An analysis of U.S. and World wheat supply-demand factors and 2015-2016 price prospects following the USDA’s August 12th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports and the market actions that have followed those reports is available 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 this web location: http://www.agmanager.info/marketing/outlook/newletters/Wheat.asp
Since USDA’s World Agricultural Supply and Demand Estimates (WASDE) and Crop Production reports on August 12th, U.S. and World wheat market prices have traded sharply lower. 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 strong export sales competition occurring in what can be termed a “buyer’s market”, and c) World wheat ending stocks would be record high, with percent ending stocks-to-use at their highest level since MY 2009/10.
There are underlying concerns about key World wheat market factors, such as a) potential wheat production problems and supply prospects in Australia, India, Russia, and elsewhere in “new crop” MY 2015/16, b) the ongoing geopolitical problems in the Black Sea region and the potential for conflict in the Middle East, and c) uncertainty in World economic, financial and currency markets. However, the overriding “large crop-over-supply” situation that now exists in World & U.S. wheat markets continues to negatively influence wheat futures and cash prices. Recovery in wheat market prices may dependent on whether significant problems in wheat production and/or trade occur in major World wheat producing and exporting areas in year 2015 and beyond, and for the U.S. how long the strong value of the U.S. dollar relative to other currencies continues.
USDA U.S. Wheat Supply-Demand & Price Forecast
For U.S. wheat in the “new crop” 2015/16 marketing year, the USDA projected that there would be 55.079 million acres (ma) planted, 48.454 ma harvested, 44.1 bu/ac yields (down 0.2 bu), 2.136 billion bushels (bb) production (down 12 mb), 3.014 bb total supplies (down 17 mb), 925 million bushel (mb) exports (down 25 mb), 200 mb feed & residual use, 2.164 bb total use (down 25 mb), 850 mb end stocks (up 8 mb), with 39.3% ending-stocks-to-use (up from 38.5% in July, and up to 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 $4.65-$5.55 /bu. (midpoint =$5.10) – the lowest since $4.87 /bu in MY 2009/10.
Kansas State University U.S. Wheat Supply-Demand & Price Forecast
Key market factors to consider are the level of 2015 U.S. hard red spring wheat production, and prospects for improved U.S. wheat exports. Kansas State University projections of “new crop” MY 2015/16 supply-demand balances and prices are represented in two scenarios:
A) “Lower Exports” Scenario: 65% prob. of the same U.S. wheat production estimates as the USDA, but with U.S. exports dropping to “old crop” 2014/15 levels, i.e., 3.014 bb total supplies, 850 mb exports, 2.089 bb total use, 925 mb ending stocks, 44.3% S/U, and $4.75 /bu U.S. avg. price.
B) “Higher Exports” Scenario: 35% prob. of production prospects equal to the USDA’s but with higher U.S. wheat exports, i.e., 3.014 bb total supplies, 1.000 bb exports, 2.224 bb total use, 790 mb ending stocks, 35.2% S/U, and $5.75 /bu U.S. average price.
USDA World Wheat Supply-Demand & Market Impact
The expectation of large World wheat supplies and stocks are a “burden” on World wheat markets – driving them toward lower World wheat market prices. Record World total wheat supplies of 936.2 mmt in “new crop” MY 2015/16 are up from 918.6 mmt in “old crop” MY 2014/15, and from 892.1 mmt in MY 2013/14.
Projected World wheat ending stocks in “new crop” MY 2015/16 of 221.5 mmt (31.0% S/U) are also record high, and up from 209.7 mmt (29.6% S/U) in “old crop” MY 2014/15, and from 193.4 mmt (27.7% S/U) in MY 2013/14. For perspective, these recent supply-demand figures can be compared to the historic World wheat ending stocks and stocks-to-use minimums of 128.8 mmt and 21.0% S/U in MY 2007/08.
Looking toward Winter Wheat Seeding in Kansas in Fall 2015 (Source: http://kansasagnetwork.com/2013/planting-conditions-for-the-2014-kansas-wheat-crop-surprising-in-some-areas/)