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USDA Wheat Outlook


13 April 2012

USDA Wheat OutlookUSDA Wheat Outlook

USDA’s National Agricultural Statistics Service (NASS), in its March 31 Prospective Plantings, reported that all-wheat planted area for 2012 is forecast at 55.9 million acres, up 3 percent from the 2011 all-wheat planted area.
USDA Wheat Outlook

US Wheat Plantings Forecast Up From 2011

US wheat ending stocks for 2011/12 are projected 32 million bushels lower. Projected feed and residual use is raised 35 million bushels reflecting higher-than-expected disappearance during the December-February quarter as indicated by the March 1 stocks. Projected seed use is lowered 3 million bushels based on state level seedings as reported in the March 30 Prospective Plantings report. Projected exports for all wheat are unchanged as a 15-million-bushel increase for soft red winter (SRW) wheat is offset by the same size reduction for hard red winter wheat. By-class shifts reflect the pace of sales and shipments to date and the increasing competitiveness of US SRW wheat. The projected range for the 2011/12 season-average farm price is narrowed 5 cents on both ends to $7.20 to $7.40 per bushel.

With slightly lower global wheat supplies and higher feed and residual consumption, world wheat ending stocks for 2011/12 are projected 3.3 million tons lower than last month. Foreign wheat feed and residual use is expected higher by 5.9 million tons. World wheat trade is up 1.3 million tons this month to 143.1 million tons, breaking the historical record of 2008/09. US 2011/12 July-June trade year wheat exports are forecast up 0.3 million tons this month to 26.8 million, based on recent sales to Egypt, EU, and Mexico.

Domestic Situation and Outlook

Prospective Wheat Plantings for 2012 Are Up From 2011 Seedings

Winter wheat plantings for 2012 are estimated at 41.7 million acres, 3 percent above last year, down 1 percent from the previous estimate in the National Agricultural Statistics Service (NASS) January 12 Winter Wheat Seedings report. Of the 2012 total winter-wheat acreage, 29.9 million acres are hard red winter (HRW), 1.4 million acres above last year. More acres of HRW were seeded this year due to higher prices and an acreage rebound in Kansas, Oklahoma, and Texas where dry conditions limited 2011 planted area.

Soft red winter (SRW) wheat seeded area is 8.4 million acres, down 0.2 million acres from last year. There are large acreage increases from last year in the Southeast and large acreage decreases in most States in the Corn Belt and Northeast. These decreases are primarily due to a late row-crop harvest that prevented fall seedings.

Soft white winter wheat planted area is 3.117 million acres for 2012, down from 3.282 million acres in 2011. Hard white winter wheat planted area is 0.338 million acres for 2012, up slightly from 0.323 million acres in 2011.

Spring wheat plantings for 2012, including durum, are estimated at 14.2 million acres, 0.4 million acres above last year. Other spring wheat growers intend to plant 12.3 million acres this year, down 0.4 million acres from 2011 seedings. Of this other spring total, 11.3 million acres are hard red spring (HRS) wheat. This HRS planted acreage is down from 11.6 million acres in 2011, an already low planted area due to extensive flooding that resulted in widespread prevent planting in North Dakota. Planted acreage for 2012 is expected to be down in all producing States except Montana. A very low acreage is expected to be planted in South Dakota.

Area seeded to durum wheat for 2012 is expected to total 2.223 million acres, up from 1.369 million acres in 2011. The largest increases are expected in North Dakota and Montana, where seedings were limited last year due to excessively wet conditions during the spring planting season. California and Arizona are reported to have seeded 240 thousand acres this year, 40 thousand more than for 2011.

Soft white spring wheat planted area is expected to be 0.561 million acres for 2012, down from 0.657 million acres in 2011. Hard white spring wheat planted area is expected to be 0.123 million acres for 2012, down from 0.148 million acres in 2011.

2011/12 Supplies

Total projected supplies for 2011/12, at 2,982 million bushels, are unchanged from March. Supplies for 2011/12 are 297 million bushels below 2010/11. Year to year, lower beginning stocks and production were only slightly offset by higher expected imports.

Projected supplies of HRW, HRS, and durum are down year to year, mostly because of reduced production. HRW production is down from last year because of reduced harvested area and lower yields. Year to year, the planted area for the 2011 HRW crop is slightly smaller than 2010, but the rate of abandonment is up sharply and yields are down from the previous year due to the severe drought on the Central and Southern Plains. HRS and durum production are down from a year ago with lower planted and harvested areas and lower yields. Excessive moisture and cool temperatures on the Northern Plains resulted in late seeding and prevented plantings. The 2011 HRS crop was reduced by a greater percentage from 2010 than the HRW crop. The result is a substantial premium of HRS over HRW and a substitution of HRW for HRS in some flour blends.

Projected supplies of SRW and white are up from 2010/11, mostly because of larger production. SRW production is up from last year because of larger harvested area and higher yields. The 2011 crop area recovered from 2010, when a rain-delayed row-crop harvest and low prices reduced SRW seedings in the fall of 2009. Due to excellent weather conditions through much of the season, production was up significantly from the previous year, with production in many of the SRW States up more than 100 percent from 2010. White wheat production was up due to both higher area and yield.

All-wheat 2011 production is estimated at 1,999 million bushels, unchanged from March, but down 208 million bushels from 2010. All-wheat harvested area is estimated at 45.7 million acres, unchanged from December and down 1.9 million acres from last year. The US all-wheat estimated yield is 43.7 bushels per acre for 2011, unchanged from December, but down 2.6 bushels from the record high of 46.3 bushels in 2010.

Projected all-wheat imports for 2011/12 are unchanged from March, but there are minor offsetting class changes. Based on the pace of sales and shipments to date, slightly higher SRW imports are offset by lower HRS and durum imports. Projected 2011/12 imports are up 23 million bushels year to year, mostly due to higher HRS, durum, and SRW imports. Imports of HRS and durum are higher year to year because of tighter US supplies for these classes of wheat. The increase in SRW imports reflects shipments of feed-quality wheat from the EU.

Estimated 2011/12 carryin stocks, in total and by class, are unchanged from March. Projected 2011/12 carryin stocks of HRS and SRW are down sharply year to year. The carryin stocks for the other classes are nearly unchanged year to year.

2011/12 Use

Domestic use of wheat for 2011/12 is projected at 1,189 million bushels, up 32 million bushels from March and 61 million bushels higher than last year. Food use for 2011/12 is projected at 930 million bushels, unchanged from March. Projected food use for 2011/12 is up 4 million bushels from 2010/11. Projected seed use is down this month to 79 million bushels from 82 million bushels in March. Spring wheat seedings, reported in the March 30 Prospective Plantings report, were smaller than expected. Feed and residual use this month is projected at 180 million bushels, up from 145 million bushels in March following the release of the March 30 Grain Stocks report. Projected feed and residual use for 2011/12 is 48 million bushels above feed and residual use for 2010/11.

Projected exports for 2011/12 are unchanged from March, but there are offsetting class changes based on the pace of sales and shipments to date. A 15-million-bushel increase for SRW exports is offset by a similar decrease for HRW. At 1,000 million bushels, projected exports are down 289 million bushels from 2010/11 because of higher production in several major exporting countries and relatively high US prices.

Projected total US ending stocks for 2011/12, at 793 million bushels, are down 32 million bushels from March and down 69 million bushels from 2010/11.

All-wheat ending stocks are expected to be down 8 percent from 2010/11. Durum, HRS, white and HRW ending stocks are projected down from 2010/11 by 53 percent, 23 percent, 15 percent, and 9 percent, respectively. SRW ending stocks are projected up from 2010/11 by 23 percent.

2011/12 Price Range Is Narrowed

The 2011/12 season-average farm price range is projected at $7.20 to $7.40 per bushel, narrowed from $7.15 to $7.45 in March. This compares with $5.70 for the previous year and the record high of $6.78 for 2008/09.

Current Winter Wheat Crop Conditions Are Better Than Last Year

The National Agricultural Statistics Service (NASS) April 9 Crop Progress report indicated that 61 percent of the winter wheat crop is rated good to excellent and 10 percent was rated poor to very poor. A year ago at this time, 36 percent of the winter wheat crop was rated good to excellent and 36 percent was rated poor to very poor. The principal reason the 2011 winter wheat crop conditions were worse than this year’s conditions was the lack of moisture on the Central and Southern Plains.

Conditions are still poor in Texas, but not as bad as a year ago. This year 31 percent of the Texas crop is rated poor to very poor, compared with 66 percent for the 2011 crop. Oklahoma is much improved. This year, only 4 percent of the Oklahoma crop is rated poor to very poor, compared with 60 percent for the 2011 crop. The year to year improvement in crop conditions for Kansas, Nebraska, and Colorado follow a similar pattern. Respectively, the shares of each State’s 2011 and 2012 crops that rated poor to very poor are: Kansas, 37 percent to 6 percent; Nebraska, 20 percent to 5 percent; and Colorado, 57 percent to18 percent. For these HRW-producing States in the Central and Southern Plains, the average share of their winter wheat crops rated good to excellent is 56 percent.

The SRW-producing States are generally in good condition this year compared to the wheat crop in the Central and Southern Plains. The SRW-producing States 2012 crop averages 73 percent rated good to excellent and only 5 percent poor to very poor. Last year at this time, the average percent rated good to excellent for these States was 66 percent with 7 percent poor to very poor. Among these States, Ohio’s crop is in the most difficult situation, with 50 percent rated good to excellent and 17 percent rated poor to very poor.

Conditions for the 2012 crop are also good in the Pacific Northwest (PNW). The three States in the the PNW average 77 percent rated good to excellent and only 5 percent poor to very poor. Last year, these States average 81 percent good to excellent and 2 percent poor to very poor.

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 2011-20, is available at http://www.ers.usda.gov/briefing/wheat/2012baseline.htm/.

International Situation and Outlook

Foreign Wheat Supplies Are Down Slightly

World wheat production for 2011/12 is projected up just 0.3 million tons to 694.3 million this month, while global supplies slightly decrease by 0.5 million tons, with a 0.8-million-ton reduction in world beginning stocks.

The wheat harvest in most countries was completed months ago, and this month’s revisions reflect new information received mostly from government agencies. The partly offsetting revisions in wheat production are for Syria, Pakistan, South Africa, Egypt, and Iran. In Syria, reports from procurement agencies and information about on-farm wheat stocks suggest a production increase of 0.6 million tons to 3.9 million. In Pakistan, where the wheat harvest was completed in April 2011, the wheat production estimate is up 0.2 million tons to 24.2 million. Wheat output is also up 0.1 million tons to 1.9 million in South Africa, where the final official estimate confirmed a record wheat yield. Partly offsetting are two 0.3-million-ton reductions in wheat production: for Egypt, where area harvested is estimated slightly lower, and for Iran as reported by the country’s Ministry of Agriculture (Iranian 2010/11 wheat output is also down 0.5 million tons). Changes smaller than 0.1-million ton in wheat production are made for Mexico, Chile, Japan, and Jordan.

The 2011/12 foreign (and global) wheat balance is tightened this month. Slightly lower wheat supplies (lower beginning stocks that are partly offset by a production increase) and higher feed and residual consumption leave projected world ending stocks for 2011/12 down 3.3 million tons.

Beginning stocks for 2011/12 are down 0.8 million tons this month. Stocks have been reduced for Iran, down 1.0 million tons with lower production in two consecutive years and higher 2010/11 feed use; and for Japan, Pakistan, and Uzbekistan a combined 0.5 million tons. Beginning stocks are projected higher for Jordan, Ethiopia, Kenya, Yemen, and Libya for a total of 0.7 million tons. Smaller (less than 0.1 million tons) changes in beginning stocks are made for Bangladesh, Colombia, Philippines, Saudi Arabia, South Africa, Turkey, and Uruguay.

Foreign Feed and Residual Use Increased Significantly

Foreign wheat consumption is projected up 2.0 million tons to 654.4 million this month. Foreign wheat feed and residual use for 2011/12 is expected to be higher by 5.9 million tons this month, while food, seed and industrial use (FSI) is reduced 3.9 million.

Several factors have been pushing 2011/12 foreign wheat feed and residual use up, almost 20 percent above previous highs reached in 2008/09-2009/10. The record wheat harvest of 2011/12 naturally led to greater wheat losses adding to residual use, while abnormally high precipitation in some large wheat-producing countries resulted in production of a higher share of lower quality wheat more suitable for feeding. Two good examples where feed and residual use is projected to increase sharply are Australia and Kazakhstan. Both countries had historically high wheat production in 2011/12 with abnormally high rainfalls that promoted record yields, but also resulted in big quantities of lower quality wheat that is more appropriate for feeding and is harder to store. In Australia, feed and residual use is projected up 1.5 million tons (or 50 percent), while in Kazakhstan it is expected to increased 2.1 million tons (or 110 percent) on the year.

Another reason foreign wheat feed use is expected to be record high is that income growth in a number of countries is driving meat consumption and livestock sector development at a time when wheat prices are unusually competitive vis-à-vis corn. Foreign wheat feeding is up 21 million tons, or nearly 20 percent, on the year, while foreign coarse grain feeding is up about 15 million tons, or less than 3 percent on the year. A striking example is China where wheat feeding is projected up 6.5 million tons (or 50 percent) on the year while corn feeding is projected up only 3.0 million tons (or 2 percent) on the year. Countries that are expected to follow similar wheat feed use patterns include: South Korea, where wheat feeding is projected up almost 30 percent on the year; Mexico, where wheat feeding is projected up 150 percent on the year; Egypt, where wheat feeding is projected up 13 percent on the year; and in a number of others.

This month, a review of domestic consumption estimates for India showed that the data series understated feed and residual use while overstating food consumption, and resulted in shifting wheat from food to feed use, leaving total domestic consumption and officially reported ending stocks unchanged. Assuming that at least 3 percent of Indian wheat supplies should end up as a residual loss, the wheat residual-use series for India is revised back to 1960/61 to better conform to the country’s rising wheat-production numbers. For 2011/12, Indian wheat feed and residual use is projected 2.9 million tons higher, and is fully offset by a reduction in the country’s FSI use. Changes for 1960/61-2010/11 are made accordingly.

In China, wheat feed consumption for 2011/12 is projected up 2.0 million tons this month as domestic prices continue to favor wheat feeding over corn, and China continues to expand its feed-wheat imports. Wheat feeding is also up 0.4 million tons in Saudi Arabia, where barley feeding is being partly replaced by wheat. Wheat feeding is up 0.3 million tons in Mexico, as corn and sorghum are in short supply there this year. The Government of Mexico also subsidizes the usage of higher quality wheat for feeding, creating a disincentive for the farmers to export their durum wheat. Smaller changes in wheat feeding are made for Colombia, Morocco, Philippines, Vietnam, and South Africa–all reflecting higher projected wheat imports.

In addition to the 2.9-million-ton reduction in Indian FSI that does not have any effect on the wheat balance, food use is projected down this month in Jordan, Libya, Mexico, Pakistan, Russia, and Uzbekistan. Partly offsetting are increases in South Africa, and Kenya. Slight (smaller than 0.1 million tons) FSI changes are made for Angola, Colombia, Japan, Morocco, and Philippines.

Ending Stocks Reduced

Foreign wheat ending stocks for 2011/12 are projected down 2.4 million tons to 184.7 million tons this month, while global ending stocks are down 3.3 million tons to 206.3 million, the difference being due to a 0.9-million-ton stock reduction in the United States.

Ending wheat stocks are revised down 1.5 million tons for China, reflecting higher wheat feeding partly offset by expanded imports prospects; for Iran, stocks are down 1.4 million tons because of lower beginning stocks, wheat output, and local marketing year imports. Stocks in Argentina, Canada and Brazil are down 0.5, 0.3, and 0.2 million tons, respectively, reflecting higher projected exports. For Japan, Saudi Arabia, and Turkey, ending wheat stocks are down 0.4 million tons each, because of a combination of lower supplies and higher wheat use for the first two countries. For Turkey the change mainly reflects lower imports. In Egypt and Uzbekistan, ending stocks are down 0.3 million tons each, because of lower wheat output in Egypt and a combination of lower supplies and higher projected exports partly offset by lower wheat use in Uzbekistan.

The largest increases for wheat ending stocks are in Ukraine, Syria, Jordan, and Uruguay, which are up 1.0, 0.6, 0.4, and 0.2 million tons, respectively, reflecting lower estimated exports for Ukraine and Uruguay, higher wheat supplies for Syria, and a combination of higher supplies and lower wheat use in Jordan. Smaller changes in ending stocks are made for a number of countries.

World Wheat Trade and US Exports Boosted Further

World wheat trade is increased 1.3 million tons this month to 143.1 million tons, breaking the historical record of 2008/09. As was described above, strong demand for meat products and therefore for grains, fueled by higher incomes in a number of countries, has been increasingly satisfied this year by abundantly available feed-quality wheat that remains competitively priced vis-à-vis corn and other coarse grains.

Being in the last quarter of the July-June trade year, most of the trade revisions this month are based on the pace of sales and shipments. Wheat exports are increased this month for Argentina, Brazil, and Pakistan, up 0.5 million tons to 10.2, 2.0, and 0.8 million tons, respectively. In Argentina, the evidence of a strong pace of wheat export licenses coupled with recent strong sales to Algeria and Morocco, and the assessment of wheat domestic consumption based on the local mill-grind data, support an increase in 2011/12 projected wheat exports. Brazil has been demonstrating stronger-than-expected pace of exports, selling non-trivial amounts of wheat to such non-traditional destinations as Saudi Arabia, Iran, South Africa, EU, and many others. The Brazilian Government continues to subsidize exports of low-protein wheat that can be either used for feed or to make flat bread in North Africa and Middle East. In Pakistan, after the wheat export ban was lifted in December 2010, the country’s wheat exports took off. The country has been actively exporting through the first half of 2011/12 trade year before wheat prices in the region declined, making Pakistani wheat less competitive. Exports are also up 0.4 and 0.3 million tons, respectively, for Uzbekistan and Canada, reflecting the pace of shipments.

Wheat exports are down this month for Ukraine and Uruguay by 1.0 and 0.2 million tons, respectively, both based on pace of sales. Despite ample wheat stocks (63 percent higher on the year), and with no clear official wheat exports restrictions, Ukraine continues to lag substantially behind in wheat sales. Since the beginning of the local marketing year in July 2011 through early April 2012, Ukraine has exported just under 4.0 million tons of wheat. As suggested in February (http://usda01.library.cornell.edu/usda/ers/WHS//2010s/2012/WHS-02-13-2012.pdf), the Government may be using bureaucratic measures to ensure ample domestic wheat supplies in case of a harvest shortfall in 2012/13.

The largest increase this month in 2011/12 wheat imports is for China, up 0.5 million tons to 2.0 million. The country continues to import large quantities of feed-quality wheat from Australia for use inSouth China provinces, as it seems to be cheaper than moving wheat from wheatproducing areas farther north. Evidence of rising shipments supports an increase in projected imports for the following countries: Mexico up by 0.3 million tons to 4.5 million, as it continues to replace low corn and sorghum supplies with imported wheat; Kenya, Morocco, Philippines, and Vietnam up by 0.2 million tons each; while Angola and Israel are up 0.1 million tons each. A lower pace of imports resulted in reduced imports for Turkey, down 0.3 million tons, and for Libya, down 0.2 million tons.

US 2011/12 July-June trade year wheat exports are forecast up 0.3 million tons this month to 26.8 million. The forecast for the June-May local marketing year is unchanged at 1,000 million bushels. This means that an additional 0.3 million tons of wheat is expected to be exported in June 2012 after the start of the local 2012/13 marketing year. The latest sales to Egypt, EU-27, and Mexico support this projection, as at least part of the recently sold wheat is likely to be delivered in June. The pace of sales and shipments supports an increase that puts exports 9.2 million tons lower than a year earlier, when exports reached 36.0 million tons. US Census estimates of wheat exports for July 2011 through February 2012 reached 17.1 million tons, 4.6 million lower compared with the same period a year earlier. Grain inspections for March indicate exports of 2.5 million tons, down 0.94 million tons on the year. As of March 29, 2012, outstanding export sales were 4.5 million tons, 3.2 million tons lower than a year ago. These sources combined indicate an 8.7-million-ton drop on the year in export commitments.

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