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USDA Wheat Outlook


16 September 2013

USDA Wheat Outlook - September 2013USDA Wheat Outlook - September 2013


USDA Wheat Outlook

Projected U.S. wheat supplies for 2013/14 are raised 10 million bushels with higher expected imports from a larger wheat crop in Canada. U.S. trade and food use changes by class largely reflect higher projected exports by Canada. Hard red spring (HRS) wheat imports are raised 10 million bushels and durum imports are raised 5 million bushels. Partly offsetting is a 5-million-bushel reduction in projected soft red winter wheat imports. Food use is raised 10 million bushels for HRS wheat and lowered 10 million bushels for hard red winter (HRW) wheat. HRS wheat exports are lowered 10 million bushels reflecting increased competition from Canadian spring wheat. HRW wheat exports are raised an offsetting 10 million bushels on the strong pace of sales and shipments in recent weeks. Projected all wheat ending stocks are raised 10 million bushels. The projected range for the 2013/14 season-average farm price is narrowed 10 cents on each end of the range to $6.50 to $7.50 per bushel, well below the 2012/13 record of $7.77 per bushel.

Increased foreign production forecast for 2013/14 boosts world wheat supplies this month. The increase in world wheat supplies and slightly lower consumption raise projected world ending stocks. U.S. wheat export prospects are unchanged, while European Union (EU-27) and Canadian exports are on the rise.

Domestic Outlook

Higher Projected Imports Raise 2013/14 Supplies and Ending Stocks

Projected 2013/14 imports and supplies are raised 10 million bushels this month. Imports are raised to 140 million bushels with expected higher hard red spring (HRS) and durum imports from Canada. Total use for 2013/14 is unchanged from August. There are, however, offsetting food use and export changes that shift more hard red winter (HRW) to export markets and more HRS for domestic use. Thus, ending stocks for 2013/14 are projected up 10 million bushels from August to 561 million bushels. These projected 2013/14 ending stocks are down 157 million bushels from 2012/13.

Total production is forecast at 2,114 million bushels, is unchanged this month, but down 155 million bushels from 2012/13. Forecast area planted and harvested is unchanged this month. The average all-wheat yield is 46.2 bushels per acre.

Winter Wheat Areas and Production are Unchanged This Month

Hard red winter (HRW) production is forecast at 791 million bushels, down 212 million bushels from a year ago. The HRW yield is forecast at 38.9 bushels per acre, down from last year’s 40.7 bushels. Production is down this year from 2012 due partially to the lower planted area for the 2013 crop, and both a higher abandonment rate and a lower yield because of severe drought and spring freeze damage.

Soft red winter (SRW) production is forecast at 542 million bushels, up 122 million bushels from last year. The SRW yield is 62.1 bushels per acre, up from last year’s 60.3 bushels. SRW production is forecast higher than 2012 because of larger harvested area and higher yield.

White winter wheat production for 2013 is estimated to total 209 million bushels. The planted and harvested areas, production, and yield for white winter wheat are as follows (hard white winter = HWW and soft white winter = SWW):

Spring Wheat Areas and Production Are Unchanged This Month

Hard red spring (HRS) production is forecast at 475 million bushels, 30 million bushels below 2012. HRS yields are forecast at 41.7 bushels, down from last year’s 44.0 bushels. Both yields and harvested area are down from 2012.

White spring production is estimated to total 36.5 million bushels, 1.0 million less than 2012. The planted and harvested areas, production, and yield for white spring wheat are as follows (hard white spring = HWS and soft white spring = SWS):

Durum wheat production is forecast to total 60.2 million bushels, down 22 bushels million from a year ago. Durum production is forecast down compared to 2012 because of lower area. Durum yield for 2013/14 is forecast at 40.1 bushels per acre, higher than last year’s 39.0 bushels.

Projected 2013/14 Supplies Raised 10 Million Bushels This Month

Projected 2013/14 U.S. wheat supplies are raised a net 10 million bushels this month because of import changes. Production and carryin stocks are unchanged. Projected HRS and durum imports are raised 10 million bushels and 5 million bushels, respectively. SRW imports are dropped 5 million bushels. The import increases are based on larger expected supplies in Canada and reduced U.S. production of these classes year to year.

Projected 2013/14 Supplies Down From 2012/13

Total U.S. wheat supply for 2013/14 is down 162 million bushels from 2012/13 to 2,972 million bushels. Supplies of all classes except SRW are down year to year. HRW supplies decreased the most, as smaller production and imports more than offset higher beginning stocks. Durum supply also decreased sharply percentagewise as smaller production and beginning stocks more than offset higher expected imports. Higher SRW production more than offsets lower beginning stocks, raising 2013/14 supplies from the previous year.

Projected Total 2013/14 Utilization Unchanged This Month

Projected 2013/14 total U.S. wheat use is unchanged from August. However, there are offsetting class changes for food use and for exports. For food use, HRS use is raised 10 million bushels while HRW use is lowered 10 million bushels. These offsetting changes are made in anticipation of more substitution of HRS for HRW in flour blends. For exports, HRW is raised 10 million bushels based on the pace of shipments and sales to date while HRS is dropped 10 million bushels because of expected increased competition from Canada.

Projected 2013/14 Use Is Down Slightly From 2012/13

Projected total use for 2013/14 is 2,411 million bushels, down 5 million bushels from 2012/13. Domestic use is expected to be down slightly more than exports are projected to increase. Domestic use is down because feed and residual use is expected to fall 110 million bushels from 2012/13 to 280 million bushels. While feed use is expected to be high during the summer quarter of 2013/14, such use is then expected to decrease sharply with the fall corn harvest and lower expected corn prices. Total food use is expected up with population growth and expected lower flour extraction than in 2012/13. Projected exports for 2013/14 are 93 million bushels higher than 2012/13 exports.

Projected 2013/14 Ending Stocks Up From August, Down From 2012/13

The projected 2013/14 U.S. wheat ending stocks are raised 10 million bushels from August to 561 million bushels. The 10-million-bushel increase is the net result of stock increases for HRS and durum of 10 million bushels and 5 million bushels, respectively, and a 5-million-bushel decrease for SRW.

Total ending stocks for 2013/14 are expected to decrease by 22 percent from 2012/13. Stocks of HRW, white, and SRW are expected down 43 percent, 20 percent, and 14 percent, respectively. Stocks of durum and HRS are expected up 18 percent and 9 percent, respectively.

2013/14 Price Range Projection

The 2013/14 season-average farm price range is projected at $6.50 to $7.50 per bushel, narrowed from $6.40 to $7.60 per bushel in August. The 2013/14 range is down from the record $7.77 per bushel reported for 2012/13.

2012/13 Supply/Disappearance To Be Posted

The 2012/13 supply/disappearance by class by quarter will be posted during the week of September 16 at http://www.ers.usda.gov/data-products/wheat-data.aspx under the Historical Data section.

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 Wheat 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. A detailed discussion summarizing the historical forces determining U.S. wheat supply and utilization, along with the analysis underlying the wheat projections for 2013-22, is available at http://www.ers.usda.gov/topics/crops/wheat/usda-wheat-baseline,-2013-22.aspx.

International Outlook

World Wheat Production Prospects Boosted Further

World wheat production in 2013/14 is forecast at 708.9 million tons, up 3.5 million this month. The largest increase is for Canada, where the wheat crop is forecast up 2.0 million tons to 31.5 million. This is based on a 2-percent increase in harvested area, and on yields that are projected to be 5 percent higher than last month and surpass the existing record. It appears that a combination of optimal temperatures and adequate soil moisture and precipitation since mid-July during the flowering and filling stages of crop development, more than mitigated delayed planting after a cold wet spring. Yields are boosted to a record-high level, as confirmed by increased estimates from the Statistics Canada July report. The unusually dry and warm weather since the beginning of August promoted rapid maturation of the wheat crop, and the latest provincial reports gauge 88 percent of wheat to be in excellent/good condition. Winter wheat harvesting, which covers less than 10 percent of wheat area, is already complete. Spring wheat harvesting is progressing rapidly, while favorable weather forecasts with no early frosts in sight reduce risks of its disruption, and are expected to benefit grain quality. It is worth mentioning that the July Statistics Canada estimates for both area and production do not include British Columbia and the Maritime Provinces (Newfoundland and Labrador, Prince Edward Island, Nova Scotia, New Brunswick), which are estimated to add about 3 percent to the area and production estimates. Estimates covering the whole country will be made available by Statistics Canada in November (see http://www.statcan.gc.ca/daily-quotidien/130821/t130821a001-eng.htm).

Despite previous concerns about an excessively cold winter, a late spring, and a hot summer, EU-27 wheat production is expected to reach 142.9 million tons in 2013/14, adding another 1.5 million to its third-highest ever crop this month. Wheat harvesting of the 2013/14 crop is virtually complete, and statistical offices in individual countries continue to compile and report wheat production numbers. The largest increase is in Germany, up 0.5 million tons to 24.7 million, and the harvest has reached its final stage. Reports indicate that despite extreme cold in March, a delayed, wet spring, and back-to-back outbreaks of excessive heat, the overall conditions for wheat development were mostly favorable. This boosted wheat yield potential to near-record highs, with the quality of the crop higher than expected.

August also brought further improvement in the United Kingdom (UK), where wheat area is at a 30-year low after an exceptionally wet autumn reduced planted area. The wheat crop in the UK is about 50 percent harvested, wheat yields are slightly below the 5-year average, and output is projected this month up 0.2 million tons to 12.1 million. Wheat production expectations continue to improve for the countries in the eastern EU, namely Romania, Bulgaria, Hungary, and Poland, up from 0.1-0.3 million tons each. A tiny increase is made for the Czech Republic. In neighboring Serbia (not an EU member), official government reports suggest a 0.2- million-ton increase in wheat production.

Wheat production is expected to be higher in Ukraine, up 0.5 million tons to 22.0 million, as indicated by the latest harvest reports. In Turkmenistan and Tajikistan, the two other countries of the Asian part of the Former Soviet Union block (FSU- 12), wheat production is projected up 0.4 and 0.1 million tons, respectively, based on the countries’ Ministries of Agriculture reports.

The wheat production forecast is up 0.2 million tons for Morocco where the harvest is complete, and reflects government estimates. South African wheat production is slightly increased by 0.1 million tons to 1.8 million, reflecting slightly higher area, generally good crop conditions in the Western Cape Province, and the first wheat production estimate by South Africa's National Crop Estimates Committee.

Partly offsetting are declines in projected wheat output for Iran, Paraguay, and Saudi Arabia. In Iran, wheat production is projected down 1.0 million tons to 14.5 million this month, which is still 0.5 million tons higher than last year. Iran has been enjoying favorable weather conditions, but a slow moving storm in May in southwestern Iran is expected to have affected wheat harvesting in that part of the country. Wheat output in Paraguay is projected 0.4 million tons lower to just 1.0 million, the lowest wheat output in 8 years. Unusually timed frosts in the majorproducing areas at the end of July and in August are expected to have reduced harvested area by more than 30 percent, as well as generating much lower than expected crop quality. In Saudi Arabia, the continued implementation of a 2008 decree intended to completely phase out domestic wheat production by 2016 resulted in an additional reduction in projected wheat area, down 20 thousand hectares to 0.1 thousand hectares, and in production down 0.1 million tons to 0.6 million. Wheat production for 2013/14 was also adjusted for Eritrea.

A decrease of 0.6 million tons in global beginning stocks—due to trade revisions in prior years and other changes in supply and demand—only partly offsets the 2013/14 production increase. Trade revisions for the prior years (mostly for 2012/13) led to lower beginning stocks in the EU, Pakistan, Kenya, Saudi Arabia, and Tunisia, and higher stocks in Algeria, Uzbekistan, and Indonesia. Statistics Canada reported 2012/13 wheat ending stocks 0.2 million tons higher than USDA’s earlier forecast, with an increase in the 2013/14 beginning stocks that gives Canadian wheat supplies an additional boost. Numerous changes in beginning stocks of less than 0.1 million tons are made for a number of countries, mostly reflecting the availability of trade data.

Projected 2013/14 World Wheat Feed Use Slightly Reduced

World wheat consumption for 2013/14 is forecast slightly down by 0.3 million tons this month, while wheat feed and residual use is down 0.8 million tons.

Australian wheat feed use is adjusted down this month by 0.5 million tons to 3.2 million, to better reflect the slower growth of its livestock herds. Wheat feeding in Saudi Arabia is also projected down 0.5 million tons to 0.2 million, as it is heading back towards its traditional pattern of feeding mainly imported barley and corn while importing predominantly milling-quality grain. It looks as if 2011/12, when the country wheat feeding reached 1.1 million tons, was a one-year aberration fueled by low wheat prices.

With low and still decreasing corn prices, some grain importers are expected to reduce wheat imports in favor of corn for feed use. South Korea is projected to import 0.5 million tons less wheat for feed use this month, reducing wheat feed use to 1.9 million. Vietnamese projected wheat feed use is down 0.2 million tons this month to 0.3 million, and Israel is down 0.1 million tons to 0.9 million tons.

Canadian projected feed and residual use is increased 0.3 million tons this month to 4.8 million, as larger supplies of lower-quality wheat priced competitively to corn are expected to be available for feeding to Canadian livestock. Wheat feed use is also projected slightly up for Brazil, because of a large share of low-quality wheat that has been damaged by frosts. Wheat feeding is increased as well as for Azerbaijan, Turkmenistan, and Uzbekistan. Smaller adjustments are made for a number of countries.

World Wheat Ending Stocks Projected Higher for 2013/14

World wheat ending stocks for 2013/14 are projected to reach 176.3 million tons, up 3.3 million this month. While earlier projections indicated a small decline in world wheat stocks, global wheat stocks are now expected to increase during 2013/14. Increased production prospects boost stocks for Canada, up 1.4 million tons to 6.6 million; Ukraine, up 0.5 million ton to 2.8 million; and by smaller amounts for Turkmenistan, Serbia, Morocco, and Tajikistan. Additional wheat supplies in the European Union are expected to be almost fully exported, with a slight increase in stocks of 0.1 million tons to 11.2 million. Stocks are projected higher in Algeria and Uzbekistan because of higher carry-in in both countries and lower projected exports in Uzbekistan. Stocks are up 0.5 million tons in Egypt, reflecting higher projected imports. Australia’s ending stocks are projected up 0.5 million tons this month to 3.8 million due to lower feeding.

Ending wheat stocks are projected down 0.5 million tons this month for Iran, because of lower production that is not fully offset by higher imports; in Pakistan and Kenya, down 0.4 and 0.3 million tons, respectively, on lower carry-in. Smaller changes for ending stocks are made for a number of countries.

World Wheat Trade Is Slightly Up

Projected world wheat trade for the 2013/14 (July-June) international trade year is up 0.5 million tons to 152.4 million. Driven by production changes and shifts in competitiveness, export projections for several countries are adjusted this month. EU-27 export prospects are up 1.0 million tons to 23.0 million as supplies are ample, and the pace of licenses is the strongest in 10 years (4.5 million tons of soft wheat since July 1). Romania is aggressively exporting to Egypt and France is expected to take over the Egyptian business as Romanian supplies dwindle. France is also currently exporting to China, Algeria, and Saudi Arabia. A sharp increase in wheat supplies for Canada this month—high-quality wheat in particular, which is expected to be in short supply this year—makes the country a strong competitor. Canadian exports are projected up 0.5 million tons this month to 20.5 million, the highest (for the international trade year) in almost two decades. Partly offsetting are reductions in wheat export prospects for the United Arab Emirates (UAE), down 0.4 million tons to 0.3 million; in Paraguay, down 0.3 million tons to 0.7 million, and in Uzbekistan, down 0.3 million tons to 0.4 million. The reduction in Paraguay reflects lower projected wheat supplies this month, while the changes in UAE and in Uzbekistan in the absence of new information match the confirmed 2012/13 final results.

Wheat imports increased 0.5 million tons each this month for Egypt and Iran, and by 0.2 million tons for Brazil. Egypt has been tendering aggressively since July, intending to replenish the countries’ wheat stocks to provide subsidized bread to about a quarter of its population who live below the poverty level. Several Arab countries (Saudi Arabia, UAE, and Kuwait) pledged monetary support for Egypt to aid the currency strapped country whose trade deficit is widening. Iran has a smaller projected crop and the international sanctions generally are not applicable for food purchases, so Iran is expanding its outreach for grain imports, buying wheat originating in Russia and transported in small lots by barges from the Azov Sea/Don River and via the Volga River terminals into the Caspian Sea. Iran is also expected to import more wheat from Kazakhstan in the current season, given the projected Kazakh bumper harvest. Imports in Brazil are projected up 0.2 million tons, reflecting expectations of a low quality crop, damaged by July and August frosts, and higher wheat feed use. Partly offsetting are reductions in wheat imports for South Korea and Saudi Arabia, down 0.5 and 0.3 million, respectively. The reasons for the decline were discussed above while reviewing wheat feed use. Other smaller changes are offsetting.

U.S. trade year imports are up 0.2 million tons to 3.7 million this month, on the expectation of larger durum and spring wheat imports of high quality from Canada.

U.S. 2013/14 forecast exports are unchanged this month. Exports have been very strong in the first months of the season. However, larger wheat supplies in major competitors are expected to put pressure on U.S. sales, which are projected at a more modest pace in the later part of the year.

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