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USDA Wheat Outlook


13 March 2013

USDA Wheat Outlook - March 2013USDA Wheat Outlook - March 2013

US wheat exports for 2012/13 are projected to be 25 million bushels lower this month, boosting projected ending stocks by the same amount.
USDA Wheat Outlook

Projected Exports Are Lowered, Raising Ending Stocks

Continued strong competition, particularly from European Union (EU-27) and former Soviet Union (FSU-12) countries, further reduces prospects for U.S. wheat shipments. Projected exports for hard red winter wheat are lowered 25 million bushels. Exports are also lowered 10 million bushels and 5 millionbushels, respectively, for white and hard red spring wheat, but raised 15 million bushels for soft red winter wheat. All-wheat imports are unchanged, but small adjustments are made among the classes. Trade changes largely reflect the pace of sales and shipments to date. The projected range for the season-average farm price for wheat is lowered 10 cents at the midpoint and narrowed to a range of $7.65 to $7.95 per bushel.

The world wheat production forecast for 2012/13 is increased this month. Wheat use is slightly up, as are global ending stocks. World wheat trade is projected to be larger, but U.S. wheat exports face tough competition and are projected to be lower.

Domestic Outlook

Total 2012/13 Supplies Are Unchanged From February

Total projected supplies for 2012/13, at 3,142 million bushels, are unchanged from February. 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, with higher planted area and a smaller abandonment rate. Yields are also higher year to year because of the recovery from the severe drought in 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 earlier, 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 February, but up 270 million bushels from 2011. The all-wheat harvested area is estimated at 49.0 million acres, unchanged from February, but up 3.3 million acres from last year. The U.S. all-wheat estimated yield is 46.3 bushels per acre for 2012, equaling the 2010 record. The yield is unchanged from February, but up 2.6 bushels per acre from the previous year.

Total 2012/13 carryin stocks, estimated at 743 million bushels, are unchanged from February, 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 February, but up 18 million bushels from the previous year. There are some class changes of projected imports. Based on pace to date, HRW imports are raised 3 million bushels while durum and white are lowered by 2 million bushels and 1 million bushels, respectively.

2012/13 Exports Down, Ending Stocks Up

Domestic use of wheat for 2012/13 is projected at 1,400 million bushels, unchanged from February and 218 million bushels higher than last year. Food use for 2011/12 is projected at 950 million bushels, unchanged from February, but up 9 million bushels from 2011/12. Projected food use reflects continued high extraction rates due to high wheat prices, but population growth and slightly higher per capita use (see discussion below) raise food use on the year. Projected seed use is unchanged from February. Feed and residual use is projected at 375 million bushels, unchanged from February, but up 211 million bushels from 2011/12 as wheat has become more price competitive with corn in livestock rations.

Projected exports for 2012/13, at 1,025 million bushels, are down 25 million bushels from February. Total wheat exports for 2012/13 are expected to be 25 million bushels less than in 2011/12.

Based largely on the pace of sales and shipments to date, changes are made by class of wheat. HRW, white, and HRS wheat exports are down 25 million bushels, 10 million bushels, and 5 million bushels, respectively, from February. SRW wheat exports are raised 15 million bushels from February.

Projected total U.S. ending stocks for 2012/13, at 716 million bushels, are up from February by 25 million bushels with the lower exports. The 2012/13 ending stocks are down 27 million bushels from 2011/12.

All wheat ending stocks are projected down 4 percent from 2011/12. Durum, HRS, and HRW ending stocks are up from 2011/12 by 39 percent, 19 percent, and 5 percent, respectively. SRW and white ending stocks are down from 2011/12 by 36 percent and 20 percent, respectively.

2012/13 Price Range Is Changed From February

The projected range for the season-average farm price for wheat is lowered 10 cents at the midpoint and narrowed to a range of $7.65 to $7.95 per bushel. This compares with the record $7.24 per bushel reported for 2011/12.

2012 Per Capita Flour Use Up From 2011

Per capita all-wheat flour use for 2012 is estimated at 134.4 pounds, up 1.9 pounds from the 2011 estimate but down 3.9 pounds from 2007, a recent peak. The 2012 per capita food use is down 11.9 pounds from the 2000 level when flour use started dropping sharply, apparently due to increased consumer interest in lowcarbohydrate diets.

US Per Capita Wheat Flour use, 1964-2012

Source: USDA, Economic Research Service calculations using data through the 2nd quarter of 2011 from U.S. Department of Commerce, U.S. Census Bureau, Flour Milling Products (MQ311A) and U.S. Department of Commerce, Bureau of Economic Analysis, Foreign Trade Statistics. Subsequent flour milling calculations are based on data from the North American Millers' Association.

Winter Wheat Conditions Are Mixed

Winter wheat conditions at the end of February 2013 are not as favorable as they were last year for the Plains States that provide data about current crop conditions. Nebraska’s winter wheat crop, for example, has 50 percent rated poor to very poor and only 12 percent rated good to excellent. A year ago, only 6 percent of the State’s crop rated poor to very poor and 65 percent was rated good to excellent.

Winter wheat conditions are also worse this year than last in Oklahoma, South Dakota, Kansas, and Texas at the end of February 2013. In Oklahoma, 54 percent of the winter wheat is rated poor to very poor while only 9 percent is rated good to excellent. A year ago, only 7 percent of the Oklahoma crop was rated poor to very poor and 67 percent of the crop was good to excellent. In South Dakota, 66 percent of the winter wheat is rated poor to very poor while only 3 percent is rated good to excellent. A year ago, 31 percent of the South Dakota crop was rated poor to very poor and 29 percent of the crop was good to excellent. In Kansas, 36 percent of the winter wheat is rated poor to very poor while 23 percent is rated good to excellent. A year ago, only 11 percent of the Kansas crop was rated poor to very poor and 52 percent of the crop was good to excellent. In Texas, 45 percent of the winter wheat is rated poor to very poor while 18 percent is rated good to excellent. A year ago, 43 percent of the Texas crop was rated poor to very poor and 31 percent of the crop was good to excellent.

Two other reporting States, Montana and Illinois, are in better shape than the Plains States. In Montana, only 10 percent of the crop rated poor to very poor and 38 percent rated good to excellent. A year ago at this time, the Montana crop had 12 percent rated poor to very poor and 24 percent rated good to excellent. In Illinois, only 2 percent of the crop rated poor to very poor at the end of February and 69 percent rated good to excellent. A year ago at this time, the Illinois crop had 2 percent rated poor to very poor and 81 percent rated good to excellent.

Monthly Outlook Charts

The charts for the report can be found using the link to the Chart Gallery that is on the page just before the tables.

USDA Baseline, 2013-22

Each year, USDA updates its 10-year projections of supply and utilization for major field crops grown in the United States, including wheat. This year’s report is available at www.ers.usda.gov/publications/oce-usda-agriculturalprojections/ oce131.aspx.

International Outlook

World Wheat Production Revised Up This Month

Global wheat production for 2012/13 is projected up 1.9 million tons this month to 655.5 million. The increase is due to upward revisions for India, EU-27, and Nepal. The Government of India, where the wheat harvest was completed in April-May 2012, issued a new estimate for wheat output, which pushes that country’s recordhigh crop further up 1.0 million tons to 94.9 million.

The EU-27 wheat production estimate is up 0.5 million tons to 132.3 million, reflecting the latest Lithuanian Government assessment. The data series for wheat production in Nepal has been revised starting in 2007, and for 2012/13 output is projected 0.3 million tons higher at 1.7 million.

Slight (less-than-0.1-million-ton) 2012/13 production changes are made for Russia and Peru based on official local reports.

Wheat production numbers are also slightly revised for Georgia (2010/11 and 2011/12 marketing years) and for Kyrgyzstan (years 2007/08 through 2009/10 marketing years), based on government statistical data.

Projected Wheat Use Is Slightly Up, As Well As Ending Stocks

The forecast for 2012/13 wheat use is slightly up by 0.3 million tons this month, with feed and residual use up 1.3 million tons and food use lower by 0.8 million tons, while the rest is the result of changes in local marketing year trade.

The largest increases in wheat feed use are for Australia, Canada, and South Korea, up 0.5 million tons each. In Australia, higher wheat feed use is expected to compensate for reduced sorghum feeding at a time when the sorghum crop is suffering losses caused by dry and hot weather that delayed planting and lowered the crop’s yield potential in the sorghum belt located in the east of the country in Queensland and New South Wales. In Canada, wheat feed and residual use is increased reflecting lower reported wheat stocks. In South Korea, wheat feeding is projected higher on the evidence of an increased share of wheat (relative to corn) in mixed feed rations and higher wheat imports. The same story is happening in Japan where wheat feeding is up 0.1 million tons, reflecting recent purchases of feedquality wheat. A small upward adjustment is also made for Ecuador wheat feeding. Partly offsetting is lower projected wheat feeding in Egypt and Brazil, down 0.3 and 0.1 million tons, respectively, both reflecting lower availability of domestic wheat.

Wheat food and industrial use in India is projected down 0.9 million tons (or about 1 percent) this month (but still 3 percent higher on the year), despite higher projected 2012/13 wheat output. Wheat storage capacities in India have been already seriously overstretched, with substantial quantities of wheat being stored in sub-par facilities for some time after the harvest. This has caused considerable grain and quality losses. With the new 2013/14 harvest starting in March-April, the Government is attempting to relieve overfilled storage by allowing certain amounts of wheat to be exported from Government-held stocks. It is also trying to push more wheat through the local imperfect and nontransparent Public Distribution System (PDS) to feed additional subsidized wheat to the country’s poor. Regrettably those efforts have not been successful enough, leading to an even higher estimate for ending stocks in India. It appears that the stocks this year will have to absorb both a wheat production increase and the lower projected food use. Also, constant growth of the Government-supported procurement prices heavily stimulates wheat production and creates additional challenges for the Indian Government to solve the grain storage quandary and reduce unnecessary grain losses, in a country that, according to the World Food Program, is “home to about 25 percent of the world's hungry poor” (https://www.wfp.org/countries/india/overview).

Food use has also been updated in a number of countries, mainly as a reflection of trade changes. In Egypt, Kenya, and Serbia, food use is down 0.2, 0.2, and 0.1 million tons, respectively. Those reductions are slightly offset by 0.1-million-ton increases in both Tanzania and Yemen.

With wheat beginning stocks slightly lower this month by less than 0.1 million tons (tiny declines in Chile and Kyrgyzstan), and higher production that is only partly offset by a small increase in wheat consumption, ending foreign stocks are up 0.8 million tons this month. Global wheat stocks are up 1.5 million tons to 178.2 million this month, partly reflecting an upward change in U.S. stocks because of lower projected exports. The largest increase in wheat ending stocks happens in India, where stocks are up 1.9 million tons to 23.8 million as discussed above. Another big increase in wheat ending stocks comes from Iran, where stocks are up 0.9 million tons to 4.8 million, reflecting higher imports. Increased projections of wheat imports are also the reason for higher wheat stocks (for a total of 0.8 million tons) in Algeria, China, Yemen, and Japan.

Wheat ending stocks are projected down 0.5 million tons each for: (1) Australia, with increased projected feeding; (2) for Egypt, as lower imports are partly compensated by a decrease in consumption (see a discussion below in the trade section); and (3) for EU-27, where higher projected exports are only partly offset by a production increase. This drives EU ending stocks under 10 million tons, a level unseen for about 40 years. Stocks are down 0.4 million tons for both Brazil (higher exports partly offset by lower feed use) and Canada (higher feeding). In Ukraine, stocks are also projected lower by 0.3 million tons (higher exports). Slight changes in ending wheat stocks are made for several other countries.

World Wheat Trade Up, U.S. Exports Down

World wheat trade for the international July-June 2012/13 trade year is projected up 1.6 million tons to 141.8 million this month, driven by stronger demand for imported wheat in Iran and a number of other countries throughout the world. The Iranian Government is continuing to build up its reserve wheat stocks in the midst of an intricate political situation. The wheat import projection for Iran is raised this month by 1.0 million tons to 4.0 million, reflecting the strong pace of deliveries from the EU-27 –Lithuania– and Australia. The dynamics of relative prices for wheat and corn accelerated wheat (while cutting corn) imports in Korea, up 0.5 million tons to 5.5 million. Algeria and Yemen have been recently purchasing wheat at a faster pace than expected earlier, especially from the EU-27 (France), and their 2012/13 imports are projected up 0.3 million tons this month each, to 5.5 and 2.9 million, respectively. Japanese, Chinese, and Chilean wheat imports are up 0.2 million tons each due to the pace of purchases, and are expected to reach 6.1, 3.2, and 1.0 million tons, respectively. Japan has recently made unusual purchases of SRW wheat from the U.S. that is likely to be used for feeding. There are small increases this month in projected imports by Canada, Ecuador, Tanzania, and Togo.

Import prospects for 2012/13 are reduced this month for Egypt and Kenya. The projection for Egyptian imports is reduced by 1.0 million tons this month to 8.5 million. For a number of reasons the country has trouble in securing sufficient wheat import supplies. Political instability led to depreciation of the country’s currency and a sharp reduction in currency reserves. This in turn puts strain on the state budget and affects the ability of the country’s state grain buyer—the General Authority for Supply Commodities (GASC)—to regularly import sufficient quantities of wheat using the customary wheat tenders. In order to maintain an adequate food consumption level to avoid possible unrest, Egypt is increasing the procurement price for local wheat and is subsidizing its flour production. The Government’s hope is to get additional wheat from farmers. This, however, would drive down stocks, and thereby be at odds with the traditional policy of maintaining high wheat reserves. Kenyan wheat imports are also reduced 0.2 million tons to 1.0 million, mainly because of the dwindling wheat supplies from Russia and Ukraine.

Based on the recent pace of exports and continued price competitiveness enhanced by weak exchange rates, exports are increased this month for the EU-27. Based on the volume of export licenses, EU-27 exports are projected up 1.0 million tons to 19.5 million, almost 20 percent higher than a year ago when EU-27 wheat output was 5.0 million tons larger. This year, lack of competition from Russia and Ukraine allowed European (and especially eastern European) wheat exporters to expand their deliveries to the traditional Russian and Ukrainian importers of North Africa and the Middle East. This wheat export expansion by the EU-27 is being matched by high corn imports, the largest in 10 years.

Brazilian wheat exports are projected up 0.5 million tons this month to 1.7 million tons. Since eliminating tariff rate quotas for wheat exports through July 2013, Brazil has been exporting feed-quality wheat at a higher-than-expected pace. Ukraine’s export prospects are up 0.3 million tons this month to 6.5 million.

Based on the pace of shipments in recent months, exports are projected higher this month also for Croatia, Iran (a particular sale of wheat to Syria), Morocco, and Serbia.

Faced with increased competition from EU-27 and India, and a relatively strong currency, U.S. wheat exports are reduced 0.5 million tons to 28.5 million for the international July-June trade year, which is still 0.4 million tons higher than last year’s exports.

Despite improved shipments, outstanding wheat sales are currently on par with last year. As we enter the last quarter of the marketing year, and approach the last quarter of the trade year, it becomes increasingly difficult to sustain the pace of shipments necessary to meet last month’s U.S. export projection.

From July 2012 through January 2013, the U.S. Census Bureau reported that exports of wheat reached 13.6 million tons, down from 15.2 a year earlier. However, grain inspections for February 2013 were 2.5 million tons, up 33 percent compared with a year ago. Outstanding export sales as of February 28, 2013 are at 5.4 million tons, almost the same as last year at this time.

For the June-May 2012/13 local marketing year, U.S. wheat exports are projected down 25 million bushels to 1,025 million.

March 2013

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