An analysis of U.S. and World Wheat supply-demand factors and price prospects based on information from the July 10, 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 Thursday, July 23rd: http://www.agmanager.info/marketing/outlook/newletters/archives/
Overview and Perspective
Since USDA’s World Agricultural Supply and Demand Estimates (WASDE) and Crop Production reports on July 10th, U.S. wheat market prices have trended sharply lower due to a) continuing large World wheat supply-demand balances, and b) continued strength of the U.S. dollar – a negative for U.S. wheat exports. For the “new crop” 2015/16 marketing year the USDA projected that 1) World wheat total supplies and total use would be at record high levels, 2) World wheat export trade would be down moderately from a year ago – with some improvement in U.S. exports from the 15 year low in MY 2014/15, and c) World wheat ending stocks would be record high, with World percent ending stocks-to-use at their highest level since MY 2009/10.
There are emerging but as of yet largely unconfirmed concerns about potential problems with wheat supply prospects from Australia, India, and elsewhere in “new crop” MY 2015/16 due to the development of a significant “El Nino” World weather pattern, as well as the ongoing geopolitical problems in the Black Sea region, and long term uncertainty in World financial and currency markets. World wheat markets have evolved into a “large crop-over-supply” situation, with the future depending 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 Supply-Demand & Price Forecast for “New Crop” MY 2015/16
For U.S. wheat in the “new crop” 2015/16 marketing year, the USDA projected that there would be 56.079 million acres (ma) planted, 48.454 ma harvested, 44.3 bu/ac yields, 2.148 billion bushels (bb) production (up 27 million bushels or ‘mb’ from June), 3.031 bb total supplies (up 58 mb), 950 mb exports (up 25 mb), 200 mb feed & residual use (up 5 mb), 2.189 bb total use (up 30 mb), 842 mb end stocks (up 28 mb), with 38.5% ending-stocks-to-use (the highest level since 48.6% in MY 2009/08). The USDA projected U.S. average wheat prices for “new crop” MY 2015/16 in the range of $4.75-$5.75 /bu. (midpoint =$5.25) – up $0.25 from a month ago but still the lowest since $4.87 /bu in MY 2009/10.
KSU U.S. Wheat Supply-Demand & Price Forecast for “New Crop” MY 2015/16
Key market factors 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. KSU projections of “new crop” MY 2015/16 supply-demand balances and prices are represented in two scenarios:
A) “Medium Yield-Higher Exports” Scenario: 85% prob. of USDA acreage, yields and production of 2.148 bb production, 3.031 bb total supplies, 1.000 bb exports, 2.214 bb total use, 817 mb ending stocks, 36.9% S/U, and $5.50 /bu U.S. avg. price.
B) “Lower Yield-Higher Exports” Scenario: 15% prob. of 56.079 ma planted, 48.454 ma harvested, 42.5 bu/ac yields (lower than the USDA estimate), 2.059 bb production, 2.947 bb total supplies, 1.000 bb exports, 2.204 bb total use, 743 mb ending stocks, 33.72% S/U, and $6.10 /bu U.S. avg. price. If U.S. wheat exports increased by 100 mb, U.S. wheat prices could increase to the $6.15-$6.40 / bushel range.
USDA World Wheat Markets
The expectation of large World wheat supplies and stocks is pressuring World wheat prices. World wheat total supplies of 934.0 mmt in “new crop” MY 2015/16 are up from 919.4 mmt in “old crop” MY 2014/15, and from 892.2 mmt in MY 2013/14. Projected World wheat ending stocks in “new crop” MY 2015/16 of 219.8 mmt (30.8% S/U) are up from 212.1 mmt (30.0% S/U) in “old crop” MY 2014/15, and from 193.5 mmt (27.7% S/U) in MY 2013/14. The current supply-demand situation can be compared to the historic World wheat ending stocks and stocks-to-use minimums of 128.75 mmt and 20.9% S/U in MY 2007/08, which led to record high U.S. season average wheat prices of $6.89 /bu in that marketing year.
North Dakota Hard Red Spring Wheat Variety Tests in 2015 (Source: https://www.ag.ndsu.edu/news/newsreleases/2015/july-6-2015/n-d-top-wheat-producer-in-u-s)
Cumulous Clouds over a golden Kansas meadow (Source: http://melbel.hubpages.com/hub/Cloud-Types-with-Pictures)