An analysis of U.S. and World Wheat supply-demand factors and price prospects based on information from the February 10, 2015 USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports will shortly 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: http://www.agmanager.info/marketing/outlook/newletters/Wheat.asp
Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on February 10, 2014, U.S. wheat market prices traded in a volatile pattern – moving both higher and lower than the price range the day of the report. For the “current crop” 2014/15 marketing year the USDA projected that a) World wheat production, supplies, and total use would be at record high levels, b) World wheat export trade would be 3.4% lower than a year ago but still the second 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. For the U.S., the USDA also lowered its projection of U.S. wheat exports for MY 2014/15 to the lowest level in 5 years. Wheat prices in the U.S. are projected to be down to a four year low due to limited U.S. wheat exports and 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 again in MY 2014/15 as in MY 2013/14. 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 changed. However, there are developing concerns about wheat export supply availability from the Black Sea region, and the ongoing possibility of crop problems developing among major World wheat producers / exporters. United States’ wheat exports have been reduced by a recent strong positive trend in the U.S. dollar.
USDA U.S. Wheat Forecast for “current crop” MY 2014/15
The USDA maintained its projection of lower 2014 U.S. wheat production, reduced total use, increased ending stocks and % stocks-to-use, and lower prices in “current crop” MY 2014/15 vs a year ago. The USDA’s projected “current crop” MY 2014/15 scenario is for a 2.026 billion bushel (bb) 2014 U.S. wheat crop, 2.776 bb total supplies (down 20 million bushels or ‘mb’ from January on reduced imports), 900 mb exports (down 25 mb), 2.084 bb total use (down 25 mb), 692 mb ending stocks (up 5 mb), 33.2% ending stocks-to-use (vs 32.6% last month), and a forecast U.S. price of $6.00 /bu (range of $5.85 to $6.15) – compared to $5.90-$6.30 ($6.10 midpoint) from January.
KSU U.S. Wheat Forecast for “next crop” MY 2015/16
KSU projections of “next crop” MY 2015/16 supply-demand balances and prices are represented in two scenarios, either “Trend Yield” or “Short Yield” scenarios, which are as follows. A) “Trend Yield” Scenario: 60% prob. of 54.830 million acres (ma) planted, 46.105 ma harvested, 45.9 bu/ac trend yield, 2.116 billion bu. (bb) production, 2.958 bb total supplies, 1.050 bb exports, 2.260 bb total use, 698 mb end stocks, 30.9% S/U, $6.20 /bu U.S. average price. B) “Short Yield” Scenario: 40% prob. of 54.830 ma planted, 46.105 ma harvested, 43.5 bu/ac trend yield, 2.006 bb production, 2.858 bb total supplies, 1.025 bb exports, 2.224 bb total use, 634 mb end stocks, 28.5% S/U, $6.45 /bu U.S. average price. The key assumption in these KSU projections is that there will be a moderate recovery in U.S. wheat exports.
USDA World Wheat
World wheat total supplies of 912.5 mmt in “current crop” MY 2014/15 are up from 891.6 mmt in MY 2013/14, and 855.4 mmt in MY 2012/13. Projected World wheat ending stocks in “current crop” MY 2014/15 of 197.9 mmt (27.7% S/U) are up from 187.5 mmt (26.6% S/U) in MY 2013/14, and from 174.5 mmt (25.8% S/U) in MY 2012/13. For perspective, these figures can be compared to the historic World wheat ending stocks and ending stocks-to-use minimums of 129.7 mmt and 21.1% S/U in MY 2007/08.
Kansas Wheat fields a year ago (January 2014) (Source: http://kansasagnetwork.com/2014/kansas-wheat-condition-drops-significantly-during-the-month-of-january/)