USDA Wheat Outlook

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13 February 2013

USDA Wheat Outlook - February 2013

US wheat ending stocks for 2012/13 are projected 25 million bushels lower this month with higher expected feed and residual disappearance. Feed and residual use is projected 25 million bushels higher as weaker cash prices relative to corn support opportunities for increased wheat use in livestock and poultry rations. Feed and residual use is raised 10 million bushels each for hard red winter (HRW) and soft red winter (SRW) wheat, and raised 5 million bushels for white wheat. Projected all-wheat exports for 2012/13 are unchanged, but HRW and hard red spring (HRS) wheat are lowered 25 million bushels and 5 million bushels, respectively. Offsetting these reductions are projected increases in SRW and white wheat exports of 25 million bushels and 5 million bushels, respectively. By-class export changes largely reflect the pace of sales and shipments to date. The projected season-average farm price for wheat is narrowed 5 cents on both ends of the range to $7.70-$8.10 per bushel.

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

Global wheat supplies are forecast slightly higher this month, with a small production decrease offset by increased beginning stocks. Global wheat use and ending stocks for 2012/13 are virtually unchanged. World wheat trade in 2012/13 is projected to be down slightly with US exports down 0.5 million tons on the July-June world trade year.

Domestic Outlook

2012/13 Supplies Are Unchanged From January

Total projected supplies for 2012/13, at 3,142 million bushels, are unchanged from January. 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, with higher planted area and a smaller abandonment rate. Yields are also higher year to year because of the recovery from the severe drought in 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 January, but up 270 million bushels from 2011. The all-wheat harvested area is estimated at 49.0 million acres, unchanged from January, but up 3.3 million acres from last year. The US all-wheat estimated yield is 46.3 bushels per acre for 2012, equaling the 2010 record. The yield is unchanged from January, but up 2.6 bushels per acre from the previous year.

Total 2012/13 carryin stocks, estimated at 743 million bushels, are unchanged from January, 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 January, but up 18 million bushels from the previous year.

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

Domestic use of wheat for 2012/13 is projected at 1,400 million bushels, up 25 million bushels from January and 218 million bushels higher than last year. Food use for 2011/12 is projected at 950 million bushels, unchanged from January, 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 unchanged from January. Feed and residual use is projected at 375 million bushels, up 25 million bushels from January because wheat has become more price competitive with corn in livestock rations. Projected feed and residual use for 2012/13 is 211 million bushels above feed and residual use for 2011/12.

Projected exports for 2012/13, at 1,050 million bushels, are unchanged from January. Total wheat exports for 2012/13 are expected to be the same as in 2011/12.

Based largely on the pace of sales and shipments to date, offsetting changes are made by class of wheat. HRW and HRS wheat exports are down 25 million bushels and 5 million bushels, respectively, from January. SRW and white wheat exports are raised 25 million bushels and 5 million bushels, respectively, from January.

Projected total US ending stocks for 2012/13, at 691 million bushels, are down from January by 25 million bushels with the higher feed and residual use. The 2012/13 ending stocks are down 52 million bushels from 2011/12.

All wheat ending stocks are projected down 7 percent from 2011/12. Durum and HRS ending stocks are up from 2011/12 by 47 percent and 16 percent, respectively. White, SRW, and HRW ending stocks are down from 2011/12 by 34 percent, 28 percent, and 4 percent, respectively.

2012/13 Price Range Is Narrowed in February

The projected range for the 2012/13 season-average farm price in February is narrowed to $7.70-$8.10 per bushel, compared with $7.65-$8.15 per bushel from last month based on prices reported to date. 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 January 2013 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 50 percent rated poor to very poor and only 8 percent rated good to excellent. A year ago, only 3 percent of the State’s crop rated poor to very poor and 65 percent was rated good to excellent.

Winter wheat conditions are also worse this year than last in Oklahoma, South Dakota, and Kansas at the end of January 2013. In Oklahoma, 69 percent of the winter wheat is rated poor to very poor while only 5 percent is rated good to excellent. A year ago, only 9 percent of the Oklahoma crop was rated poor to very poor and 54 percent of the crop was good to excellent. In South Dakota, 66 percent of the winter wheat is rated poor to very poor while only 3 percent is rated good to excellent. A year ago, 30 percent of the South Dakota crop was rated poor to very poor and 25 percent of the crop was good to excellent. In Kansas, 39 percent of the winter wheat is rated poor to very poor while 20 percent is rated good to excellent. A year ago, only 12 percent of the Kansas crop was rated poor to very poor and 49 percent of the crop was good to excellent.

Two other reporting States, Montana and Illinois, are in better shape than the Plains States. In Montana, only 9 percent of the crop rated poor to very poor and 41 percent rated good to excellent. A year ago at this time, the Montana crop had 12 percent rated poor to very poor and 26 percent rated good to excellent. In Illinois, only 3 percent of the crop rated poor to very poor at the end of January and 67 percent rated good to excellent. A year ago at this time, the Illinois crop had 3 percent rated poor to very poor and 75 percent rated good to excellent.

According to USDA Drought Monitor maps, large part of Plains winter wheat area has been severely impacted by the lack of moisture. Spring rains will be especially important for the 2013 crop.

US Drought Monitor - 2013 vs 2012

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 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, is available at www.ers.usda.gov/publications/oce-usda-agricultural-projections/oce131.aspx.

International Outlook

World Wheat Supplies Unchanged

While global wheat supplies are basically unchanged this month (higher by less than 0.1 million tons), world wheat production in 2012/13 is forecast down 0.7 million tons at 653.6 million. In Kazakhstan, the government statistical office released final harvest results that indicate lower-than-expected harvested area and a 0.7-million-ton reduction in wheat output, lowering the harvest to 9.8 million. Brazilian 2012/13 wheat production is reduced 0.5 million tons to 4.3 million following disappointing final harvest reports from Rio Grande do Sul, the second largest wheat-producing State in Brazil, where frost and hail reportedly affected yields more than expected. Partly offsetting are upward revisions for wheat production in Ukraine for both the current and previous year (up 0.3 and 0.2 million tons for 2012/13 and 2011/12, respectively) and in Belarus, up 0.1 million tons. Small adjustments are made for Mexico (where the harvest was completed in June 2012), South Africa, and South Korea. Series revisions resulting in production changes are made for a number of prior years for Paraguay and Moldova.

The small reduction in world wheat output is offset by a 0.8-million-ton increase in global beginning stocks, due to a revision of the wheat food consumption series for South Korea for the last 3 years, the already mentioned revisions for Paraguay and Moldova, and a reduction of 2011/12 feed use in Israel.

Slight changes are projected for foreign wheat use for 2012/13, with a reduction of less than a million tons for both food use and wheat feeding. Wheat feeding in the EU-27 is reduced 0.5 million tons to 52.0 million this month, as the region is expected to feed more corn coming from Brazil, while exporting additional wheat. Projected feed use is also decreased 0.3 million tons to 0.1 million for Saudi Arabia, as that country returns to its historical pattern of higher barley and marginal wheat feeding, after last year’s high feed wheat availability and relatively low prices caused a spike in wheat feeding. Wheat feeding is trimmed for Viet Nam and Israel as a result of lower imports. Partly offsetting this reduction is projected higher wheat feeding in Korea, up 0.6 million tons on account of a rebound in its pork sector, which had been badly hurt by a foot-and-mouth disease outbreak in 2010-11. Lower (0.2 million tons) feeding in Kazakhstan is fully offset by an increase in Ukraine, both reflecting adjustments in wheat output. A small wheat feed use adjustment is made for Paraguay following the production series revision.

With foreign wheat supplies slightly up and wheat consumption down a little, foreign wheat ending stocks for 2012/13 are projected 0.8 million tons higher this month to 157.9 million. World ending stocks are practically unchanged this month at 176.7 million tons, with a small reduction in US stocks. Projected ending stocks are up 0.5 million tons to 3.9 million in Iran (higher imports) and 0.4 million tons in South Korea (larger supplies partly offset by higher consumption). Stocks are also up in Ukraine (0.3 million tons), Belarus (0.1 million tons), and slightly up in Kazakhstan, Moldova, and Paraguay. Partly offsetting are reductions in ending stocks for Morocco (down 0.5 million tons on lower projected imports), and very small reductions in stocks for Mexico, South Africa, and Viet Nam.

World Wheat Trade for 2012/13 Projected Down Slightly

World wheat trade for the international July-June year 2012/13 is projected to be down slightly this month by 0.3 million tons to 140.2 million. EU-27 and Indian exports are both up 0.5 million tons, to 18.5 and 8.5 million, respectively, while exports for the United States, Kazakhstan, and Brazil are forecast lower. The EU-27 is expected to export more wheat freed up from animal feeding, while replacing it by importing additional quantities of corn. India continues to issue tenders from the overloaded government stocks ahead of the upcoming wheat harvest and to export wheat at a fast pace; India has become a prominent player in world wheat exports this year. Lower supplies and the pace of Kazakhstan and Brazilian wheat exports, on the other hand, support lower export projections, down 0.5 and 0.3 million tons to 6.5 and 1.2 million, respectively.

Projected wheat imports for 2012/13 are little changed this month. For South Korea, wheat imports are expected to increase 0.6 million tons to 5.0 million, due to the pace of confirmed purchases mainly from India, which is currently the cheapest source of feed-quality wheat. Imports are also up 0.3 million tons for Iran based on purchases from the United States, Russia, and Germany. At the same time, projected wheat imports are reduced 0.5 million tons for Morocco, as favorable wheat harvest prospects for the next year are expected to dampen imports. With Russia and Ukraine having already exported most of their wheat, it is becoming increasingly hard to find readily available supplies of feed wheat, which slows the purchases of a number of feed wheat importers. For this reason, projected imports are down 0.3 million tons for Saudi Arabia, and 0.2 million tons for both Israel and Viet Nam.

US exports projected for the 2012/13 June-May marketing year are unchanged this month at 1,050 million bushels (28.6 million tons). However, for the July-June international trade year, US exports are projected down 0.5 million tons to 29.0 million as wheat exports for the month of June 2013 are expected lower. Higher projected wheat feeding in the United States is expected to boost demand for SRW wheat leaving lesser amounts available for exports, while expected availability of HRW wheat for export is also declining with worsening production prospects because of persistent dryness in the Southern and Central Plains. For July through December 2012, US Census data indicate exports of about 11.5 million tons, down 1.8 million from the previous year. Grain inspections for January 2013 were higher by 0.14 million tons compared with last year. Outstanding export sales as of January 31, 2013 are up 0.5 million tons compared with last year at this time. The pace of shipments in the final months of 2012/13 are expected to be stronger than in the same months last year.