KSU Wheat Market Outlook in November 2014

An analysis of U.S. and World Wheat supply-demand factors and price prospects based on information from the November 10, 2014 USDA Crop Production and World Agricultural Supply and 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 the following web address: http://www.agmanager.info/marketing/outlook/newletters/Wheat.asp

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Summary

Overview

Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on November 10, 2014, U.S. wheat market prices have generally responded in a neutral-to-positive manner to projections of marginally larger World wheat ending stocks and ending stocks-to-use, but lower U.S. domestic supply-demand balances. 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 6.6% 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 U.S. are projected to be down to the lowest levels in four years due to limited demand for U.S. wheat exports and for domestic livestock wheat feeding.
The USDA projects 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 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. United States’ wheat exports have been reduced by a recent strong positive trend in the U.S. dollar. The wheat market will now likely focus on weekly export sales and shipments, the condition of U.S. and foreign crops in the field, and the upcoming January 12, 2015 USDA NASS Crop Production Annual Summary report.

USDA U.S. Wheat Forecast for “New Crop” MY 2014/15

The USDA projected lower 2014 U.S. wheat production, reduced wheat total use, an increase in ending stocks and % stocks-to-use, and lower prices in “new crop” MY 2014/15 versus a year ago. The USDA’s projected MY 2014/15 scenario is: 56.8 million acres (ma) planted, 46.4 ma harvested, 43.7 bu/ac yield, a 2.026 billion bushel (bb) 2014 U.S. wheat crop (down 9 mb), 2.785 bb total supplies (down 10 mb), 925 mb exports, 2.141 bb total use, 644 mb ending stocks (down 10 mb), 30.1% ending stocks-to-use (down from 30.6% last month), and a forecast U.S. price of $5.90 per bu. (range of $5.65 to $6.15) – narrower by $0.10 /bu on each end of the price range from the October WASDE.

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 possibility of either “Lower Export” or “Higher Export” scenarios, which are as follows: a) “Lower Export” Scenario: 10% prob. of acreage, yields, production and total supplies being the same as those of the USDA, but with 125 mb less U.S. wheat exports. This would result in 800 mb exports, 2.016 bb total use, 769 mb ending stocks, 38.15% S/U, and a forecast price of $5.00-5.60 /bu (midpoint of $5.30 – down from $5.90 for the USDA); and b) “Higher Export” Scenario: 10% prob. of acreage, yields, production and total supplies being the same as those of the USDA, but with 125 mb more U.S. wheat exports. This would result in 1.050 bb exports, 2.266 bb total use, 519 mb ending stocks, 22.9% S/U, and a forecast price of $7.00 /bu (up from the USDA midpoint of $5.90).

USDA World Wheat

World wheat total supplies of 905.6 mmt in “new crop” MY 2014/15 are up from 889.5 mmt in “old crop” MY 2013/14, and up from 854.1 mmt in MY 2012/13. Projected World wheat ending stocks in “new crop” MY 2014/15 of 192.9 mmt (27.1% S/U) are up from 185.7 mmt (26.4% S/U) in “old crop” MY 2013/14, and from 174.8 mmt (25.7% S/U) in MY 2012/13. For perspective, these figures can be compared to the historic World wheat stocks minimum of 129.0 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 Argentina (+3.8 mmt), Brazil (+0.9 mmt), Russia (+4.0 mmt), and Ukraine (+0.24 mmt), with decreases forecast for the U.S. (-6.8 mmt), Australia (-1.1 mmt), Canada (-1.2 mmt), the EU (-3.9 mmt), India (-2.9 mmt), and Kazakhstan (-2.8 mmt).

United States Monthly Drought Outlook Graphic - click on image to enlarge

U.S. Monthly Drought Outlook (Source: http://www.cpc.ncep.noaa.gov/products/expert_assessment/mdo_summary.html)

http://www.kansas.com/incoming/hh4hng/picture876745/alternates/FREE_960/1105westernksChalk Pyramids in the Smoky Hill / Smoky River Region of Western Kansas (Source: http://www.kansas.com/news/article986935.html)

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