KSU Wheat Market Outlook: Assessing Wheat Market Prospects in Mid-December 2015

An analysis of U.S. and World wheat supply-demand factors and late 2015-2016 price prospects following the USDA’s December 9th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports, the USDA Agricultural Baseline projections to 2025 and the market actions that have followed those reports will be available on the KSU AgManager website on Tuesday, December 22nd (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

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Summary

Overview

Since USDA’s World Agricultural Supply and Demand Estimates (WASDE) and Crop Production reports on December 9th, U.S. and World wheat market prices have moved sideways-to-marginally higher. For the “new crop” 2015/16 marketing year the USDA projected that 1) World wheat total supplies (947.0 mmt) and total use (717.1 mmt) would be at record high levels, 2) World wheat export trade (161.7 mmt) would be down moderately from a year ago (164.4 mmt) – with World export sales competition occurring in what can be termed a “buyer’s market”, and c) World wheat ending stocks (229.9 mmt – up from 212.1 mmt a year ago) would be record high, with percent ending stocks-to-use (32.1% – up from 30.0% a year ago) at their highest level in 14 years (since MY 2001/02). The 38-year low in World wheat ending stocks of 128.6 mmt and percent ending stocks-to-use of 20.9% S/U occurred in the last major “short crop” marketing year in MY 2007/08.

There are ongoing concerns in the World wheat market about….

a) potential wheat production problems and supply prospects in the Black Sea region and elsewhere),

b) foreign geopolitical changes and conflicts,

and c) spillover impacts from volatile World economic, financial and currency markets.

Even so, the “large crop-over supply” situation currently existing in World & U.S. wheat markets continues to have a strong negative influence on World wheat prices. For wheat prices are to recover significantly before summer-2016 it is likely that significant World wheat production problems and/or trade disruptions would need to occur.

Ongoing strength in the U.S. dollar exchange rate is a serious negative factor that is limiting U.S. wheat exports, raising U.S. wheat ending stocks, and causing sharply lower U.S. wheat prices.

USDA U.S. Wheat Forecast for “New Crop” MY 2015/16

The USDA made no adjustments in its supply-demand forecasts for U.S. wheat in the “new crop” 2015/16 marketing year – with 2.052 billion bushels (bb) production, 2.930 bb total supplies, 800 million bushels (mb) of exports, 2.019 bb of total use, 911 mb ending stocks, and 45.1% ending-stocks-to-use (up to the highest level since 48.6% in MY 2009/10). A price range of $4.80-$5.20 /bu was forecast with a midpoint of $5.00 /bu –the lowest level since $4.87 /bu in MY 2009/10.

KSU U.S. Wheat Forecast for “New Crop” MY 2015/16

Two possible domestic wheat market scenarios are forecast by Kansas State University for “new crop” MY 2015/16:

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 to 750 mb exports, with 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 again equal to the USDA’s, but with higher U.S. wheat exports, i.e., 900 mb exports, with 811 mb ending stocks, 38.3% S/U, and $5.85 /bu U.S. average price.

USDA U.S. Wheat Forecast for “Next Crop” MY 2016/17

In their Agricultural Projections to 2025 the USDA provided a forecast of U.S. wheat market outlook for the “next crop” 2016/17 marketing year beginning June 1, 2016.  The USDA projected 2016 U.S. wheat plantings of 53.0 million acres (ma) – down 1.644 ma from 2015. Forecast 2016 harvested acres of 44.9 ma would be down 2.194 ma vs 2015.

With projected yields of 45.9 bu/ac (up from 43.6 bu/ac in 2015), 2016 U.S. wheat production is projected to be 2.060 bb (up marginally vs 2015), with 2016/17 total supplies equaling 3.096 bb (up from 2.930 bb in “new crop” MY 2015/16).

With forecast “next crop” MY 2016/17 total use of 2.198 bb, and ending stocks of 928 mb (42.8% S/U), U.S. wheat prices are projected to be $4.40 /bu – down from $5.00 /bu in “new crop” MY 2015/16.

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https://i0.wp.com/kansasagnetwork.com/wp-content/uploads/2014/01/Winter-Wheat-with-Snow-Cover1.jpg

Kansas Wheat Fields – January 2014 (Source: http://kansasagnetwork.com/2014/k-states-jim-shroyer-on-evaluating-cold-injury-to-wheat-in-kansas/ )

https://i1.wp.com/www.nps.gov/wica/learn/photosmultimedia/images/Sunrise-in-Winter_2.jpg 

“Sunrise in Winter” – A National Park Service Photograph (Source: http://www.nps.gov/wica/learn/photosmultimedia/photo-gallery-park-scenes.htm )

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