hanging over the market” and limiting U.S. and foreign wheat feeding.
Wheat being harvested in the Southwestern U.S. in Past Years (Source: http://southwestfarmpress.com/wheat/)
USDA U.S. Wheat Forecast for “New Crop” MY 2014/15: The USDA projected smaller U.S. wheat production, reduced usage, an increase in U.S. wheat stocks-to-use, and higher prices in “new crop” MY 2014/15. The USDA projected “next crop” MY 2014/15 supply-demand and price scenario is: 55.8 million acres (ma) planted, 45.9 ma harvested, 82.3% harvested-to-planted acres, 42.7 bu/ac yields, a 1.963 billion bushel (bb) 2014 U.S. wheat crop, 2.706 bb total supplies, 950 mb exports, 2.166 bb total use, 540 million bushels (mb) ending stocks, 24.9% ending stocks-to-use, and $7.30 average price per bu. ($6.65 to $7.95). If 2014 U.S. winter wheat production prospects decline further, or problems develop with the 2014 U.S. spring wheat crop, then the USDA’s supply-demand projections may tighten even further, leading to higher U.S. wheat price forecasts.
KSU U.S. Wheat Forecast for “New 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 45.9 ma harvested, 82.3% harvested-to-planted acres, 42.7 bu/ac, 1.963 bb 2014 U.S. wheat production, 2.706 bb U.S. wheat supplies, 1.000 bb exports, 2.216 bb total use, 490 mb ending stocks, 22.1% S/U, & $7.90 /bu; b) “Low Production” Scenario: 25% prob. of 44.6 ma harvested, 79.9% harvested-to-planted acres, low yields of 39.0 bu/ac, 1.739 bb 2014 U.S. wheat production, 2.502 bb U.S. wheat supplies, 925 mb exports, 2.086 bb total use, 416 mb ending stocks, 19.9% S/U, & $8.75 /bu; and c) “High Production” Scenario: 15% prob. of 45.9 ma harvested, 82.3% harvested-to-planted acres, yields of 45.6 bu/ac, 2.095 bb 2014 U.S. wheat production, 2.818 bb U.S. wheat supplies, 1.050 bb exports, 2.261 bb total use, 557 mb ending stocks, 24.6% S/U, & $7.30 /bu.
Black Sea Wheat Production in 2013 (Source: http://www.themoscowtimes.com/)
USDA World Wheat: World wheat total supplies of 884 mmt in “new crop” MY 2014/15 are down from 889 mmt in “current year” MY 2013/14, but up from 855 mmt in MY 2012/13. Projected World wheat ending stocks in “new crop” MY 2014/15 of 187.4 mmt (26.9% S/U) are up from 186.5 mmt (26.5% S/U) in MY 2013/14, and from 175.3 mmt (25.8% S/U) in MY 2012/13. These levels of World stocks and/or supplies need to be measured against the recent historic World wheat stocks minimum of 129.4 mmt (21.0% S/U) in MY 2007/08 for context and market perspective. Year-over-year increases in wheat exports in “new crop” MY 2014/15 are projected for Argentina, Brazil, and Russia, with decreases forecast for the United States, Australia, Canada, the EU, India, Kazakhstan, and the Ukraine. Should threats to wheat production and supplies in the U.S. and World wheat markets subside, large supplies of wheat would likely be available to World wheat export buyers – which would present a challenge for U.S. wheat exports and prices later in 2014.
Afghanistan Wheat Supplies (Source: https://www.blog.foreignpolicy.com)