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USDA Wheat Outlook

12 February 2014

USDA Wheat Outlook - 12 February 2014USDA Wheat Outlook - 12 February 2014

USDA Wheat Outlook

U.S. wheat ending stocks for 2013/14 are projected 50 million bushels lower as higher expected food use and exports more than offset an increase in projected imports. Imports are raised 10 million bushels as railroad backlogs and other logistical problems slow Canadian wheat shipments to Canadian Pacific Coast terminals and encourage additional shipments of hard red spring (HRS) wheat into the U.S. market. Projected food use is increased 10 million bushels based on the latest flour production data reported by the North American Millers’ Association. Food use increases are projected for hard red winter (HRW) and HRS wheat. Exports are projected 50 million bushels higher as reduced competition from Argentina and strong sales and shipments further boost prospects for U.S. wheat in world trade. A reduction in expected exports from Australia during the July-June world trade year also raises prospects for 2013/14 U.S. shipments. Exports are projected higher for all classes except durum. The season-average farm price for all wheat is narrowed 5 cents on both ends of the projected range to $6.65 to $6.95 per bushel.

The global wheat balance is largely unchanged. Wheat exports are projected higher for the United States and the European Union, while exports for Argentina, Kazakhstan, Australia, and India are forecast lower.

Domestic Outlook

 Projected 2013/14 Supplies Are Increased This Month

Projected total 2013/14 supplies, at 3,018 million bushels, are up 10 million bushels this month. The increase is entirely for HRS.

Projected 2013/14 Supplies Down From 2012/13

Total U.S. wheat supply for 2013/14 is down 113 million bushels from 2012/13 as reduced production and lower beginning stocks more than offset higher imports. Supplies of HRW and durum are down year to year, while supplies are up for the other classes. HRW supplies decreased the most, as smaller production and imports more than offset higher beginning stocks. HRW production is down from 2012 due partially to the smaller planted area for the 2013 crop, and both a higher abandonment rate and a lower yield because of severe drought and spring freeze damage. SRW supplies were up the most year to year as higher production and imports more than offset lower beginning stocks. SRW production is higher than 2012 because of larger harvested area and higher yield.

Projected Total 2013/14 Utilization Is Up 60 Million Bushels This Month

Projected 2013/14 total U.S. wheat use, at 2,459 million bushels, is up from January with both higher food use and exports. Food use is raised 10 million bushels to 960 million bushels based on the flour production report for the last quarter of 2013 provided by the North American Millers’ Association. HRW and HRS food uses are raised.

Projected exports, at 1,175 million bushels, are up 50 million bushels from January based on the pace of sales and shipments to date and expectations for reduced competition from Argentina and Australia through the end of the marketing year. The increases by class are: HRS, up 25 million bushels; HRW and white, up 10 million bushels each; and SRW, up 5 million bushels.

Projected 2013/14 Annual Use Is Up From 2012/13 Levels

Projected total annual use for 2013/14 is up 45 million bushels million bushels from 2012/13 as higher exports more than offset lower domestic use. Domestic use is expected to be down 122 million bushels from 2012/13 while exports are projected up 168 million bushels. Domestic use is down because feed and residual use is expected to fall 138 million bushels from 2012/13. Total food use is expected 15 million bushels higher with population growth and expected lower flour extraction rate than in 2012/13.

Projected 2013/14 Ending Stocks Down From January and From 2012/13

The projected 2013/14 U.S. wheat ending stocks are lowered 50 million bushels from January to 558 million bushels. These projected ending stocks are down 160 million bushels from 2012/13. Total ending stocks for 2013/14 are expected to decrease by 22 percent from 2012/13. Stocks of HRW, white, and SRW are expected down 47 percent, 22 percent, and 9 percent, respectively. Stocks of HRS and durum are expected up 15 percent and 14 percent, respectively.

2013/14 Price Range Projection Narrowed

The 2013/14 season-average farm price range is narrowed to $6.85 to $6.95 per bushel, from the $6.60 to $7.00 per bushel projected in January. The 2013/14 range is down from the record $7.77 per bushel reported for 2012/13.

2013 Per Capita Flour Up Slightly, Nearly Unchanged From 2012

Per capita all-wheat flour use for 2013 is estimated at 134.7 pounds, up 0.3 pounds from the 2012 estimate but down 3.6 pounds from 2007, a recent peak. The 2012 per capita food use is down 11.6 pounds from the 2000 level when flour use started dropping sharply, apparently due to increased consumer interest in lowcarbohydrate diets.

HRW Crop Conditions Are Better This Year, but Down From Late December

HRW crop conditions at the end of January 2014 are better than they were at the same time a year ago. In Kansas, 20 percent of the crop is rated poor to very poor and 35 percent is rated good to excellent. A year ago at this time, 39 percent was rated poor to very poor and 20 percent was rated good to excellent.

In Nebraska, 18 percent of the crop is rated poor to very poor and 46 percent is rated good to excellent. A year ago at this time, 50 percent was rated poor to very poor and 8 percent was rated good to excellent.

In Oklahoma, 24 percent of the crop is rated poor to very poor and 36 percent is rated good to excellent. A year ago at this time, 69 percent was rated poor to very poor and 5 percent was rated good to excellent.

In Texas, 41 percent of the crop is rated poor to very poor and 19 percent is rated good to excellent. A year ago at this time, 49 percent was rated poor to very poor and 14 percent was rated good to excellent.

While conditions are substantially improved from last year at this time, declines since late December 2013 are of concern. The share of the crop rated good to excellent in Kansas and Oklahoma declined 23 and 27 percentage points, respectively, from late December 2013 to late January 2014. The share of the Nebraska crop rated good to excellent has fallen 19 percentage points. In Texas, where conditions were already lower in late December, the share of the crop rated good to excellent has fallen 3 percentage points.

USDA Agricultural Projections to 2023

Each year, USDA updates its 10-year projections of supply and utilization for major field crops grown in the United States, including wheat. This report is scheduled to be released February 13, 2014, at agricultural-baseline-projections.aspx.

International Outlook

World Wheat Production Almost Unchanged This Month

Projections for 2013/14 world wheat production are trimmed this month. Wheat output is projected down 0.8 million tons this month to 711.9 million. All changes for 2013/14 world wheat production resulted from the latest government statistical reports and updates for wheat harvests that were completed a while ago. Kazakhstan’s 2013/14 wheat production is down 1.6 million tons to 13.9 million, following a number of official revisions. In Kazakhstan and the other Former Soviet Union (FSU) countries, drying and cleaning of grain is routinely done after grain is transported to the elevators, and preliminary information is reported in so-called “bunker” weight, straight from the fields before cleaning and drying. It appears that despite low precipitation throughout the wheat growing period, this year the ratio between wheat output in “clean” (after drying) and “bunker” weight turned out to be lower than past years’ averages, leading to smaller final production numbers. Wheat output is also projected down 0.3 million tons to 3.3 million in Algeria with reduced area more than offsetting a small increase in reported yield.

Partly offsetting is a higher estimate for wheat production in Brazil, up 0.6 million tons, to 5.3 million. Frost damage and consequent wheat yield reduction in Parana, which produces 40 percent of the country’s wheat, turned out to be offset by higher wheat yields in Rio Grande do Sul. Rio Grande do Sul—another major wheatproducing province with an equal share of total output—benefited from excellent harvest conditions. Wheat production is also up in Ukraine by 0.3 million tons to 22.3 million. Wheat output in Kyrgyzstan and Nepal are both up in the range of 0.1- 0.2 million tons. Slight changes to 2013/14 wheat output are also made for South Africa, Russia, and the European Union (Sweden), reflecting the latest official reports and revisions. For 2012/13, wheat output is revised slightly down by 0.2 million tons in Argentina, as a spike in domestic prices last year and the level of exports indicate lower 2012/13 wheat supplies.

The small reduction in world wheat output is slightly exacerbated by a 0.3-millionton reduction in global beginning stocks, mainly due to a revision of 2012/13 production for Argentina, as well as finalized trade numbers in Russia and Kazakhstan. Very small changes in beginning stocks are also made for several other countries.

EU Wheat Feeding Down Further

Small changes are projected for foreign wheat use for 2013/14, with a decrease of 0.3 million tons for total foreign disappearance. Foreign wheat feed and residual use is reduced 1.3 million tons this month to 128.2 million, but that decline is partly offset by other changes. These changes mainly reflect local marketing-year adjustments to imports and exports, reducing wheat disappearance (for detailed explanation of how changes in exports and imports can affect calculated global consumption, see the special article in the Feed Outlook June 2013 issue, available at: 2013.pdf). Global wheat consumption is projected up 0.6 million tons, with U.S. domestic food consumption up 0.3 million.

Wheat feeding in the EU is reduced 1.0 million tons to 49.5 million this month, as the region is expected to continue switching to corn feeding with more corn imports, while exporting additional wheat. South Korea is also projected to import additional corn, while lowering wheat feeding, down 0.2 million tons to 2.1 million. Wheat feeding is also reduced for Moldova, down 0.2 million tons to 0.3 million, as a result of higher projected exports. Wheat consumption is slightly revised for Bolivia, Bosnia, and Kyrgyzstan.

Foreign Stocks Nearly Unchanged, U.S. Stocks Down

With foreign wheat supplies down slightly and consumption up a little, foreign wheat ending stocks for 2013/14 are projected 0.3 million tons lower this month to 168.6 million. World ending stocks are down 1.7 million tons this month to 183.7 million, with a reduction in U.S. stocks. Projected ending stocks are down 1.0 million tons to 10.7 million in the EU (higher exports and lower imports that are partly offset by a reduction in wheat feeding). Stocks are also down in Algeria and Russia (down 0.3 million, each), in Mexico and Pakistan (0.2 million tons, each). Partly offsetting are higher ending stocks in Argentina (up 0.7 million tons to 1.7 million with a reduction in exports), for Ukraine and Brazil (up 0.3 million tons, each), and South Korea and Kazakhstan (up 0.2 million tons, each). Very small changes in stocks are made for a number of other countries.

Trade Shares Shift Among Major Exporters

World wheat trade for the international July-June year 2013/14 is projected to be practically unchanged this month at a record 155.5 million tons. A number of offsetting changes in the global wheat trade mainly continue the adjustments made last month for several countries. Wheat exports are projected up considerably for the EU and the United States, while exports for Argentina, Kazakhstan, Australia, and India are forecast lower.

The EU is expected to carry on with its current trend of exporting substantial amounts of wheat while also importing additional quantities of corn. EU wheat exports for 2013/14 are projected up 1.5 million tons this month to reach a whopping 27.5 million, with euro devaluation and vigorous wheat export activity supported by the high volume of wheat export licensing (about 7.0 million tons ahead of last year). At the same time, EU grain imports are projected to shift further away from wheat to corn. EU wheat imports are projected down 0.5 million (sluggish import licenses), counterbalanced by increased corn imports, as the region is projected to import (mainly from Ukraine) an additional 1.5 million tons of corn. The shift in availability of wheat versus corn supplies is expected to drive a gradual substitution of corn for wheat in rations.

Argentine wheat export prospects continue to slide, down 1.0 million tons to just 2.0 million. So far Argentine has exported just about 0.2 million tons, and with tight government controls it is unclear when or how big export shipments will be. (See also our January issue, available at: 2014.pdf). Export prospects for Kazakhstan wheat are decreased 1.0 million tons to 7.0 million, as projected wheat supplies decline with the recent official revision to the country’s wheat output. Australian wheat exports for the international July-June trade year are forecast down 0.5 million tons to 18.5 million. In the first 2 months of the new crop year (October-September), wheat exports have been fairly weak, which lowers trade year (July-June) export expectations,. India’s wheat exports are also down 0.5 million tons to 5.5 million. Despite already bulging stocks and the upcoming 2014/15 wheat harvest, the Indian Government has failed to sufficiently lower the mandatory price for exported wheat, making exports less competitive.

Wheat export prospects are increased for Moldova, up 0.15 million tons to 0.2 million, with larger sales to Turkey, Romania, and Georgia. Exports are raised for Mexico and Pakistan, up 0.2 and 0.1 million tons, respectively, based on the current pace of shipments for Mexico, and for Pakistan based on reports of additional wheat shipments to Afghanistan.

The reduction in EU wheat imports is fully offset by an increase in projected Iranian imports, up 0.5 million tons to 5.0 million, as relaxed international sanctions simplify financial transactions with the Western countries. Imports are projected slightly lower for Brazil, down 0.2 million tons to 7.5 million, in line with higher wheat production estimates. Smaller adjustments of wheat imports based on production revisions and pace of shipments are made for several countries.

U.S. Wheat Exports and Imports Projected Higher

With an expectation of sharply lower Argentine wheat exports and less robust Australian exports, the United States is projected to export an additional 1.0 million tons of wheat, reaching 31.5 million for the international July-June trade year (up 50 million bushels to 1,175 million for the June-May local marketing year). The recent pace of U.S. sales and shipments supports this increase, despite lower January sales compared to a year ago, as a certain slowdown in the shipments was anticipated. The United States continues to sell additional exports, mainly to Brazil but also to Chile, Peru, and Bolivia, thereby replacing Argentina in the South American markets. With commitments (shipments plus outstanding sales) over 5 million tons higher than a year ago, even a slower pace of additional sales will bring 2013/14 U.S. wheat exports to 31.5 million tons, or up almost 4 million tons on the year.

U.S. trade year imports are up 0.3 million tons to 4.5 million this month (up 10 million bushels for the June-May local marketing year), more than 1.0 million ahead of last year’s historical high. The projection is based on the expectation that additional wheat from the Canadian Prairies will move into the United States. Canada appears overwhelmed by the current logistical problems it is experiencing from exporting its record harvest. With railroad backlogs and other issues affecting its ability to move wheat to Pacific Coast terminals, the U.S. market becomes a more attractive alternative for Canadian wheat. Imported Canadian wheat will likely end up blended with U.S. domestic wheat and milled for the U.S. flour market.

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