An analysis of U.S. and World Wheat supply-demand factors and price prospects based on information from the May 12, 2015 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 at the following web address on Tuesday, May 19th: http://www.agmanager.info/marketing/outlook/newletters/archives/
Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on May 12, 2015, U.S. wheat market prices have traded higher due to concerns about U.S. Hard Red Winter wheat production prospects and some weakening of the value of the U.S. dollar. For the “new crop” 2015/16 marketing year the USDA projected that a) World wheat total supplies and total use would be at record high levels, b) World wheat export trade would be 4.1% lower than a year ago – with U.S. exports at their lowest level since MY 2009/10, and c) World wheat ending stocks would be record high, with percent ending stocks-to-use at their highest level since MY 2011/12.
There are emerging concerns about potential wheat export supply prospects from Australia in “new crop” MY 2015/16 due to the emergence of a significant El Nino World weather pattern. Other factors of concern are a) ongoing wariness of how geopolitical problems in the Black Sea region, and b) strength in the U.S. dollar that has limited the competitive position of U.S. wheat exports in World markets. World markets have evolved into a “large crop-over-supply” situation, with future prospects dependent on whether production and/or export problems can be avoided in major World wheat producing and exporting areas in year 2015 and beyond.
USDA U.S. Wheat Forecast for “Current” MY 2014/15
Projected U.S. wheat exports were dropped to 860 million bushels (mb) (down 20 mb) – down to the lowest level since 2008/09. Taken together with a 5 mb decline in imports, the USDA raised its forecast of ending stocks to 709 mb (up 25 mb), with 34.5% ending-stocks-to-use (the highest level in 4 years). Projected U.S. wheat prices of declined $0.05 to $6.00 /bu – compared to $6.87 in MY 2013/14, $7.77 (record) in MY 2012/13, and $7.24 in MY 2011/12.
USDA U.S. Wheat Forecast for “New Crop” MY 2015/16
The USDA projected 55.367 million acres (ma) planted, 47.977 ma harvested, 43.5 bu/ac yield, 2.087 billion bushels (bb) production, 2.937 bb total supplies, 925 mb exports, 2.144 bb total use, 793 mb end stocks, 37.0% S/U, and a $5.00 /bu U.S. average price in “new crop” MY 2015/16 – the lowest since $4.87 in MY 2009/10.
KSU U.S. Wheat Forecast for “New Crop” MY 2015/16
KSU projections of “new crop” MY 2015/16 supply-demand balances and prices are represented in two alternative scenarios:
A) “Medium Yield-Increased Exports” Scenario: 75% prob. of 55.367 ma planted, 46.557 ma harvested, 43.5 bu/ac yield, 2.025 bb production, 2.874 bb total supplies, 975 mb exports, 2.194 bb total use, 680 mb end stocks, 31.0% S/U, and $5.50 /bu U.S. avg. price.
B) “Low Yield-High Exports” Scenario: 25% prob. of 55.367 ma planted, 46.557 ma harvested, 42.0 bu/ac low yield, 1.955 bb production, 2.814 bb total supplies, 1.000 bb exports, 2.196 bb total use, 618 mb end stocks, 28.7% S/U, and $6.20 /bu U.S. avg. price. Key factors in these forecasts for “new crop” MY 2015/16 are the level of 2015 U.S. wheat production, and the degree of recovery in U.S. wheat exports.
USDA World Wheat
World wheat total supplies of 919.3 mmt in “new crop” MY 2015/16 are up from 916.4 mmt in “current” MY 2014/15, and 893.7 mmt in MY 2013/14. Projected World wheat ending stocks in “new crop” MY 2015/16 of 203.3 mmt (28.4% S/U) are up from 201.0 mmt (28.1% S/U) in “current” MY 2014/15, and from 190.0 mmt (27.0% S/U) in MY 2013/14.
Growing World wheat stocks prospects are a burden on World wheat market prices. For perspective, these recent supply-demand figures can be compared to the historic World wheat ending stocks and stocks-to-use minimums of 128.75 mmt and 21.0% S/U in MY 2007/08.
Wheat Fields in May 2014 near Hays, Kansas (Source: http://www.hayspost.com/2014/05/07/k-state-to-host-may-27-wheat-tour-in-tribune-spring-field-day-in-garden/)
Wheat Harvest near Minsk, Belarus in the Black Sea Region (Source: http://www.theaustralian.com.au/archive/business-old/wheat-prices-hit-two-year-high-as-russia-bans-grain-exports/story-e6frg90x-12259019)