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USDA Wheat Outlook

16 July 2012

USDA Wheat Outlook - July 2012USDA Wheat Outlook - July 2012

Projected U.S. wheat supplies for 2012/13 are raised 5 million bushels, with higher estimated beginning stocks more than offsetting lower forecast production. Beginning stocks were reported in the June 29 Grain Stocks report 15 million bushels above last month’s projection.
USDA Wheat Outlook

Feed and residual disappearance, seed use, and exports are all lowered slightly for 2011/12. Production for 2012/13 is reduced 10 million bushels as a 14-million-bushel reduction in winter wheat is only partly offset by a higher forecast for spring wheat.

Total U.S. wheat use for 2012/13 is projected 35 million bushels higher. Domestic U.S. food use for 2012/13 is raised 5 million bushels on expectations of lower flour extraction rates for this year’s crop. Projected feed and residual use is lowered 20 million bushels, with higher prices and stronger export demand. Exports are projected 50 million bushels higher with reduced competition from Black Sea exporters. Ending stocks for 2012/13 are projected 30 million bushels lower. The projected range for the 2012/13 season average farm price is raised 60 cents on both ends to $6.20 to $7.40 per bushel, supported by sharply higher corn and soybean prices. This compares with the record $7.24 per bushel reported for 2011/12.

Significant reductions in production and export prospects for Russia and Kazakhstan provide additional support for higher 2012/13 export forecasts for the EU-27 and the United States. Record world wheat trade for 2011/12 is projected even larger this month.

Domestic Situation and Outlook

Ending Stocks for 2012/13 Projected To Decrease From June Ending stocks of wheat for 2012/13 are projected to be down 30 million bushels from June to 664 million bushels. Ending stocks for 2012/13 are projected down 79 million bushels from 2011/12 as total use increases more than supplies.

Total production is forecast at 2,224 million bushels, down 10 million bushels from June, but up 225 million bushels from 2011/12. Total planted area is forecast at 56.0 million acres, up 1.6 million acres from the previous year. Total harvested area is forecast at 48.8 million acres, up 3.1 million acres from the previous year. The all-wheat yield is forecast at 45.6 bushels per acre, up 1.9 bushels from the previous year.

Winter Wheat Production Estimates by Class

Hard Red Winter (HRW) production is forecast to be down 14 million bushels from June to 1,010 million bushels, but up 230 million bushels from a year ago. Production is up year to year with the higher forecast planted area for the 2012 crop and the expected smaller abandonment rate. Yields are also due to the recovery from the severe drought on the Central and Southern Plains the previous year. Forecast planted area is up from June, while harvested area is down from last month. Forecast planted area, harvested area, and yield and year-to-year changes for 2012 are 30.0 million acres, up 1.5 million acres; 24.5 million acres, up 3.1 million acres; and 41.2 bushels per acre, up 4.8 bushels per acre, respectively.

Soft red winter (SRW) production is forecast up 1 million bushels from June to 429 million bushels, but down 29 million bushels from last year. SRW production is forecast lower year to year with both lower planted and harvested areas and lower yield. Forecast planted area and harvested area are down from June, while yield is up from last month. Forecast planted area, harvested area, and yield and year-to-year changes for 2012 are 8.3 million acres, down 0.3 million acres; 7.2 million acres, down 0.2 million acres; and 59.7 bushels per acre, down 2 bushels per acre, respectively.

White winter wheat production for 2012 is estimated to total 232 million bushels, down 24 million bushels from the previous year.

Spring Wheat Production Estimates by Class

Hard red spring (HRS) production is forecast at 435 million bushels, up 37 million bushels from 2011. HRS production is forecast up as higher yields more than offset lower planted and harvested areas. Forecast planted area, harvested area, yield, and year-to-year changes for 2012, respectively, are 11.4 million acres, down 0.2 million acres; 11.1 million acres, down 0.2 million acres; and 39.2 bushels per acre, up 4.0 bushels per acre.

White spring production is estimated to total 36.3 million bushels, down 21.2 million bushels from 2011/12.

Durum wheat production is forecast to total 82.0 million bushels, up 31.5 million bushels from a year ago. Durum production is forecast up with higher planted and harvested areas and higher yield. In the previous year, excessive moisture and cool temperatures on the Northern Plains resulted in late seeding and prevented plantings. Planted area in 2011 was the lowest since 1960. Forecast planted area, harvested area, yield, and year-to-year changes for 2012, respectively, are 2.2 million acres, up 834,000 acres; 2.1 million acres, up 810,000 acres; and 38.6 bushels per acre, up 0.1 bushels per acre.

Projected 2012/13 Supplies Up This Month

The 2012/13 outlook for U.S. wheat supplies is raised 5 million bushels from June. Beginning stocks for 2012/13, at 743 million bushels, are up 15 million bushels from June. Projected imports, at 120 million bushels, are unchanged from June. Production is forecast at 2,224 million bushels, down 10 million bushels from June.

International Situation and Outlook

World Wheat Production Down Sharply This Month

World wheat production for 2012/13 is projected to decline by 6.7 million tons this month because of a 6.5-million-ton drop in foreign production and a slight decrease in U.S. wheat production. The projection for foreign wheat output for 2012/13 is reduced this month to 604.8 million tons. This leaves foreign wheat production 35.5 million tons lower than estimated for the previous year.FSU-12 dominates in this month’s decline, as wheat production in this region is projected down 6.2 million tons: down 4.0 million tons to 49.0 million for Russia, down 2.0 million tons to 13.0 million for Kazakhstan, and down 0.2 million tons to 0.5 million (about a 30 percent decline) for Moldova. From Moldova in the west to the south of Russia and the Volga Valley to the spring wheat areas of Siberia and parts of northern Kazakhstan in the east of the continent, growing conditions continued to deteriorate in June.

Expectations that key wheat areas in the South District of Russia would partly recover in June, helped by rains in the beginning of the month, did not materialize because of unrelenting, stressful heat of 35 C (95 F) that quickly wiped out accumulated moisture. Winter wheat harvesting in Russia started 10 days earlier than usual with accelerated maturation of the wheat crop, and harvest reports show about a 30-percent decline in wheat yields compared to last year, when approximately the same size of area was harvested (Russian Ministry of Agriculture reports as of July 9, 2012, and July 16, 2011). To make matters worse, torrential rains during the last 2 weeks in the South of Russia (Krasnodar and Stavropol) virtually halted harvesting, and are expected to reduce the quantity and quality of winter wheat in those major producing regions. As for spring wheat, planting has been virtually completed with the latest reports indicating lower than expected sown spring wheat area, down 1.0 million hectares this month. Hot and dry weather accelerated spring wheat development in the lower Central and Volga Districts (flowering and filling stages), as well as in the Altay and Novosibirsk regions of Russia and in northern Kazakhstan (heading and flowering). These weather conditions made the crop more vulnerable to persistent high temperatures and low soil moisture levels. Satellite-derived vegetative indices support this picture, confirming sustained damage to the spring wheat crop.

Wheat production changes are projected for the past 2 years for China, down 2.0 million tons to 118.0 million for 2012/13, and up 0.5 million tons to 117.9 for 2011/12. The 2011/12 estimate has been recently released by the Government statistical service (China National Bureau of Statistics), and the 2012/13 crop size reflects early indications from estimates by the China National Grain and Oils Information Center. Wheat production in 2012/13 is still being projected at a record level, though just slightly higher than last year’s volume, reflecting good growing conditions in some areas, but problems in parts of the North China Plain that had an exceptionally dry spring.

Canadian 2012/13 wheat production is reduced by 0.4 million tons to 26.6 million this month, which is still 1.3 million tons higher year to year. The decrease is entirely based on a 0.15- million-hectare reduction in sown area, down to 9.35 million hectares, but still up 80,500 hectares on the year. As reported by Statistics Canada, wet conditions in the Prairies delayed sowing, especially in Saskatchewan that produces half of Canada’s wheat and in Manitoba that accounts for 15 percent of the country’s wheat production. Although both provinces are expected to have a healthy increase in wheat sown area on the year, the preliminary estimates have been slightly lowered.

This month’s reduction in foreign wheat production is partly offset by an increase in 2012/13 production prospects in the EU-27, up 2.1 million tons to 133.1 million. Timely abundant June precipitation in the northern parts of the European continent benefited the wheat crop in France, Germany, Hungary, Latvia, Lithuania, and Netherlands, and warranted this month’s increase in yield prospects for these countries, of a total of 2.5 million tons. This increase more than offsets area and yield reductions in Poland, such that production is down 0.4 million tons. Despite recent precipitation in Poland, wheat appears not to have recovered from adverse winter and spring conditions, and current projected yields better reflect the impact of that earlier weather.

Larger Beginning Stocks Partly Offset Production Cuts

Foreign 2012/13 beginning stocks are forecast up 1.2 million tons to 177.0 million, partly offsetting the 6.5-million-ton reduction in foreign wheat production. Most changes in beginning stocks reflect trade revisions for 2011/12. The largest among the changes are reductions in beginning stocks in Argentina and Russia, by 0.7 and 0.4 million tons, respectively, based on higher 2011/12 wheat exports. Other large changes include increases in China, Australia, and Turkey, up 0.7, 0.6, and 0.4 million tons, respectively. In China, the 2011/12 wheat output revision and higher imports result in higher 2011/12 ending stocks and therefore 2012/13 beginning stocks. For Australia, the stocks increase reflects lower 2011/12 wheat feeding that is only partly offset by higher 2011/12 exports. In Turkey, record-high 2011/12 wheat imports boost stocks. Higher 2011/12 imports also resulted in larger beginning stocks in Uzbekistan (0.3 million tons) and Egypt (0.2 million tons), while in South Korea stocks are up 0.2 million tons because of lower feeding. Smaller changes in beginning stocks have been made for a number of other countries.

Wheat Consumption Projected Slightly Down

Projected foreign wheat consumption in 2012/13 is down just 0.2 percent. Foreign feed use for 2012/13 is decreased slightly this month, down 0.8 million tons with the adjustments in individual countries partly offsetting. The largest decrease in projected feed use is for Kazakhstan, down 1.0 million tons to 2.5 million, reflecting lower wheat availability and higher prices as production declines. Feed use in Australia is reduced by 0.5 million tons. The 2011/12 record wheat harvest had a larger than usual share of feed-quality wheat, and Australia was anticipated to use more wheat for feed in both 2011 and 2012. However, though feed use in those years did increase, higher wheat prices and a shift in international demand to more grass fed Australian beef trimmed the amount of wheat used for feeding. Australia found itself highly competitive as a supplier of feed-quality wheat, delivering record amounts of low-quality wheat to a number of Asian countries, North Africa, and Middle East, while stocking the remainder. For the EU-27, wheat feeding is up 0.5 million tons this month, reflecting higher supplies and sharply reduced corn imports. Smaller changes in wheat consumption are made for several countries.

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