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USDA Wheat Outlook


15 September 2014

USDA Wheat Outlook - 15 September 2014USDA Wheat Outlook - 15 September 2014


USDA Wheat Outlook

Projected U.S. Wheat Ending Stocks Raised and Prices Dropped

Projected U.S. wheat supplies for 2014/15 are raised 10 million bushels with higher expected imports of hard red spring (HRS) wheat from Canada. This reflects higher stocks in Canada as well as the strong shipment pace to date. Domestic use is unchanged, but exports are lowered 25 million bushels with larger global wheat supplies and increased competition. Hard red winter (HRW) wheat exports are lowered 15 million bushels due to the slow pace of sales and shipments to date. HRS wheat exports are lowered 10 million bushels with increased competition expected from Canada. A 5-million-bushel increase in soft red winter wheat exports is offset by a 5-million bushel reduction for white wheat. Projected all wheat ending stocks are raised 35 million bushels. The projected range for the 2014/15 season-average farm price is lowered 40 cents at the midpoint to $5.50 to $6.30 per bushel.

An increased foreign production forecast for 2014/15 and larger beginning stocks boosted world wheat supplies this month. The increase in world wheat supplies is larger than the increase in use, raising projected world ending stocks. U.S. wheat export prospects are slightly down while European Union (EU), Canadian, and Ukrainian exports are on the rise. For a second year in a row, the EU is expected to be the largest world wheat exporter.

Domestic Outlook 

Wheat Ending Stocks for 2014/15 Projected Up Sharply From August

Ending stocks of all wheat for 2014/15 are projected up 35 million bushels from August with larger supplies and lower use. Total wheat supplies for 2014/15 are projected up 10 million bushels from August with larger imports of hard red spring wheat. Planted and harvested areas and production are unchanged from August. Total projected uses are down 25 million bushels from August because of lower exports. Projected domestic use is unchanged from August.

2014 U.S. Winter Wheat Production Is Unchanged From August

The survey-based forecast of winter wheat production, at 1,397 million bushels, is unchanged from August, but down 137 million bushels from 2013. Expected 2014 harvested area is 32.4 million acres, unchanged from 2013. The 2014 winter wheat yield is forecast at 43.1 bushels per acre, down 4.3 bushels from the previous year.

2014 Winter Wheat Production Estimates by Class

Hard red winter (HRW) production is forecast at 729 million bushels, down 15 million bushels from a year ago. Production for 2014 is down from 2013 as a lower yield more than offset higher harvest area. Forecast yield is 33.3 bushels per acre, down from last year because of drought conditions and an April spring freeze. Forecast planted area, harvested area, and yield and year-to-year changes for 2014 from 2013 are 30.4 million acres, up 0.8 million acres; 21.9 million acres, up 1.7 million acres; and 33.3 bushels per acre, down 3.5 bushels per acre, respectively.

Soft red winter (SRW) production is forecast at 466 million bushels, down 99 million bushels from last year. 2014 production is forecast lower than 2013 because of lower harvested area. Forecast planted area, harvested area, and yield and yearto- year changes for 2014 from 2013 are 8.5 million acres, down 1.5 million acres; 7.3 million acres, down 1.6 million acres; and 64.0 bushels per acre, up 0.3 bushels per acre, respectively.

White winter wheat production for 2014 is forecast to total 202 million bushels, down 24 million bushels from a year ago. 

Desert durum production in California and Arizona is forecast at 12.6 million bushels for 2014. This production is less than the 14.8 million bushels in 2013.

Spring Wheat Production Estimates by Class

Hard red spring (HRS) production is forecast at 529 million bushels, up 39 million bushels from 2013. HRS production is forecast up as higher harvested area more than offset lower yields. Forecast planted area, harvested area, and yield and yearto- year changes for 2014 from 2013 are, respectively, 12.0 million acres (up 1.1 million), 11.7 million acres, (up 1.0 million), and 45.2 bushels per acre (down 0.6 bushels).

White spring production is estimated to total 43.2 million bushels, up 0.1 million bushels from 2013.

Durum wheat production is forecast to total 60.5 million bushels, down 1.4 million bushels from a year ago. Durum production is forecast down from 2013 with slightly smaller harvest area and lower yields. Forecast planted area, harvested area, and yield and year-to-year changes for 2014 from 2013 are, respectively, 1.47 million acres (unchanged), 1.42 million acres, (unchanged), and 42.7 bushels per acre (down 0.9 bushels).

Projected 2014/15 Supplies Up This Month

The 2014/15 outlook for U.S. wheat supplies is raised 10 million bushels from August to 2,789 million bushels. Beginning stocks for 2014/15, at 590 million bushels, are unchanged from August. Projected imports, at 170 million bushels, are up 10 million bushels from August. The increased imports are HRS based on the pace of imports. Production is forecast at 2,030 million bushels, unchanged from August.

Projected 2014/15 Supplies Down From 2013/14

Total supplies are down a projected 227 million bushels from 2013/14 to 2,789 million bushels. Only HRS supplies are projected up year to year. Projected supplies of the other classes are down, especially HRW and SRW. HRW supplies are down mostly because of lower carryin stocks; the combined result of sharply lower production in 2013/14 compared to 2012/13 and strong 2013/14 exports. SRW supplies are down mostly due to lower production; the result of lower planted and harvest areas.

Projected 2014/15 Utilization Down This Month

The 2014/15 outlook for U.S. wheat use is projected down 25 million bushels from August to 2,091 million bushels. Food use, at 960 million bushels, is unchanged from August. Seed use and feed and residual use, at 76 million bushels and 155 million bushels, respectively, are also unchanged. Projected exports are lowered 25 million bushels from August to 900 million bushels. Exports are lowered for HRW, HRS, and white by 15 million bushels, 10 million bushels, and 5 million bushels, respectively. SRW exports are raised 5 million bushels.

Projected 2014/15 Utilization Down from 2013/14

Total use is projected down by 335 million bushels from 2013/14 to 2,091 million bushels. Total use of all classes is down year to year with the SRW and HRW classes down the most.

Projected domestic use, at 1,191 million bushels, is down 59 million bushels from 2013/14 as lower expected feed and residual use more than offset higher food use. Projected 2014/15 exports are down 276 million bushels from 2013/14 to 900 million bushels, especially due to SRW and HRW exports. SRW and HRW are exports expected down 106 million bushels and 138 million bushels, respectively.

Projected 2014/15 Ending Stocks Up From August and 2013/14

The projected 2014/15 outlook for U.S. wheat ending stocks is raised 35 million bushels from August to 698 million bushels. Total 2014/15 ending stocks are expected up 18 percent from 2013/14. Stocks of SRW, HRS, durum, and white are expected up year to year by 68 percent, 36 percent, 12 percent, and 4 percent, respectively. HRW ending stocks are expected down 15 percent.

The 2014/15 Price Range Is Down From August

The projected season-average farm price range for 2014/15 is $5.50 to $6.30 per bushel, down from the August range of $5.80 to $6.80 per bushel. For comparison, the season-average farm price for 2013/14 is estimated at $6.87 per bushel.

2013/14 Quarter By Class Supply/Disappearance Data

The flour produced report for the 2nd quarter of 2014 resulted in a slight increase in total wheat used for food for 2013/14, 950 million bushels to 951 million bushels.

This data completes the 2013/14 marketing year supply/disappearance table. This quarter by class data will be posted to the ERS website before the end of September. See Historical Tables at http://www.ers.usda.gov/data-products/wheat-data.aspx for this data.

USDA Wheat Baseline, 2014-23

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 2014-23, is available at http://www.ers.usda.gov/topics/crops/wheat/usda-wheat-baseline,-2014-23.aspx.

International Outlook

World Wheat Production Prospects Boosted This Month

World wheat production in 2014/15 is forecast at 720.0 million tons, up 3.9 million tons this month, getting further ahead of last year’s record of 714.0 million tons. Increased wheat output in the Northern Hemisphere, mostly based on harvest reports, more than offset reductions for the Southern Hemisphere, where growing conditions have been less favorable.

Wheat production in the EU is up 3.1 million tons this month to a second-largest ever crop of 151.0 million. Based on local government estimates and harvest reports, wheat output across the EU from the United Kingdom (UK) in the west to Romania in the east is projected higher. The biggest increase is made for the UK, the third-largest wheat producer in the EU, up 0.9 million tons to 16.3 million. An excessively wet climate in this country gave way this season to drier weather, which promoted exceptionally good yields. Wheat projections were increased also in Germany, Poland, France, Romania, and several other EU member countries. Partly offsetting are slightly lower projections for Denmark and Slovakia. Wheat production for Serbia, not an EU member, is also projected up. The quality of wheat in Europe is expected to be unusually low, because of widespread heavy rains during the harvest in August.

For Ukraine, the wheat production estimate is raised 2.0 million tons this month to 24.0 million tons based on harvest repots. Ukraine grows predominantly winter wheat, and the harvest is virtually complete. The harvest reports currently exclude wheat production in Crimea, estimated at about 0.6 million tons. This amount is added to the USDA Ukrainian wheat production estimate. Small and fully offsetting wheat production changes are also made for several FSU-12 countries—Uzbekistan, Azerbaijan, Armenia, and Tajikistan.

The wheat production estimate for Morocco is increased 0.4 million tons this month to 5.1 million, based on revised government estimates. Despite dryness during the planting period in southern wheat areas of the country, rains in April and May partly alleviated the damage. In Algeria, wheat production is estimated sharply lower this month, down 1.0 million tons to 2.6 million. Both area and yield are reduced, as the dry spell in the eastern part of the country during the reproductive period in March slashed wheat yields.

Wheat production in Saudi Arabia continues to decline, down 0.1 million tons to 0.5 million with the continuation of wheat area reduction. The country plans to stop wheat domestic purchases by 2016.

Australian wheat production is reduced 0.5 million tons this month to 25.5 million. After a favorable start to the growing season, there are indications that low precipitation and higher temperatures in parts of Western Australia, Victoria, and Queensland affected crop development. Yield prospects have been reduced, but rainfall during the months of September and October will still be very important in determining yields.

Wheat production in Argentina is reduced 0.2 million tons this month to 12.3 million, with a small reduction in planted wheat area due to excessive wetness in the Buenos Aires.

Higher Beginning Stocks Further Boost 2014/15 Supplies

World wheat beginning stocks for 2014/15 increased 2.8 million tons this month due to changes in 2013/14 supply and demand. Chinese stocks increased 2.0 million tons this month, as wheat feeding for 2013/14 is lowered to better reflect the fluctuations in relative wheat and corn prices. Statistics Canada reported wheat ending stocks 0.8 million tons higher than USDA’s earlier forecast. Wheat feed and residual use turned out to be lower-than-expected in Canada in 2013/14, despite huge off-the-chart production. It appears that, given high transportation costs last year, the farmers opted for holding more of their grain in stocks rather than sending it to feeders. Kazakhstan’s stocks are up 0.3 million tons on lower wheat exports. Algeria, facing drought in 2014, imported more wheat at the end of 2013/14, boosting stocks 0.5 million tons. Several importers, such as South Africa, Sudan, and a number of others imported in the last months of 2013/14 slightly different amounts of wheat than expected, altering 2014/15 beginning stocks. Tajikistan’s wheat supply and demand were revised for several years, changing the stocks estimates in the interval of 0.1-0.2 million tons.

Projected 2014/15 World Wheat Feed Use Up This Month

World wheat consumption for 2014/15 is forecast up 3.2 million tons this month to 710.0 million tons. Almost all the increase is for wheat feed and residual use, up 3.1 million tons this month to 137.8 million tons. Chinese wheat feeding for 2014/15 is increased 2.0 million tons this month, while feeding for 2013/14 is reduced 2.0 million tons (see the previous beginning stocks section). The important factor underlying this shift is the fluctuation of wheat prices relative to corn prices. In 2013/14, a spike in the ratio of wheat to corn prices in the North China Plain triggered a reduction of wheat feeding in favor of corn, while in 2014/15 the relative prices for wheat are more attractive, and therefore more wheat feeding is expected. Higher wheat imports in Iran are expected to boost feeding in the country by 0.5 million tons. Small production changes triggered minor changes in wheat feeding in Armenia, Azerbaijan, and Uzbekistan. The wheat feed use series has been revised up for Tajikistan. A large wheat crop projected for Belarus for 2014/15 implies higher feeding. Tiny changes are made for several other countries.

World Wheat Ending Stock Increased for 2014/15

World wheat ending stocks for 2014/15 are projected to reach 196.4 million tons, up 3.4 million this month, and are approaching the 2011/12 level. Increased 2014/15 production prospects are boosting ending stocks this month for the European Union, up 2.2 million tons to 15.1 million (the highest since 2009/10); Ukraine, up 0.8 million tons to 5.7 million (the highest level of stocks in 20 years); and Morocco, up 0.4 million to 3.1 million. Australia’s ending stocks are down 0.5 million tons this month to 5.2 million due to lower production. Ending stocks are projected 0.6 million tons higher in Pakistan, and 0.5 million tons lower in Brazil, reflecting higher imports by the first, and higher exports by the latter. In Algeria, stocks are up 0.5 million tons, despite an almost 30-percent production cut. The country started to import large amounts of wheat at the end of the previous year, and this is projected to continue in 2014/15. Ending stocks for the United States are projected 1.0-million-ton higher as projections for its wheat imports are up and exports are down.

Small changes under 0.2 million tons in ending stocks are also projected for various countries.

World Wheat Trade Estimate for 2014/15 Boosted

World wheat trade in 2014/15 (July-June) is projected to reach a second-highest record level of 154.9 million tons, up 3.2 million this month. Wheat imports increased 1.0 million tons this month for both Algeria and Pakistan, and by 0.5 million tons for Iran. Algeria has been importing record-level amounts of wheat since the end of the last marketing year to alleviate significant decline in wheat production. Pakistan has been buying aggressively, mainly from Russia and Ukraine, and has so far already accumulated in this season about 0.8 million tons of imported wheat. With somewhat better access to financial resources, and a mediocre wheat harvest, Iran is stepping up wheat imports. Smaller adjustments to import forecasts are also made for several countries.

Export prospects for 2014/15 are adjusted significantly to reflect supply shifts. Increased production helped boost exports for both the European Union and Ukraine by 1.0 million tons this month to 26.0 and 10.0 million, respectively. The EU is now expected to be the largest wheat exporter in 2014/15, and 1.0 million tons ahead of the U.S. This is the second year in a row when the EU leads the world as the largest wheat exporter. Canadian exports are also projected up 1.0 million tons to 22.0 million tons, on par with last year. Large stocks, the apparent improved logistics, and rapid export activity support the projection. Increased beginning stocks boost projected exports in Kazakhstan, up 0.5 million tons to 6.5 million. Brazil’s wheat exports are also increased 0.5 million tons this month. The government provides transportation subsidies to move low-quality Brazilian wheat to the ports, where it is exported as milling wheat to places where it can be used to make flat bread (e.g. to Algeria). Reduced production prospects for Argentina lower its export prospects by 0.2 million tons to 6.3 million.

Tiny changes are made for wheat exports in Georgia and Sri Lanka.

U.S. Exports Prospects Slightly Down, Imports Projected Higher

U.S. trade year imports are up 0.3 million tons to 4.4 million this month, on the expectation of larger durum and spring wheat imports of high quality Canadian wheat.

U.S. 2014/15 wheat exports are projected down 0.5 million tons to 25.0 million. Exports have been pretty slow in the first months of the season, with July grain exports of less than 2.0 million tons, down over a million tons from a year ago. Larger wheat supplies in major competitors (Canada, EU, Black Sea countries), strong dollar, and the lower-than-usual quality of domestic wheat are expected to put further pressure on U.S. sales, which are projected at a more modest pace in the later part of the year. As of September 4, 2014, wheat outstanding sales were only 5.4 million tons, down from 6.5 million tons a year ago.

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