An analysis of U.S. and World wheat supply-demand factors and late 2015-2016 price prospects following the USDA’s November 10th 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 on Thursday, December 3rd (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 November 10th, U.S. and World wheat market prices have moved sideways-to-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 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).
Wheat market analysts have ongoing concerns about a) potential wheat production problems and supply prospects in the Black Sea region, 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 currently existing in World & U.S. wheat markets continues to be the predominant negative influence on World wheat prices. If prices are to recover in December 2015 through 2016 it is likely that significant World wheat production problems and/or trade disruptions would need to occur. For the United States, ongoing strength in the U.S. dollar exchange rate is also a serious negative factor that is limiting U.S. wheat exports and price prospects.
USDA U.S. Wheat Supply-Demand & Price Forecast
The USDA adjusted its supply-demand estimates for U.S. wheat in the “new crop” 2015/16 marketing year – forecasting 54.644 million acres (ma) planted, 47.094 ma harvested, 43.6 bu/ac yields, and 2.052 billion bushels (bb) production / 2.930 bb total supplies. The USDA also forecast 180 million bushels (mb) feed & residual use, 800 mb of exports (down 50 mb), 2.019 mb of total use (down 50 mb), 911 mb ending stocks (up 50 mb), and 45.1% ending-stocks-to-use (up from 41.6% in October – up to the highest level since 48.6% in MY 2009/08). The USDA tightened the low-high range of its U.S. average wheat price projection for “new crop” MY 2015/16 to $4.80-$5.20 /bu. – leaving unchanged the midpoint forecast of $5.00 – down to the lowest level 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 given in two scenarios:
A) “Lower Exports” Scenario: 80% prob. of the same U.S. wheat supply estimates as the USDA, but with U.S. exports dropping below “old crop” 2014/15 levels, i.e., 750 mb exports, 961 mb ending stocks, 48.8% S/U, and $4.85 /bu U.S. average price; and
B) “Higher Exports” Scenario: 20% prob. of supply prospects equal to the USDA’s but with higher U.S. wheat exports, i.e., 900 mb exports, 811 mb ending stocks, 38.27% S/U, and $5.85 /bu U.S. average price.
USDA World Wheat Supply-Demand
The existence of record large World wheat supplies and ending stocks estimates are a “limiting burden” on World wheat markets – helping to drive wheat prices lower. Record World total wheat supplies of 944.7 mmt in “new crop” MY 2015/16 are up from the previous record of 918.7 mmt in “old crop” MY 2014/15, and from 892.3 mmt in MY 2013/14. These are the three highest years of World wheat production on record.
Projected record World wheat ending stocks in “new crop” MY 2015/16 of 227.3 mmt (31.7% S/U – 14 year high) are up from 211.7 mmt (29.9% S/U) in “old crop” MY 2014/15, and up from 193.6 mmt (27.7% S/U) in MY 2013/14. For perspective, these supply-demand figures are comparable to the 38 year low World wheat ending stocks of 128.8 mmt and percent ending stocks-to-use of 21.0% S/U in MY 2007/08.
2015 Kansas Wheat Harvest (Source: http://ksn.com/2015/07/14/report-93-percent-of-kansas-winter-wheat-harvested/)
2015 Wheat Harvest near Billings, Montana USA (Source: http://billingsgazette.com/news/state-and-regional/montana/montana-wheat-harvest-late-but-high-in-protein/article_6eeaec7a-7dcf-5b3b-940f-82fc65763a9c.html)