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USDA Wheat Outlook


14 December 2012

USDA Wheat Outlook - December 2012USDA Wheat Outlook - December 2012

Projected US wheat ending stocks for 2012/13 are raised 50 million bushels, reflecting lower prospects for exports again this month.
USDA Wheat Outlook

US Exports Down and Ending Stocks Up

Projected US wheat ending stocks for 2012/13 are raised 50 million bushels, reflecting lower prospects for exports again this month. US exports are projected 45 million bushels lower for hard red winter wheat, 10 million bushels lower for soft red winter wheat, and 5 million bushels lower for hard red spring wheat. White wheat exports are raised 10 million bushels. The projected 2012/13 season-average farm price for all wheat is lowered 10 cents at the midpoint and the range is narrowed to $7.70 to $8.30 per bushel.

US wheat export prospects are reduced further, on increased competitor supplies and the slow pace of sales, whereas world wheat trade and stocks are projected higher this month. World 2012/13 wheat production is raised by 3.7 million ton with increases in China, Australia, and Canada. World wheat ending stocks for 2012/13 are projected higher by 2.8 million tons.

Domestic Situation and Outlook

2012/13 Supplies Are Unchanged from November

Total projected supplies for 2012/13, at 3.142 million bushels, are unchanged from December. Supplies for 2012/13 are 168 million bushels above 2011/12. Higher production (+270 million bushels) and imports (+18 million bushels) more than offset lower beginning stocks (-119 million bushels) year to year.

Projected supplies of hard red winter (HRW), hard red spring (HRS), and durum are up year to year, mostly because of higher production. HRW production is up 224 million bushels year to year, with higher planted area and smaller abandonment rate. Yields are also higher year to year because of the recovery from the severe drought on the Central and Southern Plains the previous year. HRS and durum production are up 107 million bushels and 32 million bushels, respectively, from a year ago with larger harvested areas and higher yields. Production for these two classes of wheat recovered from the previous year when excessive moisture and cool temperatures in the Northern Plains resulted in late seeding and prevented plantings.

Projected supplies of soft red winter (SRW) and white are down from 2011/12. Both classes had lower production for 2012/13, down 38 million bushels and 55 million bushels, respectively, on the year. Production is down for both classes because of smaller harvested area and lower yields. SRW planted area was down because a late row crop harvest delayed plantings in the Corn Belt and Northeast.

All-wheat 2012 production is estimated at 2,269 million bushels, unchanged from November, but up 270 million bushels from 2011. The all-wheat harvested area is estimated at 49.0 million acres, unchanged from November, but up 3.3 million acres from last year. The US all-wheat estimated yield is 46.3 bushels per acre for 2012, equaling the record 46.3 bushels for 2010. The yield is unchanged from November, but up 2.6 bushels from the previous year.

Total 2012/13 carryin stocks, estimated at 743 million bushels, are unchanged from November, but down 119 million bushels from 2011/12. Carryin stocks are down year to year for all classes except SRW. Projected all-wheat imports for 2012/13, at 130 million bushels, are unchanged from October, but up 18 million bushels from the previous year.

2012/13 Exports Down and Ending Stocks Up

Domestic use of wheat for 2012/13 is projected at 1,338 million bushels, unchanged from November, but 156 million bushels higher than last year. Food use for 2011/12 is projected at 950 million bushels, unchanged from November, but up 9 million bushels from 2011/12. The higher year-to-year food use reflects both continued high extraction rates due to high wheat prices and population growth. Feed and residual use is projected at 315 million bushels, unchanged from November. Projected feed and residual use for 2012/13 is 151 million bushels above feed and residual use for 2011/12.

Projected exports for 2012/13 are 1,050 million bushels, down 50 million bushels from November based on the pace to date and on increased prospects for competition from foreign supplies. Exports for 2012/13 are expected to be the same as in 2011/12.

Based largely on the pace of sales and shipments to date, HRW, SRW, and HRS exports are reduced 45 million bushels, 10 million bushels, and 5 million bushels, respectively. White exports are raised 10 million bushels. Exports of durum are unchanged.

Projected total US ending stocks for 2012/13, at 754 million bushels, are up from November by 50 million bushels with the lower projected exports. The 2012/13 ending stocks are up 11 million bushels from 2011/12.

All wheat ending stocks are projected up 2 percent from 2011/12. Durum, HRS, and SRW ending stocks are up from 2011/12 by 55 percent, 16 percent, and 16 percent, respectively. White and HRW ending stocks are down from 2011/12 by 20 percent and 14 percent, respectively.

2012/13 Price Range Is Narrowed in December

The projected range for the 2012/13 season-average farm price in December is narrowed to $7.70 to $8.30 per bushel compared with $7.75 to $8.45 per bushel last month. With this narrowing of the price range, the midpoint is lowered 10 cents per bushel with the larger expected carryout and weakening export prospects. This compares with the record $7.24 per bushel reported for 2011/12.

Winter Wheat Conditions Are Mixed

Winter wheat conditions as of November 25 are not as favorable as last year at this time. For all winter wheat seedings, 33 percent of the crop rated good to excellent compared to 52 percent a year ago. Twenty-six percent of the seedings this year are rated poor to very poor compared to 13 percent a year ago at this time.

This year’s crop conditions are quite variable by region of the country. Conditions for HRW seendings are not as good as for SRW seedings. For the Central and Southern Plains, the percentage of seedings rated poor to very poor are: Nebraska, 46; Oklahoma, 44; and Texas, 40; and Kansas, 25. South Dakota is even worse, with 64 percent of the crop rated poor to very poor.

SRW States that have the highest percentage of their seedings rated good to excellent include: Indiana, 72; Michigan, 72; Ohio, 70, Illinois, 69; North Carolina, 67; and Arkansas, 63. Conditions in the Pacific Northwest (PNW) are also much better than the Plains. The percentage of PNW rated good to excellent is: Idaho, 77; Washington, 67; and Oregon, 61.

USDA Wheat Baseline, 2012-21

Each year, USDA updates its 10-year projections of supply and utilization for major field crops grown in the United States, including wheat. A detailed discussion summarizing the historical forces determining US wheat supply and utilization, and the analysis underlying the wheat projections for 2012-21, is available at http://www.ers.usda.gov/topics/crops/wheat/usda-wheatbaseline,- 2012-21.aspx.

International Situation and Outlook

Global Wheat 2012/13 Production Larger

Global wheat production for 2012/13 is forecast up 3.7 million tons this month to 655.1 million. Chinese wheat production is up 2.6 million tons to 120.6 million, as that country’s National Bureau of Statistics (NBS) recently issued its first grain production estimates for 2012 by crop, which, though very much in line with its July estimates for total summer grains, indicated slightly lower area harvested, but higher yields. With wheat area roughly stable, wheat yields in China have been steadily increasing over the last 10 years (though a small drop in yields occurred in 2009/10).

Australian wheat production is projected 1.0 million tons higher at 22.0 million. On December 4, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) issued a new forecast stating that “crops have held up better than expected in many winter cropping regions, given the dry conditions experienced in the past few months.” The main reason for higher than expected wheat yields is apparently still abundant sub-soil moisture reserves in the eastern provinces of Queensland, New South Wales, and parts of Victoria and South Australia. In Western Australia, sub-soil moisture levels are low, but still better than top-soil levels. Canada’s 2012/13 wheat production is increased 0.5 million tons to 27.2 million this month. The increase is based on a Statistics Canada survey (over 29,000 farmers, from October 26 to November 14), that indicated that favorable harvest weather and lower abandonment resulted in higher than expected harvested area (especially in Saskatchewan and Manitoba, up 18 and 27 percent on the year, respectively) and in larger wheat output.

Wheat production in Brazil is down 0.2 million tons to 4.8 million. Though conditions in Parana, which produces about half of Brazilian wheat, are reported to be good, another major wheatproducing state of Rio Grande de Sul (about a 30-percent share in wheat output) suffered adverse weather conditions in some parts of the state. Frost, hail, and unusually high-intensity rainfall coincided with wheat filling and maturing, while especially heavy precipitation (the latest being on December 5) affected harvesting, causing additional lodging.

A revision of the wheat data series for North Korea this month is based on a special report by the United Nations’ Food and Agriculture Organization and the World Food Program (FAO/WFP). The mission in October 2012 was allowed and supported by the North Korean Government. The mission was permitted to visit various parts of the country, and was given access to official crop data and other relevant information. Though the changes are small in absolute terms (for 2010/11 down 0.03 million tons to 0.2 million, for 2011/12 down 0.05 million tons to 0.15 million, and for 2012/13 down 0.1 million tons to 0.1 million), current data better reflect reality, showing much lower yields in the years with adverse weather conditions, such as 2011/12 and 2012/13.

Small adjustments are made for EU-27 (with a slightly lower wheat output in France), Mongolia, and Jordan.

For 2011/12, global production is raised 0.4 million tons, based on an upward revision for Australia (0.4 million tons) as recently reported by the Australian Bureau of Statistics. Production for Canada is revised slightly higher based on the latest data from Statistics Canada.

Lower 2012/13 Beginning Stocks Partly Offset Production Increase

The 3.7-million-ton increase in global production prospects this month is partly offset by a 2.1- million-ton reduction in 2012/13 beginning stocks. Increased 2011/12 wheat feed use for China raises 2011/12 ending stocks and 2012/13 beginning stocks 2.0 million tons this month. Higher 2012/13 beginning stocks are projected for Australia, up 0.4 million tons on larger 2011/12 production, for Russia, up 0.5 million tons as a result of an upward revision of 2011/12 imports, and for South Africa, up 0.2 million tons with lower domestic consumption. These increases are more than offset by the reductions for Paraguay (down 0.4 million tons), Kazakhstan (down 0.3 million tons), Argentina (down 0.2 million tons), EU-27 (down 0.1 million tons), and several other smaller changes, reflecting 2011/12 trade revisions.

Wheat Consumption Down Slightly for 2012/13

A small 1.2-million-ton decrease is projected for global wheat use for 2012/13, with marginal changes for both feed and food use this month, as sizeable shifts in feed use for a number of countries are mostly offsetting. Wheat feed use is projected higher for China for two consecutive years, up 2.0 and 1.0 million tons for 2011/12 and 2012/13, respectively. Increased Chinese feeding is better correlated with the high growth rates in its compound feed-production industry, and is a reflection of the domestic relative prices that are about 10 percent lower for wheat compared to corn. While increased from the previous forecast, China’s 2012/13 wheat feeding is expected to decline compared to the previous year due to abundant corn supplies.

Wheat feeding in Canada is increased 0.5 million tons to 3.7 million this month, which is still almost 1.0 million tons lower than last year when an abundance of low-quality wheat encouraged higher feeding. This year’s wheat quality is good, and this month’s increase in feeding reflects expectations of a less significant decline in Canadian livestock numbers, than previously expected. Wheat feed use is also projected up 0.5 million tons to 1.0 million in Iran, following its expanding imports of wheat for food use while feeding its domestically produced low-quality wheat. Smaller upward revisions of feed use are made for Brazil and South Africa.

EU-27 wheat feed use projected for 2012/13 is further reduced by 1.5 million tons. Corn imports and coarse grain feeding are projected higher, more than offsetting the wheat feeding reduction, as relative prices continue to favor corn over wheat for feeding. Australian feed use is revised down for three years in a row: for 2010/11, down 0.5 million tons, and for 2011/12 and 2012/13 down 0.3 million tons, each. The changes are in line with ABARES estimates, and better reflect the pace of livestock developments and residual use. Projected feed use is also trimmed for Paraguay.

Ending Stocks for 2012/13 Are Up

With global wheat supplies up 1.6 million tons and wheat consumption down, world wheat ending stocks for 2012/13 are projected 2.8 million tons higher this month to 176.9 million. Higher ending stocks in the United States account for half of this increase. Projected stocks are up 1.1 million tons to 5.8 million in Australia (higher supplies and lower consumption only partly offset by larger projected exports), and in Russia, up 1.0 million tons to 5.9 million (higher estimated imports in both 2011/12 and 2012/13). Stocks are also up in the EU-27 by 0.8 million tons to reach 10.0 million (lower domestic consumption only partly offset by higher exports). Ending 2012/13 stocks in China are up marginally (just 0.1 million tons), as production and import increases are absorbed by lower beginning stocks (see above) and higher feeding. Partly offsetting are stocks’ reductions in India, cut 0.5 million tons; Turkey, down 0.3 million; Kazakhstan, trimmed 0.25 million; and Argentina, reduced 0.2 million. These changes reflect trade adjustments for 2011/12 and 2012/13. Smaller, mainly offsetting changes for ending stocks are made for a number of other countries.

World Wheat Trade for 2012/13 Is Raised

World wheat trade in 2012/13 for the July-June marketing year is projected up 1.5 million tons to 140.3 million tons this month. Projected exports for 2012/13 are increased this month by 0.5 million tons for each of the following countries: Australia, EU-27, India, and Paraguay. Increased supplies and lower consumption expectations strengthen Australian wheat exports prospects that are projected at 19.5 million tons. An exceptionally high pace of corn import licenses in the EU-27 lead to higher projected corn imports this month, and additional corn is expected to replace wheat in animal feeding. With additional quantities of wheat available for export, EU-27 wheat exports are projected at 18.0 million tons. India has been exporting at a faster pace than expected earlier, boosting the 2012/13 export forecast to 7.5 million. The Government of India has announced additional exports from its ample stocks, and growing conditions for the next crop are good. In Paraguay, monthly wheat exports–mainly to Brazil– tripled in October and November, boosting the country’s wheat exports for both the local 2011/12 marketing year that ended in November, and the 2012/13 international July-June trade year. Wheat exports for the 2011/12 local year and 2012/13 trade year are up in Argentina and Uruguay by 0.2 and 0.1 million tons, respectively, reflecting higher than expected sales in the last several months.

Exports are also projected up 0.1 million tons, each, for Croatia, Morocco, Serbia, and South Africa, based on the pace of shipments. An even smaller upward change is made for Moldova. Wheat exports are projected down 0.2 million tons to 3.3 million for Turkey, on expectation of lower wheat flour exports to Indonesia, which is shifting its buying more toward wheat grain (currently from India) and processing it domestically.

Projected 2012/13 wheat imports are up 0.5 million tons, each, for Brazil, Iran, Russia, and China. In Brazil, the pace of imports is high, reflecting lower crop prospects, and wheat is coming mainly from Argentina. Iran is importing at a high pace form Russia, Australia, EU-27, Switzerland, Kazakhstan, and even Uzbekistan, and large deliveries are expected in December. Russia is expected to import more wheat into its drought-hit Siberian district that borders Kazakhstan, a traditional supplier of wheat to Russia. China is importing wheat at a higher pace than last year from Australia, but also from Canada and the United States. The Chinese import high-quality wheat mainly for blending purposes, as the quality of domestic wheat is generally low. Imports are projected 0.5 million tons lower for Turkey to 3.5 million, as imports from Russia and Ukraine are expected to wind down in the second half of the year.

US Export Prospects for 2012/13 Continue To Decline

US wheat exports for the 2012/13 July-June international trade year are projected down 1.0 million tons this month to 29.5 million. US exports, though, are still expected to be up 1.4 million tons on the July-June year. Even though it has been expected that US wheat exports will be back-loaded, with more exports occurring in the later part of the year when the main competitors exhaust their supplies, the current US pace of exports is extremely poor. Already 5 months into the international year (and 6 months into the local marketing year), it is getting increasingly difficult to achieve projected exports, especially with larger wheat supplies and stronger competition from Australia and Canada. Also, the outlook for next year’s U.S wheat crop has grown increasingly uncertain, given unfavorable November crop conditions. If this pessimistic outlook is realized, domestic prices could rise more than would be expected seasonally, intensifying competition for US exports.

Census exports for July through October 2012 are 8.5 million tons, still 12 percent down compared to a year ago. Grain Inspections for November were 1.3 million tons, down 21 percent from 2011. At the end of November 2012, outstanding export sales for the current marketing year were 4.45 million tons, almost 4 percent lower than last year at the same time. The total export commitment (US Census for October, plus November inspections, plus November 29 outstanding sales) comes to 14.2 million tons, versus 15.9 million last year, a decline of 10 percent while 2012/13. US exports for the July-June year are still forecast about 5 percent higher than in 2011/12.

For the local June-May marketing year, US exports are down 50 million bushels (or 1.4 million tons), to 1,050 million (or 28.6 million tons) this month.

December 2012

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