USDA Wheat Outlook

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17 January 2013

USDA Wheat Outlook - January 2013

Feed and Residual Use Up, Stocks Down

Projected U.S. wheat ending stocks for 2012/13 are lowered 38 million bushels this month. Feed and residual use is projected 35 million bushels higher as December 1 stocks, reported in the January Grain Stocks, indicate higher-than-expected disappearance during September-November. Seed use is raised 2 million bushels based on the winter wheat planted area reported in Winter Wheat Seedings. Projected exports for all wheat are unchanged; however, hard red winter (HRW) wheat exports are lowered 25 million bushels and soft red winter (SRW) wheat exports are raised 25 million bushels based on the pace of sales and shipments to date and the increasing competitiveness of SRW wheat in world markets. All wheat imports are also unchanged, but small adjustments raise projected HRW wheat imports 5 million bushels and reduce hard red spring wheat and durum imports by a combined 5 million bushels. The projected range for the 2012/13 season-average farm price for all wheat is lowered 10 cents at the midpoint and narrowed to $7.65 to $8.15 per bushel, based on prices reported to date.

Foreign wheat production for 2012/13 is slightly reduced this month, but projected foreign use is down a little more, slightly boosting foreign ending stocks. World wheat trade (July-June) is increased marginally to 140.5 million tons, with higher exports forecast this month for India, Russia, and Ukraine, and reduced exports for Australia and Canada.

Domestic Outlook

2012/13 Supplies Are Unchanged from December

Total projected wheat supplies for 2012/13, at 3,142 million bushels, are unchanged from December. 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 year to year, with higher planted area and a 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. HRS and durum production are up 107 million bushels and 32 million bushels, respectively, from a year ago 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 December, but up 270 million bushels from 2011. The all-wheat harvested area is estimated at 49.0 million acres, unchanged from December, 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 record 46.3 bushels for 2010. The yield is unchanged from December, but up 2.6 bushels per acre from the previous year.

Total 2012/13 carry-in stocks, estimated at 743 million bushels, are unchanged from December, 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 December, but up 18 million bushels from the previous year. By class, a 5-million-bushel increase in HRW imports from December is offset by lower imports of HRS and durum, down 3 million and 2 million bushels, respectively.

2012/13 Feed and Residual Use Up and Ending Stocks Down

Domestic use of wheat for 2012/13 is projected at 1,375 million bushels, up 37 million bushels from December and 193 million bushels higher than last year. Food use for 2011/12 is projected at 950 million bushels, unchanged from December, but up 9 million bushels from 2011/12. The higher year-to-year food use reflects both continued high extraction rates due to high wheat prices and population growth. Projected seed use is up 2 million bushels based on the January Winter Wheat Seedings report. Feed and residual use is projected at 350 million bushels, up 35 million bushels from December because the January Grains Stocks report indicated higher-than-expected feed and residual use during the September-November quarter. Projected feed and residual use for 2012/13 is 186 million bushels above feed and residual use for 2011/12.

Projected exports for 2012/13 are 1,050 million bushels, unchanged from December based on the pace to date. Total exports for 2012/13 are expected to be the same as in 2011/12.

Based on the pace of sales and shipments to date and increasing competitiveness of SRW wheat in world markets, projected HRW exports are lowered 25 million bushels and SRW exports are raised 25 million bushels from December.

Projected total U.S. ending stocks for 2012/13, at 716 million bushels, are down from December by 38 million bushels with the higher domestic use. 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 and HRS ending stocks are up from 2011/12 by 47 percent and 13 percent, respectively. White, HRW, and SRW ending stocks are down from 2011/12 by 19 percent, 9 percent, and 9 percent, respectively.

2012/13 Price Range Is Narrowed and Lowered in January

The projected range for the 2012/13 season-average farm price in January is narrowed to $7.65 to $8.15 per bushel compared with $7.70 to $8.30 per bushel from last month based on prices reported to date. With this narrowing of the price range, the midpoint is lowered 10 cents per bushel. This compares with the record $7.24 per bushel reported for 2011/12.

Winter Wheat Conditions Are Mixed

Winter wheat conditions at the end of 2012 are not as favorable as last year for the Plains States that provide data about current crop conditions. Nebraska’s winter wheat crop, for example, has 49 percent rated poor to very poor and only 14 percent rated good to excellent. A year ago, only 2 percent of the State’s crop rated poor to very poor and 74 percent was rated good to excellent.

Winter wheat conditions are also worse this year than last in Oklahoma and Kansas. In Oklahoma, 61 percent of the winter wheat is rated poor to very poor while 11 percent is rated good to excellent. A year ago, only 7 percent of the Oklahoma crop was rated poor to very poor and 63 percent of the crop was good to excellent. In Kansas, 31 percent of the winter wheat is rated poor to very poor while 24 percent is rated good to excellent. A year ago, only 9 percent of the Kansas crop was rated poor to very poor and 53 percent of the crop was good to excellent.

Two other reporting States, Montana and Illinois, are not that much different year to year. In Montana, only 8 percent of the crop rated poor to very poor and 40 percent rated good to excellent. A year ago at this time, the Montana crop had 9 percent rated poor to very poor and 30 percent rated good to excellent. In Illinois, only 2 percent of the crop rated poor to very poor and 70 percent rated good to excellent.

International Outlook

Projected World Wheat Production Down Slightly This Month

World wheat production in 2012/13 is projected down slightly by 0.8 million tons to 654.3 million. For Argentina, the wheat crop projection is reduced 0.5 million tons to 11.0 million. With about 90 percent of wheat already harvested, both area harvested and yields are expected to be lower than previously forecast. Heavy rainfall for more than 3 months in a row since October is expected to reduce harvested area and has reportedly led to outbreaks of fungal diseases that have further hurt yields. In Russia, the government statistical agency reported that in 2012/13 wheat production, in so-called “clean weight” (which measures grain after it has been dried and cleaned of impurities), reached 37.7 million tons, down 0.3 million from last month’s forecast, and down 18.5 million tons on the year.

Global 2012/13 Wheat Disappearance Trimmed, Stocks Slightly Up

Projected world wheat use is trimmed slightly, down 0.5 million tons at 673.5 million tons, while foreign wheat domestic use is down 1.5 million tons. For Russia, reduced production and higher projected exports lead to lower forecast wheat feed and residual use, down 0.5 million tons this month to 12 million. In Russia, both pork and poultry numbers continue to grow at a high rate, and compound feed production is growing rapidly, reaching record-high levels. As discussed in November (see http://usda01.library.cornell.edu/usda/ers/WHS//2010s/2012/WHS-11-14- 2012.pdf), feed and residual use does not directly reflect the actual amounts being fed to animals, and therefore may not accurately reflect the dynamics of the country’s livestock industry. Rather, feed and residual use may reflect other data problems -- in this case, what may be under-reported grain production data. A 0.8- million-ton reduction in world local marketing year wheat exports, and a 0.2- million-ton increase in local marketing-year imports, further reduce world wheat use by 1.0 million tons.

With foreign wheat consumption down more than production, foreign ending stocks for 2012/13 are projected up slightly by 0.7 million tons this month to 157.1 million. The largest increases in projected ending stocks (0.5 million tons each) are for Australia and Canada, with reduced export prospects. Stocks for Iran are up 0.2 million tons, reflecting higher projected imports. Stocks are projected lower for Russia and Ukraine, down 0.3 and 0.2 million tons, respectively, on higher projected exports in both countries and a lower wheat output in Russia.

World Wheat Trade Inches Up, U.S. Wheat Export Prospects Unchanged

World wheat trade was almost unchanged, up just 0.2 million tons at 140.5 million tons this month. Projected wheat exports are up 0.5 million tons for India and Russia, and up 0.2 million tons for Ukraine. India is trying to relieve its overloaded storage space ahead of the new crop, given that deliveries from the new harvest will start in March. Just recently, three major Indian governmental trading companies announced tenders totaling an additional 0.65 million tons in wheat sales to be delivered in January-February 2013. Russia has already exported in the current marketing year about 9.8 million tons of wheat, and though the Russian wheat balance is becoming tight and high domestic prices make its wheat uncompetitive for exports, it is expected that small amounts of wheat will still find their way out of the country, possibly to such neighboring former FSU countries as Armenia and Azerbaijan. The Ukrainian Government has just announced that it will make an additional 0.3 million tons of milling wheat available for export, which raises the previous wheat export limit of 5.9 million tons. By now, Ukraine has already exported about this amount of wheat. The increases are almost offset by reductions in Australian and Canadian wheat exports, each down 0.5 million tons, reflecting a slower-than-expected pace of exports in both countries. Wheat import prospects are increased 0.2 million tons to 2.7 million this month for Iran, based on recent purchases.

U.S. 2012/13 wheat exports are unchanged this month. At the projected 29.5 million tons, July-June exports would be up 5 percent from the previous year. U.S. Census data for July through November show U.S. wheat exports reaching 9.8 million tons, still down almost 14 percent on the year. Grain export inspections for December continue to run below year earlier levels. However, outstanding sales indicate significant improvement in demand, raising total commitments to last year’s level. The United States is expected to become increasingly competitive in the concluding months of the marketing year, as its competitors’ exportable wheat supplies, especially in the Black Sea region, are shrinking. U.S. wheat has become competitive enough in recent weeks to win two consecutive tenders from Egypt’s official government buying agency GASC, the latest occurring on January 10.

A year ago at this time, the Illinois crop had 2 percent rated poor to very poor and 81 percent rated good to excellent.

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.