FAO Projection for 2019 U.S. Corn Crop at 12.99 billion bu (330 mmt) + World Wheat S-D

Here is an article from the Foreign Agricultural Service regard their projections for the size of the 2019 U.S. corn crop.  They project a crop of 330 mmt or 12.99 billion bushels.

http://www.fao.org/worldfoodsituation/csdb/en/?utm_source=Ag+Insider+Subscribers&utm_campaign=a412282389-EMAIL_CAMPAIGN_2019_06_06_08_45_COPY_01&utm_medium=email&utm_term=0_b0e8c666dd-a412282389-120343085

Diminishing maize production prospects in the United States dampen the global cereal production outlook this year

Release date: 06/06/2019

FAO’s latest forecast for world cereal production in 2019 points to an increase of 1.2 percent from 2018, to 2 685 million tonnes.

However, the year-on-year expansion is now much less significant than earlier predicted, as global maize production is now seen to fall in 2019, largely because of sharp downward revisions since the previous report concerning maize production prospects in the United States.

Due to prolonged excessive wet conditions resulting in major delays in crop plantings, this year’s maize production in the United States is now pegged at 330 million tonnes, down 45 million tonnes from FAO’s first production forecast published in May and almost 10 percent (36 million tonnes) short of last year’s level.

The recent USDA crop progress report pointed to a sharply reduced planted area of only 58 percent of planting intentions as of 26 May, well below the 5-year average level of 90 percent and the slowest pace ever recorded.  (Note: this has been updated to 67% planted as of June 2, 2019 – down from the recent 5 year average of 96%.  Daniel O’Brien, Extension Agricultural Economist, Kansas State University)

Most of the expected rebound in global cereal production in 2019 is attributed to expected expansions in wheat and barley production, with year-on-year increases of 5.3 percent and 5.8 percent, respectively. Total rice production is likely to remain close to last year’s record level as expectations of area-driven expansions in Asia could offset foreseen contractions in most other regions, triggered by inclement weather and prospects of reduced profit margins.

World cereal utilization in 2019/20 is forecast to reach 2 707 million tonnes, down 15.5 million tonnes, or 0.6 percent, from the May forecast but still 1 percent (26 million tonnes) higher than in 2018/19. Most of this month’s downward adjustment again concerns the United States, where, because of deteriorating production prospects, total domestic utilization of maize is seen to fall below the 2018/19 level. Following the revision for the United States, world utilization of coarse grains in 2019/20 is now anticipated to reach 1 434 million tonnes, down 0.9 percent from the previous forecast but 0.7 percent higher than in 2018/19. Global wheat utilization is expected to grow by 1.2 percent, reaching 755 million tonnes, while that of rice is predicted to reach 518 million tonnes, 1.4 percent higher than in 2018/19.

Based on the latest production and utilization forecasts, world cereal stocks could decline by as much as 26 million tonnes, or 3 percent, in the new season to a four-year low of 830 million tonnes. This figure is around 18 million tonnes, or 2 percent, below the FAO’s May forecast. The sharp month-on-month downward revision is mostly associated with maize, whereas the forecasts for wheat and rice inventories have been raised slightly since the previous report. The projected fall in cereal stocks would result in a drop in the global cereal stock-to-use ratio to just below 30 percent, which still points to a relatively comfortable supply level.

Globally, coarse grain inventories are seen heading towards a second consecutive annual decline in 2019/20, falling by 9 percent to just over 369 million tonnes, the lowest level since 2014/15. By contrast, total wheat stocks could expand by 4.6 percent year-on-year and approach a near-record level of 281 million tonnes. The increase of 1 percent in wheat stocks since May reflects upward adjustments made for the EU and the United States, outweighing downward revisions in Australia and the Russian Federation.  World rice stocks at the close of 2019/20 are still envisaged to fall slightly (0.9 percent) from their record opening levels, to 179 million tonnes, despite some upward revisions to forecasts for the United States and Viet Nam.

World trade in cereals in 2019/20 is forecast at around 414 million tonnes, up 1.2 million tonnes, or 0.3 percent, from the previous forecast and nearly 6 million tonnes, or 1.4 percent, higher than the estimated total shipments of cereals in 2018/19. Most of the predicted expansion in world cereal trade is associated with greater wheat and rice trade, while trade in coarse grains, most notably maize, is expected to fall below the 2018/19 level, mainly on expectations of reduced imports by the EU and a sharp reduction in exports by the United States. By contrast, wheat trade is predicted to rebound by 3.3 percent from the 2018/19 reduced level, driven by stronger import demand by several countries, especially in Africa and Asia, and supported by the expectation of large export availabilities in the Black Sea region and the EU. World rice trade, on the other hand, is likely to contract by 3.5 percent in 2019 before a possible rebound in 2020 on expectation of greater purchases by several countries in Africa.

KSU Weekly Grain Market Update – The position of grain markets just prior to the USDA Reports on 5/10/209

Grain market summary notes, charts and comments supporting the Weekly Grain Market Review from KSU Ag Economics presented in the KSU Agriculture Today radio program to be played on Friday, May 10, 2019 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter

The recorded radio program will be aired at 10:03 a.m. central time, Friday, May 10, 2019 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the May 10th recording is be available at the KSU Agriculture Today website at this time.

Following are sections of the Working notes for this week’s radio program up on the KSU AgManager.info website…

KSU Wheat Market Situation in Early-May 2019 (Pre-May WASDE)

This report provides an analysis of U.S. and World wheat supply-demand factors and market price prospects following the USDA’s April 9, 2019 Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports, and the adjusted results of the February 21-22, 2019 USDA Agricultural Outlook Forum.   This article is available in full on the KSU AgManager website (http://www.agmanager.info/).

Following is a summary – with the full analysis-article for Wheat Market Outlook in Early-May 2019 to be found at this web location:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter

*****

Wheat Market Situation in Early-May 2019

Daniel O’Brien – Extension Agricultural Economist, K-State Research and Extension

May 7, 2019

 

Kansas HRW Winter Wheat Futures & Cash Markets

Hard red winter wheat market prices in the U.S. have continued to weaken since late January 2019, with declines in futures prices somewhat mitigated by stronger basis levels in Kansas Hard Red Winter (HRW) wheat cash markets.

After reaching highs of $6.34 on August 8, 2018, and $5.35 ½ on January 24, 2019, JULY 2019 HRW Wheat futures had declined down to lows of $3.90 ½ on Tuesday, April 30th and $3.91 ½ on Monday, May 6th – before closing at $4.03 the same day.  The closing price of $4.03 on May 6th is down 36.4% from the August 2018 high, and down 24.7% from the January 2019 high.

In central Kansas terminal markets on Monday, May 6th reflect these same lower price trends but with relatively strong basis levels compared to past large supply years.  These prices reflect cash market sentiments immediately after the 2019 Kansas Wheat Tour (April 30-May 2), and four days ahead of the scheduled USDA Crop Production and World Agricultural Supply-Demand Estimates (WASDE) reports due on May 10th.

On May 6th Central Kansas cash wheat price terminal quotes for ordinary U.S. no. 1 HRW ranged from $3.72 to $3.93 per bushel – with basis ranging from $0.31 to $0.08 under JULY 2019 KS HRW Wheat futures.  Cash wheat prices in eastern Kansas grain terminals in Topeka and Atchison ranged from $3.78 to $3.93 /bu with basis ranging from $0.25 to $0.10 under JULY 2019 futures.  These prices have declined to where they are only moderately above the range of $3.42 ¼ to $3.83 ¼ /bu that occurred in late December 2017 in eastern and central Kansas.  However, basis levels at that time were much wider (i.e., “weaker”), being from $0.80 under to $0.39 under nearby MARCH 2018 futures (Figure 2).

In comparison, in western Kansas on May 6th, bids for ordinary U.S. no. 1 HRW wheat at selected major grain elevators ranged from $3.53 to $3.74 /bu, with basis being $0.50 to $0.29 under JULY 2019 futures.  Recent wheat cash price bids in western Kansas are only marginally higher than the lows of $3.47 to $3.64 /bu that occurred in late December 2017 in this same area – when local basis varied from $0.85 under to $0.58 under MARCH 2018 futures.

A Hard White Wheat (HWW) grain terminal bid was available in Wichita, Kansas on May 6th for $3.95 per bushel, with a basis of $0.08 /bu under JULY 2019 Kansas HRW wheat futures.  On March 22, 2019 this bid was $4.4000 /bu, with a basis of $0.05 /bu under MAY 2019 Kansas HRW wheat futures.

 

A Deferred Future “Carrying Charge” View of KS HRW Winter Wheat Futures

On May 6th carrying charges between the JULY 2019 to SEPTEMBER 2019 Kansas HRW Wheat futures contracts (i.e., the JUL-SEP 2019 Spread) were $0.11 per bushel, or $0.0550 per bushel per month.  This compares to spreads of $0.22 /bu or $0.0733 /bu/mo. for SEP-DEC 2019, and $0.2250 /bu or $0.0750 /bu/mo. for DEC 2019-MAR 2020 Kansas HRW Wheat futures contracts.

These “full carry” deferred futures full contract storage cost contract spreads are influenced by large supplies on hand – which leads to higher Variable Storage Rates (VSR) among Kansas HRW Wheat futures contracts.  These large carries are encouraging storage of “new crop” 2019 Kansas HRW wheat on the one hand, and provide the basis for a potential return to storage hedges by producers and grain elevators for the 2019 HRW wheat crop on the other.

Extending this analysis further to later deferred contracts, whereas on May 6th harvest JULY 2019 Kansas HRW Wheat futures closed at $4.03 /bu, the JULY 2020 contract closed at $4.84 ¾ /bu for JULY 2020 – up 20.2% and $0.0681 /bu/month from JULY 2019.  Extending even further into the next year, on May 6th JULY 2021 KS HRW Wheat closed at $5.42 ½ /bu, up 11.9% and $0.0479 /bu/month from JULY 2020

From an economic viewpoint, these deferred years’ JULY Kansas HRW Wheat futures prices in years 2020 & 2021 could reflect market expectations that HRW wheat futures prices will eventually be higher than current bids for JULY 2019 futures – which is consistent with economic theory.  However, it also seems that the carrying charges now reflected across the range of available deferred KS HRW Wheat futures contracts appear to be being extended out to the distant “new crop” JULY 2020 and JULY 2021 contracts.

Restated, it appears these uninterrupted positive carrying charges are being inflexibly and mechanically applied to deferred KS HRW Wheat futures contracts as far as 24 months into the future – regardless of what expected fundamental supply-demand conditions may be in the wheat market that far out.   If this is so, then these deferred futures prices may present: a) opportunities for long-term market arbitrage positions to traders, or b) hedging opportunities for U.S. wheat producers IF they are able to financially manage the risk of potential margin calls should wheat prices should move unexpectedly higher.  For agricultural producers, these extended deferred futures prices provide profitable but at risk pricing opportunities should they choose to bear the risk of utilizing them.

 

Overall World Wheat Market Situation

Prospects for continued large World wheat supplies and ending stocks, ongoing weakness in U.S. wheat export shipments, and declining prospects for future U.S. wheat export sales have been the main causes of this downtrend in U.S. HRW wheat prices.  A general “malaise” in U.S. grain markets and grain prices may also be having a spillover impact on wheat markets.  “Malaise” is defined as a general feeling of discomfort, illness, or uneasiness whose exact cause is difficult to identify.

The current ongoing, large ending stocks situation that exists in the U.S. and World wheat markets has developed over the last 5-6 years.  This situation extends back to the historically important “short crop / tight stocks” situation that occurred in the 2012/13 marketing year.  Prior to that, the last “watershed” event in U.S. and World wheat markets were the record tight supply-demand 2007/08 marketing year for the U.S. and World wheat market.

A combination of market factors have all worked together to limit any improvement in U.S. wheat exports in “current” MY 2018/19 and any significant price improvement in current U.S. wheat markets.   These include:

#1) Large World carryover ending stocks from “old crop” MY 2017/18 which became “beginning stocks” in “current” MY 2018/19;

#2) Successful wheat crops in many other exporting and importing countries in the World; and

#3) The willingness of the Black Sea Region countries (i.e., Russia, Ukraine, Kazakhstan) to sell down their domestic reserve stocks to maintain their export market shares.

The selling off of domestic inventories has allowed Russia, Ukraine and Kazakhstan maintain their export market shares in “current” MY 2018/19.  However, this strategy also makes them more vulnerable to any repeated crop shortfalls that could occur in “new crop” MY 2019/20 – which will begin on June 1, 2019.   The risk of this action by Russia and other countries is that by deliberately allowing their domestic stocks to decline below normal levels in this marketing year they place themselves at risk to the effect of unforeseen short crops and tight supply situation in the future.  As a result, they and the broader global wheat export market are more vulnerable to market volatility and supply-demand disruptions because of their reduction in protective “buffer” carryover ending stocks.

 

Potential Sources of World Wheat “Supply Shocks”

For a turn-around in wheat market conditions to occur heading into “new crop” MY 2019/20, a disruptive, sizable, and currently unexpected shortfall or “supply shock” in World wheat production would have to occur.  The “new crop” 2019/20 marketing year will begin on June 1, 2019, and last until May 31, 2020.   Such a “change” in global wheat market supply-demand conditions is required to significantly diminish or constrain global wheat market supply-demand balances and markedly raise Wheat market prices.

In past years, wheat market rally’s have often been caused by significant wheat production shortfalls across the major exporting and growing countries.  Major exporting countries include the United States, Russia, Ukraine, Australia, the European Union, Argentina and Canada.  Other key importers and producers of wheat globally include several selected Middle East and Southeast Asia countries, India and China.

The possibility of sizable increases in Chinese purchases of U.S. wheat and other agricultural products IF a trade agreement between the U.S. and China is completed could provide a surprise boost to U.S. wheat exports in coming months.  But it seems judicious to not count on that occurring until such a trade agreement is finalized.

 

World Wheat Production for Major Exporters & Producers

World wheat production prospects for the “new crop” 2019/20 marketing year is somewhat mixed and uncertain – most notably among major World wheat exporters and producers.  In its International Crop & Weather Highlights report on May 7, 2019 the USDA gave the following assessments of developing crop conditions as they affect wheat production prospects.

In aggregate, forecast global World wheat production in “current” MY 2018/19 of 732.78 mmt is down 3.9% from last year’s record high of 763.19 mmt.   Lower production has occurred in the “current” 2018/19 marketing year (which began June 1, 2018) in some major exporting countries such as Australia, the European Union, and the Black Sea Region / Former Soviet Union-12 countries, China, and Mexico (Figures 13, 14a-b & 15a-b).  These declines were partially offset by production increases projected for exporters such as the United States, Argentina, and Canada.

  • United States: The United States is forecast to have produced 51.29 million metric tons (mmt) (1.884 billion bushels or bb) of wheat in the “current crop” 2018/19 marketing year, up from 47.38 mmt (1.740 bb) in “old crop” MY 2017/18, but down from 62.83 mmt (2.309 bb) in MY 2016/17.

Soil moisture conditions are projected to stay wet through May 13th according to the U.S. Climate Prediction Center (CPC) throughout most of the Hard Red Winter (HRW) wheat areas from the state of Texas north through Oklahoma, Kansas, Nebraska and South Dakota, while Soft Red Winter (SRW) wheat areas in the Eastern Corn Belt are also wet.  Parts of the White Wheat (WW) producing areas in Washington, Idaho and Montana are generally dry, as are the Hard Red Spring wheat and Durum wheat producing areas of northern and western North Dakota.

The U.S. Climate Prediction Center also forecasts that “moist soil conditions” will continue throughout the June-August period.  Moist conditions during May-June 2019 may encourage wheat disease development in the U.S. HRW and SRW wheat areas, although major wheat disease pressure has not occurred in these areas as of yet.

  • Australia: Australia is forecast to have produced 17.30 million metric tons (mmt) of wheat in the “current crop” 2018/19 marketing year, down from 21.30 mmt in “old crop” MY 2017/18, and from 31.82 mmt in MY 2016/17.

“Soaking rain overspread large portions of the drought-beleagured south and east (parts of Australia), promoting winter crop germination and emergence and likely triggering additional sowing.”  The USDA also indicated that, “Dry weather favored wheat, barley, and canola planting in the west, but more rain would be welcome.”

  • European Union: The EU is forecast to have produced 137.60 mmt of wheat in the “current crop” 2018/19 marketing year, down from 151.26 mmt in “old crop” MY 2017/18, and from 145.37 mmt in MY 2016/17.

In Europe, showers were indicated to have improved winter crop prospects”.  In particular, widespread showers “boosted soil moisture for reproductive winter crops in England, France and Germany, and provided timely moisture for southern Poland into the Balkans.”  In addition, “short-term dryness reduced soil moisture for wheat and rapeseed over northeastern Europe.”  And, “Sunny skies favored winter grain development in Spain after recent rain.”

  • Former Soviet Union (FSU-12): The FSU-12 is forecast to have produced 124.86 mmt of wheat in the “current crop” 2018/19 marketing year, down from 142.44 mmt in “old crop” MY 2017/18, and from 130.09 mmt in MY 2016/17.

Of this total, Russia is forecast to have produced 71.69 mmt of wheat in the “current crop” 2018/19 marketing year, down from 85.17 mmt in “old crop” MY 2017/18, and from 72.53 mmt in MY 2016/17.

Ukraine is forecast to have produced 25.06 mmt of wheat in the “current crop” 2018/19 marketing year, down marginally from 26.98 mmt in “old crop” MY 2017/18, and from 26.79 mmt in MY 2016/17.

Kazakhstan is forecast to have produced 13.95 mmt of wheat in the “current crop” 2018/19 marketing year, also down marginally from 14.80 mmt in “old crop” MY 2017/18, and from 14.99 mmt in MY 2016/17.

In the FSU,widespread showers” occurred.   Specifically, “widespread showers favored vegetative winter wheat across Moldova, Ukraine, and Russia.”

  • East Asia (China): China is forecast to have produced 131.43 mmt of wheat in the “current crop” 2018/19 marketing year, also down from 134.33 mmt in “old crop” MY 2017/18, but up from 130.09 mmt in MY 2016/17.

East Asia overall was characterized as having “showers in southern China; warm in the northeast.”  In particular, “showers continued in southern China…..”, and “warm weather in northeastern China encouraged corn, soybean, and rice planting.”

  • South Asia (India): India is forecast to have produced 99.70 mmt of wheat in the “current crop” 2018/19 marketing year, up from 98.51 mmt in “old crop” MY 2017/18, and up from 87.00 mmt in MY 2016/17.

In South Asia Tropical Cyclone Fani has occurred.  Specifically, “a severe tropical cyclone (Fani) brought high winds and downpours to northeastern India and Bangladesh.”

  • Middle East (Including Iraq, Iran, & Turkey): Selected Middle Eastern Countries are forecast to have produced 17.88 mmt of wheat in the “current crop” 2018/19 marketing year, up from 13.36 mmt in “old crop” MY 2017/18, but down from 19.16 mmt in MY 2016/17.

Similarly, Turkey is forecast to have produced 19.00 mmt of wheat in the “current crop” 2018/19 marketing year, down from 21.00 mmt in “old crop” MY 2017/18, and up from 17.25 mmt in MY 2016/17.

In the Middle East weather conditions are described as “showers continued in Turkey,” while “late-week rain arrived in Iraq.”  Specifically, “widespread light to moderate showers sustained good soil moisture for winter grains in Turkey.”  Also, “sunny skies promoted wheat and barley development in Syria, Iraq, and Iran, while heavy late-week showers maintained excellent yield prospects for crops entering or progressing through reproduction.”

  • Mexico: The wheat crop in Mexico is forecast to have produced 3.000 mmt of wheat in the “current crop” 2018/19 marketing year, down from 3.494 mmt in “old crop” MY 2017/18, and from 3.865 mmt in MY 2016/17.

In Mexico, “light showers develop in eastern corn areas”, in which “showers allowed corn planting to begin in southern Mexico, though more significant rain is needed.”   In Mexico wheat is sown in November-January, grows during February-later April, and is harvested from late April through June.

  • Canada: The wheat crop in Canada is forecast to have produced 31.80 mmt of wheat in the “current crop” 2018/19 marketing year, up from 29.98 mmt in “old crop” MY 2017/18, but down from 32.14 mmt in MY 2016/17.

For the “new crop” 2019-20 marketing year, the area seeded to wheat in Canada is forecast to increase by 9% from 2017-18 as a 4% decrease for winter wheat is more than offset by a 10% increase for spring wheat (Stats Canada, 1/25/2019). The spring wheat area is forecast to increase because of relatively good prices for wheat and a shift out of durum and winter wheat in Western Canada. Production is projected to rise by 8%.

For Canada, the Weather Channel has forecast that a “global pattern with widespread cold weather during April into early May”, is likely “persisting into June.” A “chilly pattern” is likely to persist in Canada.

  • Argentina: The wheat crop in Mexico is forecast to have produced 19.50 mmt of wheat in the “current crop” 2018/19 marketing year, up from 18.50 mmt in “old crop” MY 2017/18, and from 18.40 mmt in MY 2016/17.

In Argentina the months of June-July-August are the fall & winter seasons in Argentina.  May is the main month for planting winter small grains such as winter wheat, with final seedings occurring in June.  Wheat is progressing through the vegetative-heading-grain filling-maturity stages during September-November period, with December-early January being the harvest period.  Double crop soybeans are planted after wheat in December and harvested in late February-March – with temperatures cooling down to “fall-like” conditions in April-May (during which seeding for the next winter wheat crop occurs.

Currently in Argentina, “drier conditions aided Argentine harvests.”  Specifically, “drier weather improved conditions for summer grains, oilseeds, and cotton in Argentina.”   Therefore, “drier conditions” during May in Argentina are occurring during the main seeding season for that crop, which followed showers within the previous 1-2 weeks.  As in the U.S., heavy rainfall during winter wheat seeding is often welcome as long as soils eventually dry and the crop can be seeded in a timely manner.

World & World-Less-China Wheat Ending Stocks & % Stocks-to-Use

World Ending Stocks & % Stocks/Use

Record large carryover ending stocks of 281.89 mmt (37.91% stocks-to-use) from “old crop” MY 2017/18 have upheld total World supplies and projected ending stock balances – which are projected to be 275.61 mmt (37.29% stocks-to-use) in “current” MY 2018/19.

Percent ending stocks-to-use of 37.91% in “old crop” MY 2017/18 are a record high in the era since the early 1970s, while 37.29% stocks/use in “current” MY 2018/19 are the 2nd highest since the U.S. farm crisis years of the mid-1980s, and the 3rd highest since the early 1970s (Figures 13, 14a-b & 15a-b).  World

World-Less-China Ending Stocks & % Stocks/Use

Considering World wheat ending stocks adjusted for Chinese reserves (i.e., “World-Less-China”) provides a much tighter picture of “accessible” or “available” World wheat supply-demand balances than the aggregate “World” measure.   “World-Less-China” wheat carryover ending stocks are calculated to be 135.61 mmt in “current” MY 2018/19 – a five (5) year low.

This estimate of 135.61 mmt in World-Less-China ending stocks in “current” MY 2018/10 is down from a record high of 150.62 mmt in “old crop” MY 2017/18, and from the range of 143.67 – 148.00 mmt over previous three marketing years.  World-Less-China wheat ending stocks fell to 124.48 mmt in the tight stocks year of MY 2012/13, and 130.56 mmt for the following year in MY 2013/14.   Chinese wheat ending stocks comprised 49.2% of total World ending stocks of 275.61 mmt in “current” MY 2018/19, and 53.4% of World wheat stocks of 281.89 mmt in “old crop” MY 2017/18 (Figure 15ab).

“World-Less-China” percent (%) ending stocks-to-use are estimated to be an 11 year low of 22.08% in “current” MY 2018/19 – down from 24.19% in “old crop” MY 2017/18, and 23.77% in MY 2016/17.  This compares to aggregate World Stocks-to-Use of 37.29% in “current” MY 2017/18, a record high of 37.91% in “old crop” MY 2017/18, and 35.49% in MY 2016/17.

 

U.S. Exports of All Wheat & HRW Wheat

Export shipments of U.S. wheat have been running behind the pace needed to meet USDA export projections for “current” MY 2018/19 for U.S. Wheat overall, and for Hard Red Winter (HRW) wheat in particular.   According to USDA Foreign Agricultural Service (FAS) data, through April 25th forward sales of U.S. exports are still nearly on track to meet USDA forecasts of 945 million bushels (mb) in the “current” 2018/19 marketing year (MY) – ending on May 31, 2019 (Tables 1-1a, Figures 9ab-10ab).

Concerning all U.S. Wheat exports, as of April 25th, total shipments to date plus forward sales are projected to have reached 99.0% (935.6 mb) of the USDA’s April 9th WASDE report forecast of 945 mb for MY 2018/19 with 90.4% of the marketing year completed (i.e., 47/53 weeks).  However, actual physical shipments to date of 758.7 mb amount to only 78.1% of the USDA forecast, with a shipment rate of 31.1 mb per week needed through the end of “current” MY 2018/19 to meet the USDA target of 945 mb.   For the weeks of April 11th, 18th and 25th, U.S. Wheat shipments of 18.4 mb, 29.2 mb and 20.4 mb were less than the weekly average of 31.1 mb needed to meet the USDA’s projections by May 31, 2019.

Focusing on U.S. HRW wheat exports, as of April 25th, total shipments to date plus forward sales are projected to have reached 103.0% (340.1 mb) of the USDA’s April 9th WASDE report forecast of 330 mb for MY 2018/19 with 90.4% of the marketing year completed (i.e., 47/53 weeks).  However, actual physical shipments to date of 259.8 mb amount to only 78.7% of the USDA forecast, with a shipment rate of 11.7 mb per week needed through the end of “current” MY 2018/19 to meet the USDA target of 330 mb.   For the weeks of April 11th, 18th and 25th, U.S. HRW Wheat shipments of 5.5 mb, 15.4 mb and 8.5 mb averaged 9.8 mb/week, less than the weekly average of 11.7 mb needed to meet the USDA’s projections by May 31, 2019.

 

U.S. Wheat Supply-Demand & Prices

The USDA released their wheat production, supply-demand, and price projections for the U.S. for “current” MY 2018/19 in the April 9th WASDE (World Agricultural Supply and Demand Estimates report) (Tables 1-1a).  The USDA also released its preliminary projections for the “new crop” MY 2019/20 at it’s February 22nd Agricultural Outlook Conference (Table 1a).  The “new crop” 2019/18 marketing year for wheat represents the June 1, 2019 through March 31, 2020 period.   The next USDA projection for “new crop” MY 2019/20 will be provided in the upcoming May 10th USDA WASDE report.

These preliminary forecasts indicate USDA’s expectations of approximately 4.3% lower planted acreage in 2019, marginally lower production and total use in “new crop” MY 2019/20, large ending stocks, lower % ending stocks-to-use, and unchanged U.S. wheat prices.

U.S. Wheat Acreage

The USDA’s Prospective Plantings report on Friday, March 29, 2019 projected U.S. wheat plantings are forecast to be are record low of 47.754 million acres (ma) in 2019, down 4.3% from 47.800 million acres (ma) in 2018, down from the previous low of 46.052 ma in 2017, but down from 50.116 ma in 2016 (Tables 1-1a, Figures 5-6)Harvested acres are forecast at 38.744 ma in 2019 (84.68% harvested-to-planted).  This amount of harvested acres is projected to be up from 39.605 ma in 2018 (82.86% harvested-to-planted), and the record low of 37.555 ma (81.55% harvested-to-planted) in 2017, but still down from 43.848 ma in 2016 (87.49% harvested-to-planted) (Tables 1a-b, Figure 6).

Also in the March 29th Prospective Plantings report, the USDA projected that 31,504,000 acres of Hard Red Winter (HRW) wheat were seeded in the U.S. in fall 2018 – down from 32,535,000 acres in fall 2017, and 32,726,000 acres in fall 2016 (Figure 6).

The 2019 U.S. average wheat yield is forecast to be 47.8 bu/ac, up from 47.6 bu/ac in 2018, and 46.4 bu/ac in 2017, but down from the 2016 record high of 52.7 bu/acre (Tables 1a-b, Figure 7).

U.S. Wheat Production & Total Supplies

Wheat production in the U.S. in 2019 is forecast to be 1.852 billion bushels (bb), down from 1.884 bb in 2018, and up from 1.741 bb in 2017, but down from 2.309 bb in 2016 (Tables 1a-b, Figure 8).  With adjustments for updated beginning stocks estimates, projected “new crop” MY 2019/20 total supplies are forecast to be 3.084 bb, down from forecast “current” MY 2018/19 total supplies of 3.128 bb, and up from 3.079 bb in “old crop” MY 2017/18.  However, 3.084 bb in U.S. total wheat supplies in “new crop” MY 2019/20 would be down from 3.402 bb in MY 2016/17.

U.S. Wheat Total Use

U.S. Wheat total use is projected to be 2.108 bb in “new crop” MY 2019/20, up from a projection of 2.042 bb in “current” MY 2018/19, and from 1.980 bb in “old crop” MY 2017/18, but down from 2.222 bb in MY 2016/17 (Tables 1a-b, Figures 9a-b).

U.S. Exports

In “new crop” MY 2019/20, U.S. wheat exports are forecast to be 975 million bushels (bu), up from 945 mb in “current” MY 2018/19, and up from 901 mb in “old crop” MY 2017/18, while being down from 1.051 bb in MY 2016/17 (Tables 1-1a, Figures 9a-b, & 10a).

CommentaryKSU: U.S. wheat exports fell to 47-year lows of 778 mb and 864 mb in MY 2015/16 and MY 2014/15, respectively, down to levels just marginally above those pre-“Russian Grain Deal” levels in 1972.  This is more evidence of the only marginally competitive position that U.S. wheat exports find themselves in among foreign export competitors in recent years.

U.S. Food Use

Food Use of U.S. wheat is projected to be 975 million bushels (mb) in “new crop” MY 2019/20, up marginally from 965 mb in “current” MY 2018/19, from 964 mb in “old crop” MY 2017/18, and 949 mb in MY 2016/17 (Table 1-1a, Figure 9ab).

U.S. Feed & Residual Use

Feed & Residual Use of U.S. wheat is projected to be 90 mb in “new crop” MY 2019/20, up from 70 mb in “current” MY 2018/19, up from 51 mb in “old crop” MY 2017/18, but less than 160 mb in MY 2016/17 (Table 1-1a, Figure 9ab).

CommentaryKSU: If 2019 U.S. corn plantings and 2019 corn production decline significantly, then U.S. wheat feeding may increase to “fill the gap”.     

U.S. Ending Stocks & % Stocks-to-Use

With an adjustment by KSU for new WASDE report information on beginning stocks, USDA projected “new crop” MY 2019/20 ending stocks to be 976 mb (46.02% S/U).  This projection is down from “current” MY 2018/19 ending stocks of 1.087 bb (53.24% S/U), both of which are down from 1.099 bb in “old crop” MY 2017/18 (55.50% S/U), and from 1.181 bb in MY 2016/17 (53.14% stocks/use) (Tables 1-1a, Figures 11 & 12).

CommentaryKSU: This projection of 976 mb in U.S. wheat ending stocks in “new crop” MY 2019/20 is the lowest in four (4) years – since 976 mb (49.99% stocks/use) in MY 2015/16.  However, it remains that until either a major wheat production shortfall and/or what could be an “unanticipated” surge in U.S. wheat exports occurs, the U.S. will likely remain in the current “large supply – large ending stocks” situation.

U.S. Wheat Prices

United States’ wheat prices are projected to be $5.20 /bu in “new crop” MY 2019/20, equal to the midpoint of $5.20 /bu in the range of $5.15-$5.25 /bu in “current” MY 2018/19.  This would be up from $4.72 /bu in “old crop” MY 2017/18, from $3.89 in MY 2016/17, and $4.89 /bu in MY 2015/16, but still down from $5.99 /bu in MY 2014/15 (Tables 1-1a, Figures 11 & 12).

 

“Alt” KSU Scenario for U.S. Wheat S/D in “New Crop” MY 2019/20

To represent possible alternative outcomes for “new crop” MY 2019/20 in anticipation of the USDA May 10th WASDE report, a projected USDA scenario with a potential KSU-Scenario are provided (Tables 1-1a & Figure 11).

USDA Scenario (75% probability):   This scenario assumes:

2019 U.S. Planted Acres                   = 45.754 million acres

2019 U.S. Harvested Acres              = 39.733 million acres

2019 U.S. Yield                                 = 47.8 bushels/acre

MY 2019/20 Beginning Stocks         = 1.087 billion bushels (bb)

MY 2019/20 Production                   = 1.852 bb

MY 2019/20 Imports                        = 0.145 bb

MY 2019/20 Total Supplies            = 3.084 bb

MY 2019/20 Food Use                     = 0.975 bb

MY 2019/20 Seed Use                     = 0.068 bb

MY 2019/20 Exports                        = 0.975 bb

MY 2019/20 Feed & Residual Use   = 0.090 bb

MY 2019/20 Total Use                    = 2.108 bb

MY 2019/20 Ending Stocks              = 0.976 bb

MY 2019/20 % Stocks-to-Use           = 46.02%

MY 2019/20 Season Average Price = $5.20 / bushelUSDA; & $5.60 /buKSU

 

KSU Scenario “LOWER Acreage & Production” Scenario (25% probability):

This scenario assumes:

2019 U.S. Planted Acres                   = 45.754 million acres

2019 U.S. Harvested Acres              = 39.733 million acres

2019 U.S. Yield                                 = 44.0 bushels/acre                (down 3.89 bu/ac vs USDA)

MY 2019/20 Beginning Stocks         = 1.087 billion bushels (bb)

MY 2019/20 Production                   = 1.704 bb                               (down 0.148 mb vs USDA)

MY 2019/20 Imports                        = 0.145 bb

MY 2019/20 Total Supplies            = 2.936 bb                               (down 0.148 mb vs USDA)

MY 2019/20 Food Use                     = 0.975 bb

MY 2019/20 Seed Use                     = 0.068 bb

MY 2019/20 Exports                        = 0.975 bb

MY 2019/20 Feed & Residual Use   = 0.090 bb

MY 2019/20 Total Use                    = 2.108 bb                              

MY 2019/20 Ending Stocks              = 0.828 bb                               (down 0.081 ma vs USDA)

MY 2019/20 % Stocks-to-Use           = 39.28%                                 (down 6.74% vs USDA)

MY 2019/20 Season Avg. Price      = $6.00 / bushel                     (up $1.20 /bu vs USDA)

 

KSU Weekly Grain Market Update (5/3/2019) – 2019 Corn Planting Problems, Kansas Wheat Tour Results, and Positive Feedgrain Export Trends

Corn Market Decision Time re: Planting Prospects

and

Examining 2019 Kansas Wheat Tour Results

Daniel M. O’Brien, Extension Agricultural Economist-Kansas State University

May 3, 2019

Point #1) Delayed U.S. Corn Plantings in May 2019

The situation with 2019 U.S. corn plantings as of May 3, 2019 is the following.  First, as of April 28th the USDA reports that corn plantings are delayed in several key corn producing states in the U.S. Corn Belt – most notably in Illinois (9% vs 43% 5-yr avg), Minnesota (2% vs 24% 5-yr avg), Indiana (2% vs 17% 5-yr avg), and Ohio (2% vs 13% 5-yr avg).  Plantings in Iowa, Kansas, Missouri, Nebraska, North Carolina, North Dakota, and Tennessee are also trailing the most recent 5 year average pace, but not a seriously as in IL, MN, IN, and OH.  With credible weather service forecasts for significant rainfall over many of these central and eastern U.S. Corn Belt states over the next week, prospects for timely plantings of 2019 U.S. corn acres are declining in a quantifiable manner.

Corn futures markets have not responded to this decline in 2019 U.S. corn planting and associated production prospects.  Within the next 1-2 weeks it seems these issues of 2019 U.S. corn planting prospects, how plantings could affect 2019 U.S. corn production, supply-demand balances, and expected corn prices for what remains of the “current crop” 2018/19 marketing year (MY) through August 31, 2019, and for “new crop” MY 2019/20 will all likely have to be dealt with by the corn futures and cash markets.

If the 2019 U.S. corn crop is planted in a timely manner, then it will have fully adequate soil moisture to begin development with – and which could provide for growth from May through June and into July.

However, if instead of the 92.792 million acres (ma) projected for year 2019 by the USDA in the Prospective Plantings report on March 29th, actual 2019 U.S. corn plantings are reduced by 5% down to 88.152 ma, or by 10% down to 83.513 ma, it would likely have significant, tangible, negative impacts on 2019 U.S. corn production.

At its current projection of 92.792 ma planted, 84.723 ma harvested (91.30% harvested to planted acres), and 176.4 bu/ac yields, the USDA is implicitly forecasting U.S. corn production in year 2019 would be 14.945 billion bushels

However, IF 2019 U.S. corn plantings decline 5% to 88.152 ma, then with 91.30% harvested-to-planted acres, there would be 80.486 ma harvested.  And with the same 176.4 bu/ac yield, U.S. corn production would be 14.198 bbdown 747 mb from the initial USDA implicit forecast of 14.945 bb.

In addition, IF U.S. corn plantings are down 10% from the USDA projection to 83.513 ma, then using the same harvested-to-planted acres factor of 91.30% to figure 2019 U.S. corn harvested acres at 76.247 ma, and using 176.4 bu/ac again, then 2019 U.S. corn production would fall to 13.450 bb down 1.495 bb from the USDA’s initial levels of 14.945 bb 2019 U.S. corn production.

Therefore, either a 5% or especially a 10% reduction in U.S. 2019 Corn planted acres would have significant negative impacts on U.S. corn production in 2019, leading to much tighter U.S. corn ending stocks, and higher cash prices as usage would be rationed on smaller supplies.

Point #2) Examining the Results of the 2019 Kansas Wheat Tour

This week’s 2019 Kansas Wheat Tour projected the 2019 Kansas wheat yield to be 47.2 bu/ac, with an implicit harvested acreage estimate of 6.494 million acres (92.8% harvested-to-planted acres off of 7.000 ma planted), and 2019 Kansas wheat production of 306,500,000 bushels (i.e., 306.5 million bushels or mb).   According to KSU Extension Agronomist Romulo Lulato ( lollato@ksu.edu), the Kansas wheat crop is 3 to 4 weeks behind normal in maturity, with the next month being crucial to crop development and possible disease threats.

Since year 2014, the annual Kansas Wheat Tour has UNDER-forecast Kansas wheat production by 10.4% (in 2015), 18.2% (in 2016), 15..6% (in 2017), and 12.3% (in 2018).  The reason for this under estimate of Kansas production in recent years has been a combination of underestimated yields, and especially low projections of harvested acreage.   During the years 2011-2018 period the Kansas Wheat Tour underestimated final Kansas wheat harvested acres each year, ranging from 4% too low in 2016 to 13.7% in 2011.  For instance, in 2018 Kansas harvested acres of wheat were implicitly forecast to be 6.576 ma, but ended up being 7.300 ma as estimated by USDA.  Following the same trend, it is possible the implicit harvested acreage of 6.494 ma for wheat in Kansas for 2019 could end up being too low.

Finally, total Hard Red Winter (HRW) wheat production in the central and southern plains states of Nebraska, Colorado, Kansas, Oklahoma and Texas is forecast to be 638 million bushels (mb) in 2019, up from 523 mb for these states in 2018, but comparable to 635 mb in 2017, 870 mb in 2016, and 655 mb in 2015.  The 2019 forecast for Texas came from KSU Calculations, while those for Kansas, Nebraska, Colorado, and Oklahoma came from the 2019 Kansas Wheat Tour.

An additional factor to watch as the 2019 Kansas wheat crop develops will be the levels of protein and/or other quality factors.  It is likely that significant amounts of the high protein / good quality 2018 Kansas wheat crop likely still in storage in Kansas grain elevators.  As a result, IF the 2019 Kansas wheat crop were of lower protein / quality, THEN it is likely that carryover supplies from the higher protein/higher quality 2018 crop would be blended with the 2019 crop to enhance marketability.

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Grain market summary notes, charts and comments supporting the Weekly Grain Market Review from KSU Ag Economics presented in the KSU Agriculture Today radio program to be played on Friday, May 3, 2019 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter

The recorded radio program will be aired at 10:03 a.m. central time, Friday, May 3, 2019 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the April 26th recording is be available at the KSU Agriculture Today website at this time.

Following are sections of the Working notes for this week’s radio program up on the KSU AgManager.info website…

KSU Weekly Grain Market Analysis Through 4/26/2019 – Watching Weather for Corn Planting plus Positive Sorghum and HRW Wheat Exports Weeks

Grain market summary notes, charts and comments supporting the Weekly Grain Market Review from KSU Ag Economics presented in the KSU Agriculture Today radio program to be played on Friday, April 26, 2019 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter

The recorded radio program was aired at 10:03 a.m. central time, Friday, April 26, 2019 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the April 26th recording is be available at the KSU Agriculture Today website at this time.

Following are sections of the Working notes for this week’s radio program up on the KSU AgManager.info website…

KSU Wheat Market Outlook in March 2019 – Unfilled Hopes on U.S. Exports With Weather-Crop Uncertainty Approaching

This report provides an analysis of U.S. and World wheat supply-demand factors and market price prospects following the USDA’s March 8, 2019 Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports, and the results of the February 21-22, 2019 USDA Agricultural Outlook Forum.   This article will be available in full on the KSU AgManager website (http://www.agmanager.info/).

Following is a summary – with the full analysis-article for Wheat Market Outlook in March 2019 to be found at this web location:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter

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Wheat Market Outlook in March 2019

Daniel O’Brien – Extension Agricultural Economist, K-State Research and Extension

March 23, 2019

A. Wheat Market Overview

Hard red winter wheat market prices in the U.S. have weakened considerably since late January 2019.  Ongoing weakness in export shipments of U.S. wheat on the one hand, and declining prospects for future U.S. wheat export sales on the other, have been the main causes along with general bearishness across grain futures prices. 

In Fall-Winter 2018 prospects for short wheat crops among some major World wheat exporters improved prospects for U.S. export sales in the later part of the “current” 2018/19 marketing year (MY).  “Current” MY 2018/19 began on 6/1/2018 and will finish on 5/31/2019.  In particular, short crops in the Black Sea Region countries of Russia, Ukraine and Kazakhstan, parts of the European Union (France and other countries), and Australia were of concern. 

However, a combination of #1) large carryover stocks in World markets from “old crop” MY 2017/18, #2) successful wheat crops in many other exporting and importing countries in the World, and #3) the willingness of the Black Sea Region countries to sell down their domestic reserve stocks to maintain their export market shares, worked together to limit any improvement in U.S. wheat exports, and consequently limit any price gains from such an event. 

The selling off of domestic inventories may have allowed Russia and other countries to have maintained their export market shares in “current” MY 2018/19, but it makes them more vulnerable to any repeated crop shortfalls that could occur in “new crop” MY 2019/20 – which will begin on June 1, 2019.   The risk of tightening stocks is that these countries place themselves at risk to the effect of market shortfalls in the future – because they have reduced their “buffer” stocks. 

Going forward, it seems that wheat production risk in the major exporting countries – including the United States, Russia, Ukraine, Australia, and the European Union – will be the key driving factor in U.S. grain markets in year 2019.  The possibility of rumored sizable increases in Chinese purchases of U.S. wheat and other agricultural products IF a trade agreement between the U.S. and China is completed could provide a surprise boost to U.S. wheat exports in coming months.  But it seems judicious to not count on that occurring until such a trade agreement is finalized.

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B. Trends in CME Kansas Hard Red Winter Wheat Futures

Prices for the MAY 2019 Chicago Mercantile Exchange (CME) Kansas Hard Red Winter (HRW) Wheat futures contract declined from a high of $5.23 per bushel (/bu) on January 25, 2019 to a low of $4.18 ¼ /bu on March 12th, a drop of $1.04 ¼ or 20%.  Since then, MAY 2019 CME HRW wheat has moved higher to a close of $4.45 on March 22nd – down 15% from late-Jan. 2019 highs (Figures 1-2-3abc)

Currently CME MAY 2019 Kansas HRW Wheat futures are trading near historic lows since the beginning of year 2007.  Prices for MAY 2019 futures in the $4.40-$4.50 range compare to longter term lows of: a) $4.33 /bu for the MAY 2007 contract on 4/2/2007; b) $3.98 ¾ /bu for MAY 2017 on 4/21/2019; and $4.04 /bu for DEC 2017 on 11/28/2018.   IF crop conditions and crop progress for the 2019 U.S. HRW Wheat crop are “good” in April 2019 it is possible that prices could AGAIN decline to $4.00 /bu or less (Figures 1-2).  

It is notable that a record large net short (or sell) position is held by Management Money (Speculator) traders in CME HRW wheat according to the most recent March 19th Commodity Futures Trading Commission (CFTC) Commitment of Traders Report (Figures 3abc).  Actual short (sell) positions held by Management Money (Spec) traders are near record levels, combined with declining long positions on these contracts. This report can be found at the following web address: https://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm

Taken together, these data indicate a predominant “bearishness” among Management Money (Spec) traders in the CME Kansas HRW Wheat futures contract.  This consensus “bearish market narrative” or “pessimistic group mindset” would have to be overcome or changed by some combination of World and U.S. wheat supply-demand factors in the wheat market for CME futures to begin to move appreciably higher.   The key issue to watch in these markets will likely be whether there continue to be successful aggregate crop production prospects among major World wheat producing, exporting, and importing countries throughout calendar year 2019.

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C. Kansas HRW Wheat Cash Price & Basis Levels

In central Kansas on March 22nd – the 10th trading day a full two weeks after the USDA reports – Kansas cash wheat price terminal quotes for ordinary U.S. no. 1 HRW ranged from $4.19 to $4.55 per bushel – with basis ranging from $0.26 under to $0.10 over MAY 2019 KS HRW Wheat futures.  Cash wheat prices in eastern Kansas grain terminals ranged from $4.30 to $4.50 /bu with basis ranging from $0.15 under to $0.05 over MAY 2019 futures.  These prices are still up 19% to 22% from the range of $3.42 ¼ to $3.83 ¼ /bu in late December 2017 in eastern and central Kansas – with basis at that time being from $0.80 under to $0.39 under nearby MARCH 2018 futures (Figure 2).  

In comparison, in western Kansas on March 22nd, bids for ordinary U.S. no. 1 HRW wheat at selected grain elevators ranged from $3.92 to $4.19 /bu, with basis being $0.55 under to $0.28 under MAY 2019 futures.  Recent wheat cash price bids in western Kansas are up 13% to 15% from $3.47 to $3.64 /bu in late December 2017 in this same area – when local basis varied from $0.85 under to $0.58 under MARCH 2018 futures. 

A Hard White Wheat (HWW) grain terminal bid was available in Wichita, Kansas on 3/22/2019 for $4.4000 /bu, with a basis of $0.05 /bu under MAY 2019 Kansas HRW wheat futures.

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D. World Wheat Production

In aggregate, forecast global World wheat production in “current” MY 2018/19 of 733.00 mmt is down 3.9% from last year’s record high of 763.07 mmt.   Lower production has occurred in the “current” 2018/19 marketing year (which began June 1, 2018) in some major exporting countries such as Australia (down 18.8% to 17.30 million metric tons or ‘mmt’ from a year ago) and the European Union (down 9.0% in total to 137.60 mmt).  In the Black Sea Region, wheat production is down in Russia (down 15.6% to 71.69 mmt), Ukraine (down 7.3% to 25.00 mmt), and Kazakhstan (down 5.5% to 13.95 mmt) (Figures 13, 14a-b & 15a-b)

These declines were partially offset by production increases projected for exporters such as the United States (up 8.3% to 51.29 mmt or 1.884 billion bushels, i.e., ‘bb’), Argentina (up 5.4% to 19.5 mmt), and Canada (up 6.1% to 31.80 mmb).  Production in China is projected to be down 2.2% to 134.43 mmt, while India wheat production is forecast to be up 1.2% to 99.70 mmt. 

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E. World Wheat Ending Stocks & % Stocks-to-Use

Record large carryover ending stocks of 279.61 mmt (37.56% stocks-to-use) from “old crop” MY 2017/18 have upheld total World supplies and supply-demand balances – which are projected to be 270.53 mmt (36.45% stocks-to-use) in “current” MY 2018/19.  Percent ending stocks-to-use of 37.56% in “old crop” MY 2017/18 were record high in the modern era since the early 1970s, while 34.46% stocks/use in “current” MY 2018/19 are the 2nd highest since the farm crisis years of the mid-1980s, and the 4th highest in the modern era (Figures 13, 14a-b & 15a-b).  

In response to lower production, Russia has chosen to “sell down” it’s carryover wheat stocks to maintain market position in global trade.  Russia wheat ending stocks are projected to be 6.55 mmt in “current” MY 2018/19, down from 11.87 mmt in “old crop” MY 2017/18, and from 10.83 mmt in MY 2016/17.  In the short run this strategy of “mining” of carryover stocks by Russia DOES allow it to maintain World export market share in “current” MY 2018/19.  HOWEVER, this strategy ALSO may leave future Russian supply-demand balances more vulnerable to any domestic crop shortfall that may occur in “new crop” MY 2019/20 and succeeding years.

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F. “World-Less-China” Wheat Ending Stocks & % Stocks-to-Use

Considering World wheat ending stocks adjusted for Chinese reserves (i.e., “World-Less-China”) provides a much tighter picture of “accessible” or “available” World wheat supply-demand balances than the aggregate “World” measure.   “World-Less-China” wheat carryover ending stocks are calculated to be 130.53 mmt in “current” MY 2018/19 – down from 148.35 mmt in “old crop” MY 2017/18.  These figures compare to World ending stocks of 270.61 mmt in “current” MY 2018/19, and 249.61 mmt in “old crop” MY 2017/18 (Figure 15ab).  

“World-Less-China” percent (%) ending stocks-to-use are estimated to be and 11 year low of 21.15% in “current” MY 2018/19 – down from 23.80% in “old crop” MY 2017/18.  This compares to aggregate World Stocks-to-Use of 36.45% in “current” MY 2017/18, and 37.56% in “old crop” MY 20017/18.

This “tightness” in “World-Less-China” wheat stocks along with tighter exportable supplies in the European Union and the Black Sea region appear to have provided quiet support to World wheat market prices, but has not as of yet caused any major rallies.

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G. 2019 U.S. Winter Wheat Conditions

Prospects for the 2019 U.S. winter wheat crop are mostly “Fair to Good” at this time in the southern and central plains region of the country.  Reports from the USDA National Agricultural Statistics Service (NASS) in Kansas for the week ending March 17, 2019 indicated that a survey of observers in the state of winter wheat acreage rated the crop as 5% “excellent”, 44% “good”, 40% “fair”, 8% “poor”, and 3% “very poor”.   In Oklahoma, the HRW wheat crop was rated as 5% “excellent”, 55% “good”, 35% “fair”, 5% “poor”, and 0% “very poor”.  Similarly, in Texas, the HRW wheat crop was rated as 6% “excellent”, 27% “good”, 44% “fair”, 17% “poor”, and 6% “very poor”.  

As the 2019 hard red winter wheat crop breaks dormancy and begins spring growth in late March-early April, the condition in which the crop survived somewhat challenging winter conditions will become apparent.  The USDA’s National Agricultural Statistics Service (NASS) Crop Production reports first and preliminarily on April 9th, and then especially as the crop is more developed on May 10th, June 11th and July 11th will provide more substantiated information on 2019 U.S. HRW Wheat production prospects.

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H. U.S. Wheat Exports

Export shipments of U.S. wheat have been running behind the pace needed to meet USDA export projections for U.S. Wheat overall, and for Hard Red Winter (HRW) wheat in particular.   According to USDA Foreign Agricultural Service (FAS) data, through March 14th forward sales of U.S. exports are still on track to meet USDA forecasts of 965 million bushels (mb) in the “current” 2018/19 marketing year (MY) – ending on May 31, 2019 (Tables 1-1a, Figures 9ab-10ab)

Total shipments to date plus forward sales are projected to have reached 88.1% (850.4 mb) of the USDA’s forecast on March 14th with 78.8% of the marketing year completed (i.e., 41/52 weeks).  However, actual physical shipments to date of 638.4 mb amount to only 66.1% of the USDA forecast, with a shipment rate of 29.7 mb per week needed through the end of “current” MY 2018/19 to meet the USDA target of 965 mb.   For the weeks of March 7th and 14th, U.S. Wheat shipments of 27.3 mb and 13.1 mb were behind the weekly average of 29.7 mb needed to meet the USDA’s projections by May 31, 2019.  Shipments of U.S. HRW Wheat are in a similar situation, as strong weekly shipments are still needed through August 31st to attain the USDA U.S. export projection of 320 mb in “current” MY 2018/19.

*****

I. U.S. Wheat Supply-Demand & Prices

The USDA released their wheat production, supply-demand, and price projections for the U.S. for “current” MY 2018/19 in the March 8th WASDE (World Agricultural Supply and Demand Estimates report) (Tables 1-1a).  The USDA also released its preliminary projections for the “new crop” MY 2019/20 at it’s February 22nd Agricultural Outlook Conference (Table 1a).  The “new crop” 2019/18 marketing year for wheat represents the June 1, 2019 through March 31, 2020 period.   These preliminary forecasts indicate USDA’s expectations of 1%-2% lower planted acreage in 2019, approximately 1% higher production and total use in “new crop” MY 2019/20, and marginally higher prices.

U.S. Wheat Acreage

U.S. wheat plantings are forecast to be 47.000 million acres (ma) in 2019, down 1.67% from 47.800 million acres (ma) in 2018, up from the record low of 46.052 ma in 2017, but down from 50.119 ma in 2016 (Tables 1-1a, Figures 5-6)Harvested acres are forecast at 39.800 ma in 2019 (84.68% harvested-to-planted).  This amount of harvested acres is projected to be up 0.5% from 39.605 ma in 2018 (82.86% harvested-to-planted), and the record low of 37.555 ma (81.55% harvested-to-planted) in 2017, but still down from 43.848 ma in 2016 (87.49% harvested-to-planted) (Tables 1a-b, Figure 6).   The 2019 U.S. average wheat yield is forecast to be 47.8 bu/ac, up from 47.6 bu/ac in 2018, and 46.4 bu/ac in 2017, but down from the 2016 record high of 52.7 bu/acre (Tables 1a-b, Figure 7).

The USDA’s Prospective Plantings report will be released by the USDA on Friday, March 29, 2019.   Average pre-report projections of U.S. total wheat for 2019 seedings total 46.9 million acres (ma), with estimates ranging from 45.9 to 48.0 ma. Preliminary estimates of 2019 winter wheat seedings (average = 31.5 ma, 30.6 – 32.5 ma range), spring wheat (average = 13.4 ma, 12.3 – 13.9 ma range), and durum acreage (average 2.0 ma, 1.6 – 2.3 ma range).

In its Winter Wheat and Canola Seedings report on January, 11, 2019, the USDA projected that 31,290,000 acres of Hard Red Winter (HRW) wheat were seeded in the U.S. in fall 2018 – down from 32,535,000 acres in fall 2017, and 32,726,000 acres in fall 2016 (Figure 6).  The upcoming March 29th Prospective Plantings report will provide more information on HRW wheat seedings, as well as for soft red winter (SRW), hard red spring (HRS) wheat, and white wheat (WW) varieties.

U.S. Wheat Production & Total Supplies

Wheat production in the U.S. in 2019 is forecast to be 1.902 billion bushels (bb), up from 1.884 bb in 2018, and up from 1.741 bb in 2017, but down from 2.309 bb in 2016 (Tables 1a-b, Figure 8).  Projected “new crop” MY 2019/20 total supplies are forecast to be 3.097 bb, down from forecast “current” MY 2018/19 total supplies of 3.128 bb, and up from 3.079 bb in “old crop” MY 2017/18.  However, 3.097 bb in U.S. total wheat supplies in “new crop” MY 2019/20 would be down from 3.402 bb in MY 2016/17.

U.S. Wheat Total Use

U.S. Wheat total use is projected to by 2.108 bb in “new crop” MY 2019/20, up from a projection of 2.073 bb in “current” MY 2018/19, and from 1.980 bb in “old crop” MY 2017/18, but down from 2.222 bb in MY 2016/17 (Tables 1a-b, Figures 9a-b).

 U.S. Exports

In “new crop” MY 2019/20, U.S. wheat exports are forecast to be 975 million bushels (bu), up from 965 mb in “current” MY 2018/19, and up from 901 mb in “old crop” MY 2017/18, while being down from 1.051 bb in MY 2016/17 (Tables 1-1a, Figures 9a-b, & 10a).

CommentaryKSU: U.S. wheat exports fell to 47-year lows of 778 mb and 864 mb in MY 2015/16 and MY 2014/15, respectively, down to levels just marginally above those pre-“Russian Grain Deal” levels in 1972.  This is more evidence of the only marginally competitive position that U.S. wheat exports find themselves in among foreign export competitors in recent years. 

U.S. Food Use

Food Use of U.S. wheat is projected to be 980 million bushels (mb) in “new crop” MY 2019/20, up marginally from 965 mb in “current” MY 2018/19, from 964 mb in “old crop” MY 2017/18, and 949 mb in MY 2016/17 (Table 1-1a, Figure 9ab).

U.S. Feed & Residual Use

Feed & Residual Use of U.S. wheat is projected to be 90 mb in “new crop” MY 2019/20, up from 80 mb in “current” MY 2018/19, up from 51 mb in “old crop” MY 2017/18, but less than 160 mb in MY 2016/17 (Table 1-1a, Figure 9ab).

CommentaryKSU: With the USDA’s forecast of moderately tighter U.S. corn and total feedgrain supplies along with moderate support for feedgrain prices, they are anticipating that feeding wheat to livestock will become more marginally more economical in “new crop” MY 2019/20 than in the current marking year.   

U.S. Ending Stocks & % Stocks-to-Use

With an adjustment by KSU for new WASDE report information, USDA projected “new crop” MY 2019/20 ending stocks to be 989 mb (46.92% S/U).  This projection is down from “current” MY 2018/19 ending stocks of 1.055 bb (50.89% S/U), both of which are down from 1.099 bb in “old crop” MY 2017/18 (55.50% S/U), and from 1.181 bb in MY 2016/17 (53.14% stocks/use) (Tables 1-1a, Figures 11 & 12).

CommentaryKSU: This projection of 989 mb in U.S. wheat ending stocks in “new crop” MY 2019/20 is the lowest in four (4) years – since 976 mb (49.99% stocks/use) in MY 2015/16.  However, it remains that until either a major wheat production shortfall or what could be an “anticipated” surge in U.S. wheat exports occurs, the U.S. will likely remain in the current “large supply – large ending stocks” situation.

U.S. Wheat Prices

United States’ wheat prices are projected to be $5.20 /bu in “new crop” MY 2019/20, up from the midpoint of $5.15 /bu in the range of $5.10-$5.20 /bu in “current” MY 2018/19.  This would be up from $4.72 /bu in “old crop” MY 2017/18, from $3.89 in MY 2016/17, and $4.89 /bu in MY 2015/16, but still down from $5.99 /bu in MY 2014/15 (Tables 1-1a, Figures 11 & 12).

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J. “Alt” KSU Scenario for U.S. Wheat S/D in “New Crop” MY 2019/20

To represent possible alternative outcomes from the USDA’s March 8th WASDE and February 22nd Agricultural Profitability Conference projections.  One potential KSU-Scenario for U.S. wheat supply-demand and prices is presented in comparison to the USDA forecast for “new crop” MY 2019/20 (Tables 1-1a & Figure 11).    

USDA Scenario (50% probability):   This scenario assumes:  

2019 U.S. Planted Acres                   = 47.000 million acres

2019 U.S. Harvested Acres              = 39.800 million acres

2019 U.S. Yield                                 = 47.8 bushels/acre

MY 2019/20 Beginning Stocks         = 1.055 billion bushels (bb)

MY 2019/20 Production                   = 1.902 bb

MY 2019/20 Imports                        = 0.140 bb

MY 2019/20 Total Supplies            = 3.097 bb

MY 2019/20 Food Use                     = 0.980 bb

MY 2019/20 Seed Use                     = 0.063 bb

MY 2019/20 Exports                        = 0.975 bb

MY 2019/20 Feed & Residual Use   = 0.090 bb

MY 2019/20 Total Use                    = 2.108 bb

MY 2019/20 Ending Stocks              = 0.989 bb

MY 2019/20 % Stocks-to-Use           = 46.92%

MY 2019/20 Season Average Price = $5.20 / bushel

KSU Scenario “LOWER Acreage & Production” Scenario (50% probability):   This scenario assumes:  

2019 U.S. Planted Acres                   = 45.000 million acres (down 2.000 ma vs USDA)

2019 U.S. Harvested Acres              = 39.800 million acres (down 0.700 ma vs USDA)     

2019 U.S. Yield                                 = 47.8 bushels/acre

MY 2019/20 Beginning Stocks         = 1.055 billion bushels (bb)

MY 2019/20 Production                   = 1.821 bb (down 0.0.81 ma vs USDA)

MY 2019/20 Imports                        = 0.140 bb

MY 2019/20 Total Supplies            = 3.097 bb (down 0.081 ma vs USDA)

MY 2019/20 Food Use                     = 0.980 bb

MY 2019/20 Seed Use                     = 0.063 bb

MY 2019/20 Exports                        = 0.975 bb

MY 2019/20 Feed & Residual Use   = 0.090 bb

MY 2019/20 Total Use                    = 2.108 bb                              

MY 2019/20 Ending Stocks              = 0.908 bb (down 0.081 ma vs USDA)

MY 2019/20 % Stocks-to-Use           = 43.07% (down 3.85% vs USDA)

MY 2019/20 Season Avg. Price      = $5.20 / bushel (up $0.40 /bu vs USDA)

 

 

KSU Weekly Grain Market Analysis Through 3/17/2019 – Floods, Wet Fields and Prospects for Delayed Field Work / Corn Planting

Grain market summary notes, charts and comments supporting the Weekly Grain Market Review from KSU Ag Economics presented in the KSU Agriculture Today radio program to be played on Friday, March 15, 2019 are available on the Kansas State University www.AgManager.info website at the following KSU web address:

http://agmanager.info/grain-marketing/grain-market-outlook-newsletter/weekly-grain-market-review

The recorded radio program was aired at 10:03 a.m. central time, Friday, March 15, 2019 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the March 15th recording is be available at the KSU Agriculture Today website at this time.

Following are sections of the Working notes for this week’s radio program up on the KSU AgManager.info website…