An analysis of U.S. and World Wheat supply-demand factors and price prospects based on information from the September 11, 2014 USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports will be 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 here on Thursday morning, September 25th.
Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on September 11, 2014, U.S. wheat market prices have responded negatively to projections of larger U.S. and World wheat ending stocks and ending stocks-to-use. The USDA projected for the “new crop” 2014/2015 marketing year that a) World wheat production, supplies, and total use would be at record high levels, b) World wheat export trade would be moderately lower than a year ago but still the third highest on record, and c) World wheat ending stocks and percent ending stocks-to-use would be at their highest levels in three marketing years, although still less than during the 2009/2010 through 2011/2012 period. Wheat prices in the United States are projected to be down to the lowest levels in four years due to limited demand for U.S. wheat exports and for livestock wheat feeding.
Wheat Market Expectations & Other World Market Factors
Wheat market expectations concur with USDA projections that foreign wheat supplies are more than adequate to “mitigate” shortfalls in 2014 U.S. hard red winter wheat production in the Central and Southern plains states. Also, no other major production problems in competing World wheat exporting countries have yet emerged – at least to the degree that the “large crop-over supply” situation in World wheat markets has been affected. That said, there are preliminary concerns emerging about dry wheat production conditions in Australia, as well as crop quality problems in parts of Europe. The possible negative impact of military conflict in the Black Sea Region on World wheat exports has at least not yet emerged to an appreciable degree – but still holds potential to significantly impact wheat markets for at least the next several months.
USDA U.S. Wheat Forecast for “New Crop” MY 2014/15
Compared to a year earlier, the USDA projected lower 2014 U.S. wheat production, reduced wheat usage, an increase in U.S. wheat ending stocks and % stocks-to-use, and lower prices in “new crop” MY 2014/15. The USDA’s projected “new crop” market scenario is: 56.5 million acres (ma) planted, 46.2 ma harvested, 43.9 bu/ac yield, a 2.030 billion bushel (bb) 2014 U.S. wheat crop, 2.789 bb total supplies, 900 mb exports (down 25 mb from last month), 2.091 bb total use (up 10 mb), 698 mb ending stocks (up 25 mb), 33.38% ending stocks-to-use (up from 31.33% last month), and $5.90 average price per bu. (range of $5.50 to $6.30) – down from $6.30 last month.
KSU U.S. Wheat Forecast for “New Crop” MY 2014/15
KSU projections of “new crop” MY 2014/15 supply-demand balances and prices are essentially equal to the USDA’s except for the acknowledged possibility of a “Higher Export” scenario which is as follows: a) “Higher Export” Scenario: 20% prob. of acreage, yields, production and total supplies being the same as those of the USDA, but with 150 mb greater U.S. wheat exports. This would result in 1.050 bb exports (up 150 mb from USDA), 2.241 bb total use (up 150 mb), 548 mb ending stocks (down 150 mb from the USDA), 24.45% S/U (versus 33.38% S/U for USDA), and a forecast price of $6.75 /bu (up from the USDA midpoint of $5.90).
USDA World Wheat Supply-Demand & Export Trends Among World Sellers
World wheat total supplies of 906.4 mmt in “new crop” MY 2014/15 are up from 889.7 mmt in “old crop” MY 2013/14, and up from 855.0 mmt in MY 2012/13. Projected World wheat ending stocks in “new crop” MY 2014/15 of 196.4 mmt (27.7% S/U) are up from 186.5 mmt (26.5% S/U) in MY 2013/14, and from 175.6 mmt (25.9% S/U) in MY 2012/13. For perspective these figures can be compared to the historic World wheat stocks minimum of 129.4 mmt (21.0% S/U) in MY 2007/08. Year-over-year increases are projected for wheat exports in “new crop” MY 2014/15 for major exporters Argentina (+4.3 mmt), Brazil (+0.9 mmt), Russia (+4.0 mmt), and Ukraine (+0.24 mmt), with decreases forecast for the U.S. (-7.5 mmt), Australia (-0.5 mmt), Canada (-1.24 mmt), the EU (-5.9 mmt), India (-2.9 mmt), and Kazakhstan (-1.6 mmt).
The U.S. wheat market will now likely focus on the September 30th USDA Small Grains Summary report, and on the progress that will be made this fall in seeding the U.S. winter wheat crop for 2015.
Seeding Wheat near Great Bend, Kansas in Fall 2012 (Source: http://www.greatbendpost.com/2011/10/25/report-shows-that-2012-wheat-crop-is-almost-planted/)
Fall Harvest of High Moisture Corn in Kansas in September 2013 (Source: http://kansasagnetwork.com/2013/harvesting-high-moisture-corn-seeding-wheat-and-preparing-for-fall-harvest-in-kansas-continues/)
An Eastern Kansas Landscape in Springtime (Source: http://www.sos.ks.gov/images/Backgrounds/spring/hills.jpg)