An analysis of U.S. and World wheat supply-demand factors and 2016-2017 price prospects following the USDA’s April 12th World Agricultural Supply Demand Estimates (WASDE) report and the market actions that have followed are 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
Overview & World Wheat Market Analysis
Since the USDA’s April 12th World Agricultural Supply and Demand Estimates (WASDE) report, U.S. and World wheat market prices have been volatile because of worries about U.S. and foreign crops and a weakening of the U.S. dollar – first trending higher through April 21st, and then dropped sharply through April 25th before trending higher again through April 29th.
For the “new crop” 2015/16 marketing year the USDA projected:
1) World wheat total supplies of 947.9 mmt and total use of 708.7 mmt – both at record high levels,
2) that at least marginally weaker trade continues in World wheat exports with 163.1 mmt in the current marketing year – down from 164.1 mmt last year, and from 165.9 mmt two years ago,
3) World wheat ending stocks at a record high 239.3 mmt compared to 214.8 mmt last year, and 193.9 mmt two years ago, and
4), World wheat percent ending stocks-to-use of 33.8% – up from 30.5% last year and from 27.8% two years ago – up to their highest level in 14 years (since MY 2001/02). For perspective, the 34-year low in World wheat ending stocks of 128.7 mmt and at least a 57-year low in percent ending stocks-to-use of 20.9% S/U both occurred in MY 2007/08, the last major World wheat “short crop” marketing year.
The World wheat market continues to monitor a) potential wheat production problems in major world wheat production areas such northwestern Africa, the Middle East, south Asia/India, China, South America, and Australia, and the central and southern plains of the United States (possible wheat disease problems from seasonal rains), b) ongoing geopolitical conflicts and tensions in the Middle East and the Black Sea region that could impact commodity markets, and c) spillover impacts into grain markets and other commodities from volatile World economies, and financial and currency markets. Even so, the “large crop-over supply” situation that exists in World and U.S. wheat markets continues to have a strong prevailing negative influence on World wheat prices.
It is likely that significant World wheat production problems and/or trade disruptions would need to occur in coming weeks and months in order to have wheat prices recover significantly before summer-2016. Ongoing strength in the U.S. dollar exchange rate – although it has been weakening recently – alos is a serious negative factor that is limiting U.S. wheat exports, raising U.S. wheat ending stocks and % ending stocks-to-use, and causing sharply lower U.S. wheat prices.
USDA U.S. Wheat Forecast for “Current Crop” MY 2015/16
The USDA made minor changes in its supply-demand and price projections for U.S. wheat in the “current crop” 2015/16 marketing year – with 2.052 billion bushels (bb) production, 2.924 bb total supplies, 775 million bushels (mb) of exports, 140 mb wheat feed use (down 10 mb), 1.948 bb of total use (down 10 mb), 976 mb ending stocks (up 10 mb), and 50.09% ending-stocks-to-use (up from 49.34% in March to the highest level since 48.6% in MY 2009/10). A price range of $4.90-$5.00 /bu was forecast by the USDA with a midpoint of $4.95 /bu – the lowest U.S. wheat marketing year average price since $4.87 /bu in MY 2009/10.
USDA U.S. Wheat Forecast for “Next Crop” MY 2016/17
Based on March 31st USDA Prospective Plantings Report forecasts and information from the USDA Agricultural Outlook Forum in Arlington, VA on February 25-26, 2016, a KSU-adjusted USDA forecast of U.S. wheat supply-demand is available for “next crop” 2016/17 marketing year beginning June 1, 2016. The USDA projected 2016 U.S. wheat plantings of 49.559 million acres (ma) – down 5.085 ma from 2015. Forecast 2016 harvested acres of 42.174 ma would be down 4.920 ma vs 2015. Based on projected 2016 U.S. wheat yields of 45.9 bu/ac (up from 43.6 bu/ac in 2015), 2016 U.S. wheat production is projected to be 1.935 bb (vs 2.052 bb in 2015), with “next crop” MY 2016/17 total supplies of 3.036 bb (up from 2.924 bb in “current crop” MY 2015/16). With projected “next crop” MY 2016/17 ending stocks of 943 mb and percent ending stocks-to-use of 45.05% S/U, U.S. wheat average prices are projected to be $4.20 /bu – down from $4.95 /bu in “current crop” MY 2015/16. It is assumed by KSU that these adjusted USDA projections for “next crop” MY 2016/17 is assumed to have a 40% probability of occurring.
KSU Forecast for “Next Crop” MY 2016/17
Three alternative KSU-Scenarios for U.S. wheat supply-demand and prices are presented for “next crop” MY 2016/17, with each assuming the same 2016 planted acreage as USDA, but 437,000 less acres harvested than the adjusted USDA estimates based on historical percent harvested-to-planted acres relationships.
A) KSU-Scenario A (Trend Yield) (30% probability) assumes for “next crop” MY 2016/17: 49.559 ma planted, 41.737 ma harvested, 46.0 bu/ac yield, 1.920 bb production, 3.021 bb total supplies, 850 mb exports, 2.043 bb total use, 978 mb ending stocks, 47.87% S/U, & $4.05 /bu U.S. wheat average price;
B) KSU-Scenario B (Foreign Crop Problems – Higher U.S. Exports) (15% prob.) assumes for “next crop” MY 2016/17: 49.559 ma planted, 41.737 ma harvested, 46.0 bu/ac yield, 1.920 bb production, 3.021 bb total supplies, 1.050 bb exports, 2.243 bb total use, 778 mb ending stocks, 34.7% S/U, & $5.10 /bu U.S. wheat average price; and
C) KSU-Scenario C (Widespread U.S. Crop Problems) (15% prob.) assumes for “next crop” MY 2016/17: 49.559 ma planted, 41.737 ma harvested, 40.0 bu/ac yield, 1.669 bb production, 2.770 bb total supplies, 850 mb exports, 2.043 bb total use, 727 mb ending stocks, 35.6% S/U, & $5.00 /bu U.S. wheat average price.