USDA Wheat Outlook

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19 October 2012

USDA Wheat Outlook - October 2012

Reduced Exports Partially Offset Higher Feed and Residual Use, Lowering Ending Stocks

Projected U.S. wheat ending stocks for 2012/13 are lowered 44 million bushels as higher feed and residual disappearance more than offsets a reduction in projected exports. Production for 2012/13 is raised 1 million bushels based on the latest estimate from the September 30 Small Grains report. Feed and residual use is projected 95 million bushels higher reflecting the September 1 stocks that indicated higher-than-expected June-August disappearance. Exports are lowered 50 million bushels on the pace of shipments and sales to date and stronger expected competition. Export projections are lowered for hard red winter and soft red winter wheat. The projected range for the 2012/13 season-average farm price is narrowed 15 cents on both ends to $7.65 to $8.55 per bushel. Small revisions to 2011/12 feed and residual disappearance and seed use reflect recent updates to stocks and acreage.

The world wheat production forecast for 2012/13 is lower 5.7 million tons this month, mostly because of reduced prospects for Australia. Global wheat trade is projected slightly lower. U.S. wheat export prospects are projected to decline. Wheat exports are expected to rise for Russia, India, and Argentina, while reduced exports are projected for three major wheat exporters ? EU-27, Australia, and Canada.

Domestic Situation and Outlook

Projected Ending Stocks for 2012/13 Are Down from September

Projected ending stocks of wheat for 2012/13, at 654 million bushels, are down 44 million bushels from September, as lower exports only partially offset higher feed and residual use. Ending stocks for 2012/13 are projected down 89 million bushels from 2011/12, as total use increases more than supplies.

2012 Production Up from 2011

Total production for 2012/13 is estimated at 2,269 million bushels, nearly unchanged from September, but up 270 million bushels from 2011/12. The total is up only 1 million bushels from September because of nearly offsetting changes in winter and spring wheat production. Winter wheat production was down 37.5 million bushels from September because of lower yields and reduced harvested area. Spring wheat production was up 38.4 million bushels from September because of higher yields and larger harvested area.

Total planted area is down slightly from September while total harvested area is up slightly from September. Total planted area is estimated at 55.7 million acres, up 1.3 million acres from the previous year. Total harvested area is estimated at 49.0 million acres, up 3.3 million acres from the previous year. The all-wheat yield is estimated at a 46.3 bushels per acre, equaling the record 46.3 bushels for 2010/11. The 2012/13 yield is down 0.3 bushels from September, but up 2.6 bushels from the previous year.

Winter Wheat Production Estimates by Class

Hard red winter (HRW) production is estimated at 1,004 million bushels, down 8 million bushels from September, as lower yields more than offset slightly higher harvested area. Production is up year to year 224 million bushels, with the higher planted area for the 2012 crop and the 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. Estimated planted area, harvested area, and yield and year-to-year changes for 2012 are, respectively, 29.9 million acres, up 1.4 million acres; 24.7 million acres, up 3.3 million acres; and 40.7 bushels per acre, up 4.3 bushels per acre.

Soft red winter (SRW) production is estimated at 420 million bushels, down 15 million bushels from September, with both smaller harvest area and lower yield. SRW production is 38 million bushels lower year to year, with both lower planted and harvested areas and lower yield. Estimated planted area, harvested area, and yield and year-to-year changes for 2012 are, respectively, 8.1 million acres, down 0.5 million acres; 7.0 million acres, down 0.4 million acres; and 60.3 bushels per acre, down 1.4 bushels per acre.

White winter wheat production for 2012 is estimated to total 222 million bushels, down 14 million bushels from September because of both smaller harvest area and lower yield. Production is down 34 million bushels from the previous year. The planted and harvested areas, production, and yield for white winter wheat are as follows (hard white winter = HWW and soft white winter = SWW):

2012	HWW	SWW
Planted area (million acres)	0.34	3.01
Harvested area (million acres)	0.29	2.91
Yield (bushels/acre)	46.0	71.6
Production (million bushels)	13.3	208.3

2011	HWW	SWW
Planted area (million acres)	0.32	3.28
Harvested area (million acres)	0.27	3.18
Yield (bushels/acre)	45.5	76.6
Production (million bushels)	12.4	243.7

Spring Wheat Production Estimates by Class

Hard red spring (HRS) production is estimated at 505 million bushels, up 42 million bushels from September, with both larger harvested area and higher yield. HRS production is up year to year 107 million bushels because of both higher yields and larger harvested area. Estimated planted area, harvested area, yield, and year-toyear changes for 2012 are, respectively, 11.7 million acres, up 0.1 million acres; 11.5 million acres, up 0.2 million acres; and 44.0 bushels per acre, up 8.8 bushels per acre.

White spring production is estimated to total 37.4 million bushels, up 0.5 million bushels from September, as larger harvested area more than offset lower yield. This production is down 20.1 million bushels from 2011. The planted and harvested areas, production, and yield for white spring wheat are as follows (hard white spring = HWS and soft white spring = SWS):

2012	HWS	SWS
Planted area (million acres)	0.12	0.48
Harvested area (million acres)	0.11	0.46
Yield (bushels/acre)	74.3	62.7
Production (million bushels)	8.5	29.0

2011	HWS	SWS
Planted area (million acres)	0.15	0.66
Harvested area (million acres)	0.14	0.64
Yield (bushels/acre)	82.5	71.3
Production (million bushels)	11.9	45.6

Durum wheat production is estimated to total 82.0 million bushels, down 4 million bushels from September, with both lower yield smaller harvested area. Durum production is up 31.5 million bushels year to year, with higher planted and harvested areas and higher yield. In the previous year, excessive moisture and cool temperatures in the Northern Plains resulted in late seeding and prevented plantings. Planted area in 2011 was the lowest since 1960. Estimated planted area, harvested area, yield, and year-to-year changes for 2012 are, respectively, 2.1 million acres, up 754,000 acres; 2.1 million acres, up 790,000 acres; and 39.0 bushels per acre, up 0.5 bushels per acre.

October Changes for Projected 2012/13 Supplies

The 2012/13 outlook for U.S. wheat supplies, at 3,142 million bushels, is up 1 million bushels from September. Beginning stocks for 2012/13, at 743 million bushels, are unchanged from September. There are minor changes in durum and HRW beginning stocks based on the September NASS Grain Stocks report. Projected imports, at 130 million bushels, are unchanged from September, but there are by-class changes: both HRS and durum imports are raised while SRW imports are down. Production is estimated at 2,269 million bushels, up 1 million bushels from September.

Projected 2012/13 Supplies Up From 2011/12

Total supply is increased by 168 million bushels from 2011/12 to 3,142 million bushels. Supplies of HRW, HRS, and durum are up year to year, while white and SRW are down. HRW supplies increased the most, as larger production more than offset lower beginning stocks. Durum supply also increased sharply percentagewise, as larger production and imports more than offset lower beginning stocks. The supply of HRS increased, as larger production and imports more than offset the year-to-year decline in beginning stocks. Lower SRW production and imports more than offset higher beginning stocks, reducing supplies from the previous year. White wheat supplies are lower because of both lower beginning stocks and production.

October Changes for 2012/13 Utilization

The 2012/13 outlook for total U.S. wheat use, at 2,488 million bushels, is up 45 million bushels from September. Food use and seed use are unchanged from September. Feed and residual use is raised 95 million bushels based on the September NASS Grain Stocks report, while exports are dropped 50 million bushels based on the export pace to date. There are feed and residual changes for all classes of wheat; HRW, HRS, and durum are raised, while SRW and white are lowered. Exports of HRW and SRW are lowered. Exports of the other classes are unchanged from September.

Projected 2012/13 Utilization Up From 2011/12

Total use is increased by 257 million bushels from 2011/12 to 2,488 million bushels. Projected use is raised for three classes: HRW, HRS, and durum. The largest increase is with HRW due to both higher feed and residual use and higher exports. Projected use is lower for SRW and white.

Projected 2012/13 Total Ending Stocks Are Down from September and Down From 2011/12

The 2012/13 outlook for total U.S. wheat ending stocks, at 654 million bushels, is down from September with changes in all classes. HRW ending stocks are down the most in October as the lower exports only partially offset the higher expected feed and residual use. SRW ending stocks are up the most in October as exports and feed and residual use decline more than supplies.

The year-to-year decline in ending stocks from 2011/12 is projected at 89 million bushels. The decline is led by reduced stocks for the HRW. There are minor changes year-to-year for HRS, SRW, and white. Durum stocks are up substantially with larger production.

Total ending stocks for 2012/13 are expected to decrease by 12 percent from 2011/12. Stocks of HRW and white are expected down 39 percent and 5 percent, respectively. Stocks of durum, HRS, and SRW are expected up 55 percent, 12 percent, and 2 percent, respectively.

2012/13 Price Range Is Narrowed in October

The projected range for the 2012/13 season-average farm price is narrowed to $7.65 to $8.55 per bushel compared with $7.50 to $8.70 per bushel last month. This compares with the record $7.24 per bushel reported for 2011/12.

Winter Wheat Seedings Slightly Behind 5-Year Average

As of October 7, 57 percent of the expected winter wheat planted area had been seeded. This percentage is slightly behind the 5-year average of 59 percent, but ahead of last year’s pace of 53 percent. Emergence this year, at 23 percent, is also behind the 5-year average of 30 percent. The pace of this year’s emergence is slightly behind last year’s pace.

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 U.S. 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-wheat-baseline,-2012-21.aspx.

International Situation and Outlook

World Wheat Production Prospects Reduced This Month

Global wheat production in 2012/13 is projected to reach 653.0 million tons, down 5.7 million tons this month. The largest change this month is a 3.0-million-ton cut in projected wheat production in Australia to 23.0 million. September rainfall is the most critical for wheat production in Australia, and this year, though precipitation in September improved in the province of Western Australia after it suffered a dry spell in July, accumulated soil moisture is still much below average. In the provinces of the eastern part of the country’s wheat belt, rainfall was spotty and not well distributed, and crop development was delayed by unusually low temperatures. Because of the lack of moisture, some wheat fields are expected to be cut for hay or left unharvested, reducing expectations for harvested area, down 0.2 million hectares to 13.3 million.

Projected wheat production in Russia continues its decline as the wheat harvest gets closer to its end and projections for abandoned wheat area get higher, reaching 12 percent of planted area. This trend drives down area harvested by 0.7 million hectares to 21.8 million, and wheat production down 1.0 million tons to 38.0 million.

European Union (EU-27) wheat production for 2012/13 is reduced 0.8 million tons this month to 131.6 million, mostly because of a significant reduction for the United Kingdom (UK) (down 0.8 million tons to 14.0 million). UK is the third largest wheat producer in the EU-27 after France and Germany. In contrast to the rest of Europe, abnormally high precipitation (around twice that of normal) and cool temperatures in the UK’s major wheat-producing areas reduced yields, and promoted diseases that lowered the quality of wheat. Revisions in the official wheat production estimates for other EU-27 countries offset each other with lower estimates for France, Greece, Austria, Ireland, Bulgaria, and Slovenia being counterbalanced by the increases for Sweden, Lithuania, Hungary, Romania, Slovakia, Latvia, and Finland.

Canadian wheat production is trimmed 0.3 million tons to 26.7 million as Statistics Canada surveys revealed lower yields. Algeria also reported lower preliminary wheat production, with a reduction of 0.3 million tons to 3.3 million. Wheat production in Kyrgyzstan is down 0.3 million tons to 0.6 million, as harvest reports indicate a decline in wheat yields. Wheat area in Uruguay is projected down 0.1 million hectares, based on planting intentions reported by its Ministry of Agriculture, reducing production 0.3 million tons to 1.6 million.

There are also small changes in wheat production this month in Sudan, Mongolia, Kenya, Zambia, Tanzania, Lesotho, and the United States.

Several revisions of the previous years’ wheat production estimates are made this month. Based on the latest Australian Bureau of Statistics (ABS) data, wheat production in Australia for 2010/11 is revised down 0.5 million tons to 27.4 million, while a production revision for 2011/12 is insignificant. Wheat production in Argentina is revised up 0.5 million tons for both 2010/11 and 2011/12 to 17.2 and 15.5 million tons, respectively, with higher estimated harvested area and unambiguous evidence of the increased use of wheat for exports and domestic consumption.

World Wheat Use and Ending Stocks Down Modestly in 2012/13

Global wheat supply prospects for 2012/13 were reduced not only by lower production prospects, but also by reduced ending stocks for 2011/12. Recently acquired export data for Australia indicate another increase in historically high local marketing year wheat exports that, coupled with the lower revised 2010/11 wheat output, reduced its 2012/13 beginning stocks 1.5 million tons to 6.3 million. Changes to other countries were only partly offsetting, leaving world wheat beginning stocks for 2012/13 down 0.5 million tons this month to 198.2 million.

Global wheat consumption for 2011/12 is projected 2.4 million tons lower this month to 678.2 million, while wheat feed and residual use is up 2.4 million tons to 134.5 million, largely because of a 2.6-million-ton increase in U.S. wheat feed and residual disappearance. Changes in feed use in foreign countries are mostly offsetting. EU-27 wheat feed use is increased 0.5 million tons this month to 55.5 million, reflecting nearly stable meat production year-to-year and reduced wheat exports this month. Canada’s projected 2012/13 wheat feed and residual use is also up 0.5 million ton to 3.2 million, as smaller barley and corn crops considerably reduced coarse grain feeding. With a 1.0-million-ton reduction in projected wheat harvest, feed consumption in Russia is trimmed another 0.5 million tons this month. This is despite an announced release of 1.0 million tons of wheat from intervention stocks targeted to livestock producers in the regions most affected by the drought. Feed use is projected down 0.2 million tons each in Australia, Thailand, and Vietnam. In Australia, lower wheat supplies are expected to drive domestic prices up and put pressure on feeding. With lower Australian supplies, wheat is becoming less competitive in Vietnam and Thailand, where, for Thailand, the reduction also reflects a reported shift away from wheat towards feeding of domestic broken rice.

Food use prospects for 2012/13 are down 1.0 million tons for India, as additional wheat exports appear to come from the domestic commercial market rather than from government stocks. Food wheat use is also down 0.2 million tons in Mexico, reflecting lower imports (though still up 7 percent on the year). Smaller changes in domestic wheat use are made this month for a number of countries.

World wheat 2012/13 ending stocks are projected down 3.7 million tons this month, to 173.0 million with lower projected use only partly offsetting reduced supplies of wheat. Foreign ending stocks decline 2.5 million tons, to 155.2 million. The global stocks-to-use ratio is forecast at an adequate 25.5 percent. Although 25 million tons lower than last year, current world ending stocks are still more than 5 million tons higher than in 2008/09, and almost 45 million tons higher than in 2007/08. This month’s U.S. stocks’ reduction accounts for about one third of the world’s ending stocks decline. Reductions in the ending stocks in Australia (down 1.3 million tons to 4.8 million) and Russia (down 1.0 million tons to 5.4 million) account for most of the rest, while the changes in the other countries’ wheat stocks are largely offsetting. Minor reductions in Canadian and EU-27 wheat ending stocks (down 0.3 and 0.2 million tons, respectively) are almost offset by an increase in Argentina (up 0.4 million tons). Ending stocks are projected slightly up in Bangladesh and Vietnam, and down in Mexico, Kenya, and Kyrgyzstan. Small adjustments of less than 0.1 million tons are projected for a number of other countries.

World Wheat Trade Slightly Down, U.S. Export Prospects Reduced with Slow Start

World wheat trade in 2012/13 (international July-June trade year) is projected at 136.1 million tons, down just 0.5 million tons this month. Russia’s imports are projected higher by 0.5 million tons to 1.0 million tons as higher domestic prices following the historically tight domestic wheat supplies in Siberia are expected to encourage wheat imports from bordering Kazakhstan. Algeria’s imports are boosted 0.3 million tons to 5.3 million because of reduced production. Imports for Mexico are trimmed 0.2 million tons to 4.0 million, with relative prices favoring sorghum over wheat. This is also a move toward more traditional proportions between wheat and sorghum in importing and feeding in Mexico. It followed last year’s unusually low sorghum supplies in the United States that resulted in recordhigh wheat imports and the lowest (on par with only 2007/08) sorghum imports in 25 years. Projected wheat imports are also reduced in Kenya, Sudan, Tajikistan, Thailand, and Yemen. Kenyan imports (down 0.2 million tons) are expected to be limited by the tight supplies from the Black Sea. Sudanese and Tajik imports are trimmed 0.3 and 0.1 million tons, respectively, because of higher estimated beginning stocks, while in Thailand, import reduction (down 0.2 million tons) is a reflection of a shift away from wheat toward feeding of domestic broken rice. There are also small (under 0.1 million tons) changes this month in imports for Angola, Belarus, Kyrgyzstan, Mauritania, New Zealand, Oman, and Papua.

This month’s changes in 2012/13 wheat export projections are largely offsetting. Exports by Russia are up 1.0 million tons to 9.0 million, reflecting a rapid pace of exports despite tight supplies. So far, Russia has already exported about 8.0 million tons of grain, out of which more than 6.5 million is wheat. The pace of exports is expected to slow down and practically halt in the second part of the marketing year, as domestic wheat prices are on the rise, thereby reducing exports and even opening the door to wheat imports. Wheat exports are also up 1.0 million tons to 6.0 million in India, supporting the current fast pace of wheat exports as the country regularly floats tenders to export wheat and has reportedly exported about 2.0 million in its local marketing year. Projected wheat exports are also boosted for Argentina, up 0.5 million tons to 7.3 million, reflecting increased competitiveness and a strong export pace. Mexican wheat exports are up 0.2 million tons to 0.8 million indicating higher demand for durum wheat in North African countries and recent reported sales.

Wheat exports are projected lower this month for three major wheat exporters, namely EU-27, Australia, and Canada. Lower supplies and higher domestic prices are projected to reduce wheat exports for the EU-27, down 1.0 million tons to 16.5 million. Because of a lower forecast wheat crop and aggressive Argentine exports, Canadian wheat exports are trimmed 0.5 million tons to 19.0 million. In Australia, where supplies are projected 3.0 million tons lower this month, local marketing year exports (October-September) are trimmed, down 3.0 million tons to 18.0 million, while international trade year exports (July-June) are reduced just 0.5 million tons to 20.5 million. A sharp reduction in wheat exports by Australia is expected to happen around and after June 2013, as wheat prices later next year are expected to be much lower than now. Australia is expected to move its wheat before Northern Hemisphere countries begin their wheat harvest in July 2013. In the first three months of the international trade year (July-September), Australia has already exported around 7.0 million tons of wheat, which leaves just about 13.0 million tons for the country to ship during the remaining 9 months. Exports are also reduced for Uruguay, reflecting lower supplies.

The world wheat trade estimate for the international 2011/12 July-June year is further increased this month by 0.4 million tons, to a record 152.7 million. Revised information and final numbers from statistical agencies for July/June called for increased exports by India, up 0.4 million tons. Trade year imports are also up for Afghanistan, Bangladesh, EU-27, and Sudan by 0.2 million tons each, and are down 0.1 million tons for both Sri Lanka and Yemen. Australian wheat exports for its 2011/12 October-September local marketing year are up 1.0 million tons, reflecting the high pace of reported shipments in July-September 2012. Local marketing year (December-November) exports are also up 0.6 million tons to 12.7 for Argentina, which is the highest on record. Small changes for a number of countries are mostly offsetting.

U.S wheat exports for 2012/13 July-June are projected to decrease 1.0 million tons this month to 31.5 million, which is still 3.5 million larger than in the previous year. Wheat exports have been off to a very slow start, though it is expected that U.S. wheat exports are going to be back loaded this year. U.S. wheat exports are expected to increase as other countries drive down their stocks through domestic use or exports. Census export data for July-August 2011 show wheat grain exports at 4.56 million tons, which is lower than a year ago when wheat exports reached just 28.1 million tons for the year. Inspection and outstanding sales also lag behind. Consequently, U.S export commitments (July-August data (Census Bureau), plus September inspections and September 27 outstanding sales) add up to 11.2 million tons, versus 12.2 million last year, a 7.5 percent decline. For the local 2011/12 June- May marketing year, U.S. exports are projected down 50 million bushels this month to 1,150 million.

October 2012

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