An analysis of U.S. and World wheat supply-demand factors and 2015-2016 price prospects following the USDA’s September 11th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports and the market actions that have followed those reports will be available on the KSU AgManager website early next week (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 September 11th, U.S. and World wheat market prices have traded sideways. 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 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 in 14 years (since MY 2001/02).
Underlying concerns still exist in World wheat markets about such factors as a) potential wheat production problems and supply prospects in Australia, India, Russia, and elsewhere, b) ongoing geopolitical problems in the Black Sea region and Middle East, and c) uncertainty in World economic, financial and currency markets.
Even so, the “large crop-over supply” situation existing in World & U.S. wheat markets continues to negatively influence wheat market price prospects. For wheat prices to recover in late 2015-2016 it is likely that a significant World wheat production problem and/or trade disruption would need to occur.
In the United States the ongoing strength of the U.S. dollar is an important negative factor for U.S. wheat exports and price prospects. The USDA 2015 Small Grains Summary and Grain Stocks reports to be released on September 30th will provide the next set of U.S. wheat production and usage data to consider for wheat markets.
USDA U.S. Wheat Supply-Demand & Price Forecast
For U.S. wheat in the “new crop” 2015/16 marketing year, the USDA maintained its projection that there would be 55.079 million acres (ma) planted, 48.454 ma harvested, 44.1 bu/ac yields, 2.136 billion bushels (bb) production, and 3.014 bb total supplies, and 200 mb feed & residual use. However, the USDA lowered its forecast of U.S. exports to 900 million bushel (mb) (down 25 mb) – dropping total use to 2.139 mb (down 25 mb), raising ending stocks to 875 mb (up 25 mb), raising ending-stocks-to-use to 40.9% (up from 39.3% in August and 38.5% in July, up to the highest level since 48.6% in MY 2009/08). The USDA lowered is projection of U.S. average wheat prices for “new crop” MY 2015/16 to the range of $4.65-$5.55 /bu. (midpoint =$5.00) – the lowest since $4.87 /bu in MY 2009/10.
KSU U.S. Wheat Supply-Demand & Price Forecast
Kansas State University projections of “new crop” MY 2015/16 supply-demand balances and prices are represented in two scenarios:
A) “Lower Exports” Scenario: 70% 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., 850 mb exports, 925 mb ending stocks, 44.3% S/U, and $4.75 /bu U.S. average price.
B) “Higher Exports” Scenario: 30% prob. of production prospects equal to the USDA’s but with higher U.S. wheat exports, i.e., 1.000 bb exports, 790 mb ending stocks, 35.2% S/U, and $5.75 /bu U.S. average price.
USDA World Wheat Supply-Demand
The expectation of large World wheat supplies and stocks are a “burden” on World wheat markets – driving prices lower.
Record World total wheat supplies of 942.9 mmt in “new crop” MY 2015/16 are up from the previous record of 918.8 mmt in “old crop” MY 2014/15, and from 892.2 mmt in MY 2013/14.
Projected record World wheat ending stocks in “new crop” MY 2015/16 of 226.6 mmt (31.6% S/U) are also record high, and up from 211.3 mmt (29.9% S/U) in “old crop” MY 2014/15, and from 193.6 mmt (27.7% S/U) in MY 2013/14.
For perspective, these supply-demand figures can be compared to the historic minimum World wheat ending stocks of 128.8 mmt and stocks-to-use of 21.0% S/U in MY 2007/08.