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USDA Wheat Outlook


13 November 2013

USDA Wheat Outlook - November 2013USDA Wheat Outlook - November 2013


USDA Wheat Outlook

Projected U.S. wheat supplies for 2013/14 are raised 26 million bushels with higher estimated production and an increase in expected imports. Production was raised 14 million bushels in the September 30 Small Grains report. Production is further raised 2 million bushels for hard red spring (HRS) wheat and slightly for durum, based on the resurvey of North Dakota and Montana producers who had not finished harvesting when the September survey was completed for Small Grains. Imports are projected 10 million bushels higher with larger supplies in Canada and stronger food use expected for HRS wheat. Food use for all wheat, however, is lowered 8 million bushels reflecting the latest flour production data reported by the North American Millers’ Association. Feed and residual use is projected 30 million bushels higher based on indicated June-August disappearance from the September 1 stocks. Projected ending stocks are raised 4 million bushels.

The projected range for the 2013/14 season-average wheat farm price is narrowed 20 cents on each end to $6.70 to $7.30 per bushel. The midpoint of the range is unchanged from September at $7.00 per bushel.

The global wheat production forecast is lowered 2.5 million tons, with deteriorating prospects for Russia, Kazakhstan, and Argentina that are partly offset by the record-high Canadian crop. Foreign wheat feed use is projected lower, while ending stocks increase. Global wheat trade is almost unchanged, but the shifts in competitiveness affect expected exports by country. The projection for U.S. wheat exports is unchanged this month.

 Domestic Outlook

Higher Projected Imports Raise 2013/14 Supplies and Ending Stocks

Projected 2013/14 imports and supplies are raised 10 million bushels this month. Imports are raised to 140 million bushels with expected higher hard red spring (HRS) and durum imports from Canada. Total use for 2013/14 is unchanged from August. There are, however, offsetting food use and export changes that shift more hard red winter (HRW) to export markets and more HRS for domestic use. Thus, ending stocks for 2013/14 are projected up 10 million bushels from August to 561 million bushels. These projected 2013/14 ending stocks are down 157 million bushels from 2012/13.

Total production is forecast at 2,114 million bushels, is unchanged this month, but down 155 million bushels from 2012/13. Forecast area planted and harvested is unchanged this month. The average all-wheat yield is 46.2 bushels per acre.

Winter Wheat Areas and Production Are Unchanged This Month

Hard red winter (HRW) production is forecast at 791 million bushels, down 212 million bushels from a year ago. The HRW yield is forecast at 38.9 bushels per acre, down from last year’s 40.7 bushels. Production is down this year from 2012 due partially to the lower planted area for the 2013 crop, and both a higher abandonment rate and a lower yield because of severe drought and spring freeze damage.

Soft red winter (SRW) production is forecast at 542 million bushels, up 122 million bushels from last year. The SRW yield is 62.1 bushels per acre, up from last year’s 60.3 bushels. SRW production is forecast higher than 2012 because of larger harvested area and higher yield.

Spring Wheat Areas and Production Are Unchanged This Month

Hard red spring (HRS) production is forecast at 475 million bushels, 30 million bushels below 2012. HRS yields are forecast at 41.7 bushels, down from last year’s 44.0 bushels. Both yields and harvested area are down from 2012.

White spring production is estimated to total 36.5 million bushels, 1.0 million less than 2012.

Durum wheat production is forecast to total 60.2 million bushels, down 22 bushels million from a year ago. Durum production is forecast down compared to 2012 because of lower area. Durum yield for 2013/14 is forecast at 40.1 bushels per acre, higher than last year’s 39.0 bushels.

Projected 2013/14 Supplies Raised 10 Million Bushels This Month

Projected 2013/14 U.S. wheat supplies are raised a net 10 million bushels this month because of import changes. Production and carryin stocks are unchanged. Projected HRS and durum imports are raised 10 million bushels and 5 million bushels, respectively. SRW imports are dropped 5 million bushels. The import increases are based on larger expected supplies in Canada and reduced U.S. production of these classes year to year.

Projected 2013/14 Supplies Down From 2012/13

Total U.S. wheat supply for 2013/14 is down 162 million bushels from 2012/13 to 2,972 million bushels. Supplies of all classes except SRW are down year to year. HRW supplies decreased the most, as smaller production and imports more than offset higher beginning stocks. Durum supply also decreased sharply percentagewise as smaller production and beginning stocks more than offset higher expected imports. Higher SRW production more than offsets lower beginning stocks, raising 2013/14 supplies from the previous year.

Projected Total 2013/14 Utilization Unchanged This Month

Projected 2013/14 total U.S. wheat use is unchanged from August. However, there are offsetting class changes for food use and for exports. For food use, HRS use is raised 10 million bushels while HRW use is lowered 10 million bushels. These offsetting changes are made in anticipation of more substitution of HRS for HRW in flour blends. For exports, HRW is raised 10 million bushels based on the pace of shipments and sales to date while HRS is dropped 10 million bushels because of expected increased competition from Canada.

Projected 2013/14 Use Is Down Slightly From 2012/13

Projected total use for 2013/14 is 2,411 million bushels, down 5 million bushels from 2012/13. Domestic use is expected to be down slightly more than exports are projected to increase. Domestic use is down because feed and residual use is expected to fall 110 million bushels from 2012/13 to 280 million bushels. While feed use is expected to be high during the summer quarter of 2013/14, such use is then expected to decrease sharply with the fall corn harvest and lower expected corn prices. Total food use is expected up with population growth and expected lower flour extraction than in 2012/13. Projected exports for 2013/14 are 93 million bushels higher than 2012/13 exports.

Projected 2013/14 Ending Stocks Up From August, Down From 2012/13

The projected 2013/14 U.S. wheat ending stocks are raised 10 million bushels from August to 561 million bushels. The 10-million-bushel increase is the net result of stock increases for HRS and durum of 10 million bushels and 5 million bushels, respectively, and a 5-million-bushel decrease for SRW.

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 43 percent, 20 percent, and 14 percent, respectively. Stocks of durum and HRS are expected up 18 percent and 9 percent, respectively.

2013/14 Price Range Projection

The 2013/14 season-average farm price range is projected at $6.50 to $7.50 per bushel, narrowed from $6.40 to $7.60 per bushel in August. The 2013/14 range is down from the record $7.77 per bushel reported for 2012/13.

2012/13 Supply/Disappearance Posted

The 2012/13 supply/disappearance by class by quarter was posted during the week of September 16 at http://www.ers.usda.gov/data-products/wheat-data.aspx under the Historical Data section.

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 Wheat 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. A detailed discussion summarizing the historical forces determining U.S. wheat supply and utilization, along with the analysis underlying the wheat projections for 2013-22, is available at http://www.ers.usda.gov/topics/crops/wheat/usda-wheat-baseline,-2013-22.aspx.

International Outlook

 Wheat Production Reduced in Both Hemispheres

Global wheat production in 2012/13 is projected to reach 706.4 million tons, down 2.5 million tons this month, while foreign production is down by 2.9 million tons.

Two months have passed since our last report in September, after the October report was cancelled because of the Federal Government shutdown. Here is a brief overview of this past two months’ (September and October) wheat crop developments in the major wheat-producing regions and countries of the world.

During September-October in most of the Northern Hemisphere countries, wheat harvesting was progressing and winter wheat planting was underway. European Union (EU) countries and Ukraine finished wheat harvesting in September, Canada in October, and in Russia and Kazakhstan an unusually delayed wheat harvest is still being completed. September and October are also the months of winter wheat planting in Europe (EU, European Russia, and Ukraine), as well as in East and South Asia (China, India, and Pakistan), North Africa, and the Middle East.

The largest production change in the Northern Hemisphere (and in the world) this month is a 2.5-million-ton cut in projected wheat production in Russia to 51.5 million. This partly reflects a 0.5-million-hectare reduction in Russian wheat area. This year, a cold and wet spring delayed wheat planting in the Urals and Siberia and pushed the wheat harvest substantially back, increasing the odds of larger abandoned area.

Abnormally cold and/or excessively wet weather during September and the first half of October slowed down, and in some cases completely stalled, wheat harvest progress in parts of European Russia (Volga), in the Urals, and in Siberia. Russian meteorological records indicate that September of 2013 in the Central Belt of Russia that runs across the Central and Volga Districts had the highest precipitation level since 1885.

According to the Russian Statistical office, about 1.1 million hectares, or 4.4 percent of the area planted for wheat, has been categorized as damaged and not subject to harvesting. In the Volga District, Urals, and in the Southern District, wheat area was written off partly because of winterkill, but also because of excessive moisture that damaged fields. Less than 94 percent of the adjusted area was harvested in the Volga District (83 percent of planted), and less than 96 percent in the Urals (86 percent of planted). Daily reports suggest that the wheat harvest effectively has come to a halt, though some additional wheat is still expected to be harvested. Harvesting has been proceeding extremely slowly during the last few weeks of seemingly favorable unseasonably warm weather because of frequent on- and-off light showers. Although the weather forecast is favorable with no frosts or snow in the near future, harvesting in November in the Urals and Siberia faces exceedingly elevated risks.

In neighboring Kazakhstan, wheat production is also projected down 1.5 million tons to 15.5 million this month. Excessive wetness in the northern part of the country delayed harvesting and affected wheat yields that were previously projected at the second-highest level on record. According to reports, harvesting is progressing very slowly, and similarly in Siberia.

Partly offsetting, is a projected increase in the Western Hemisphere, specifically in Canadian wheat output, up 1.7 million tons to 33.2 million. This is an absolute record for both wheat yield and production. Note that the latest official estimate by Statistics Canada of 33.0 million tons does not include the Maritime Provinces and British Columbia, which combined account for around 0.2 million tons of mainly winter wheat. Canadian farmers were just about finished harvesting in the third week of October. Despite delayed wheat planting in Western Canada (Saskatchewan, Manitoba, and Alberta) in spring, most of the wheat was in the ground by mid-June, and from then on growing conditions were exceptionally favorable for crop development, and have materialized in the record wheat crop.

In the European Union, further refining of the wheat harvest data resulted in an increase of 0.4 million tons to 143.3 million with small increases (listed in a descending order) in the Czech Republic, Germany, Hungary, Austria, Bulgaria, Greece, France, and Portugal, and a decline in Denmark.

In the Southern Hemisphere, for two major wheat producers—Argentina and Australia—September and October were critical months for wheat development. During these months both temperature and moisture are crucial, as wheat is advancing from its vegetative stage through heading and filling to maturity. The wheat harvest in these countries is still to come, commencing in November in Australia and in December in Argentina. In Brazil—a much smaller Southern Hemisphere wheat producer—harvesting started in October and will be moving from north to south through December. Australia fared pretty well throughout these vital 2 months. This year, wheat growth conditions were strongly polarized in Australia, and virtually no wheat areas received an average level of moisture. Western Australia (WA) had almost ideal weather for wheat development, with soaking rains and warm temperatures, and South Australia (SA) and Victoria (VC) also had above-normal rainfall throughout the reproductive and filling periods. As a result, all three States maintain excellent crop prospects. At the same time, New South Wales (NSW) and Queensland (QLD) went through persistent heat and dryness during the period of maturation, and wheat yields in those States, especially in the area surrounding the border, are expected at a lower than average level. Excellent conditions in the west and south of the continent are expected to compensate for the projected losses in the east; consequently no changes to Australian wheat output are made this month.

In Argentina, wheat production is reduced for the 2013/14 marketing year, down 1.0 million tons to 11.0 million. Though the major wheat area of southern Buenos Aires province enjoyed beneficial weather with good rains in October, wheat fields in the northern provinces of the country—Cordoba, Santa Fe, Entre Rios, as well as a number of smaller provinces—suffered from excessive dryness and cold weather, and had several episodes of frosts. These adverse developments reduced prospects for the total wheat harvested area, down 0.2 million hectares to 3.7 million. Wheat production in Argentina for 2012/13 is also down 0.5 million tons to 9.5 million this month. The decline reflects mounting evidence of low wheat supplies in the country with skyrocketing domestic prices that are making further wheat exports not economically viable, at least before the new harvest will add to the supplies. No changes are made for Brazil this month.

Largely offsetting 2013/14 production changes are made for a number of countries based on final statistical and harvest reports, the largest among these are made for Uzbekistan, up 0.1 million tons, for Sudan, down 0.1 million tons, as well as smaller changes for Bangladesh, South Korea, Lesotho, Mexico, Mongolia, and Zambia.

Larger Beginning Stocks Partly Offset Production Decline

The decline in global supplies caused by lower production prospects this month is partly offset by a 1.7-million-ton increase in 2013/14 world wheat beginning stocks. Higher beginning stocks are projected in the European Union, up 1.0 million tons, in Korea and Uzbekistan, up 0.3 million tons each, and in Japan, up 0.1 million tons. These increases are correlated with the lower projected wheat use in 2012/13 in these countries, making wheat use more in line with wheat availability, livestock developments, and industrial use. Beginning stocks are down 0.2 million tons in Argentina, partly reflecting its lower production estimate for 2012/13. Smaller offsetting changes for wheat beginning stocks are made for a number of countries.

Wheat Use Reduced, Ending Stocks Up

Foreign wheat consumption for 2013/14 is projected 3.6 million tons lower this month to 667.2 million tons. Foreign wheat feed and residual use is down 2.4 million tons to 130.8 million. Wheat feed use is projected down 1.0 million tons to 13.5 million in Russia following the wheat production decline, but is still 1.6 million tons above the previous year. The poultry and hog sectors in Russia are expected to maintain their rapid development, and projected total grain feed use in Russia is essentially the same as last month. Corn feeding is projected to increase with exceptionally high supplies from the record-large harvest, and is expected to offset the decline in wheat and also in barley feed use. EU-27 wheat feed use projected for 2013/14 is reduced 0.7 million tons this month, which is still 4 percent higher than last year. The decline is offset by an increase in forecast rye and oats feeding, production of which are expected to be higher. Wheat feeding is projected down 1.0 million tons in China with a reduction in its wheat imports projection. Partly offsetting those changes, wheat feeding is up in South Korea, Uzbekistan, and New Zealand.

World wheat 2013/14 ending stocks are projected up 2.2 million tons this month, to 178.5 million, with lower projected use more than offsetting reduced supplies of wheat. Lower wheat use gave a boost to stocks in the EU, up 0.9 million tons to 12.1 million. With the record wheat output, Canada is expected to hold increased stocks, up 0.7 million tons. Stocks are also projected up in Argentina, despite reduced production. It is expected that the Government of Argentina will opt to maintain a higher stocks level, up 0.4 million tons, to mitigate the risk of soaring domestic food prices in the coming year. Smaller adjustments to wheat ending stocks are made for a number of countries.

Wheat Trade Almost Unchanged, Though Sizeable Shifts Expected Among Exporters

World wheat trade for the international 2013/14 July-June trade year is projected to be nearly unchanged from last month, down just 0.3 million tons, at 152.1 million. All changes in world trade this month indicate shifts among importers and exporters reflecting wheat availability, logistics, policies, and recent sales. China’s imports are projected 1.0 million tons lower to 8.5 million, reflecting an abrupt decline in the pace of its wheat purchases in the past 2 months. Wheat imports in the EU-27 are down 0.5 million tons, as the pace of import licenses is particularly slow. The region is switching partly to corn imports (into Spain and Italy, the major European importers of feed grain), as cheap supplies of corn from record harvests in Russia and Ukraine and large crops in Romania and Bulgaria, are becoming available at a time when wheat in those countries is in shorter supply. Wheat imports are also projected down 0.2 million tons for the Philippines, as its accumulated purchases have been lower than expected. A small downward adjustment in wheat imports is made for Venezuela. Those declines are almost fully offset by the multiple increases in wheat imports for many countries, resulting mainly from revising the supply and demand balances in line with the 2012/13 trade adjustments. The largest increase is for Algeria, up 0.5 million tons (and up 0.2 million tons for 2012/13); for Libya, up 0.3 million tons in both 2013/14 and 2012/13. Smaller increases in wheat imports are made for more than a dozen countries.

The 2013/14 U.S. wheat import projection for the July-June international trade year is increased 0.3 million tons this month to 4.0 million. Wheat imports from Canada have been stronger than previously expected. Given Canada’s record crop, and the absence of the Canadian Wheat Board that had regulated export activity, the increase is expected to be supported by continued offers of attractively priced Canadian wheat to U.S. millers. However, actual trade over the border with Canada might not be accounted for with complete accuracy. For example, some Canadian wheat exported from U.S. ports may show up as U.S. imports instead of trans-shipments.

This month’s changes in 2013/14 wheat export projections are largely offsetting. Exports by Russia are down 1.0 million tons to a still lofty 16.0 million. Despite a production cut of 2.5 million tons, a reduction in expected exports is smaller, as the major wheat-exporting regions of the country (South and North Caucasus) appear to have harvested a higher than average amount of wheat. The major cuts in Russian wheat output come from the regions further from ports, and the lower wheat surplus in those localities is not expected to strongly affect the country’s exports. This month’s reduction in wheat exports for Russia results mainly from the lower estimate of wheat output in the Volga and partly in the Central districts (rather than from the Urals and Siberia). Lower Russian wheat exports are fully offset by an increase in the EU exports, up 1.0 million tons. The EU is naturally expected to benefit from the lower Russian wheat crop. The eastern countries of the block (especially Bulgaria and Romania) are already picking up parts of the Russian business, which explains the soaring volume of the EU wheat export licenses.

Wheat exports are projected lower in Kazakhstan, down 1.0 million tons to 8.0 million, based on the lower crop estimate. An offsetting change in wheat exports is made for India, up 1.0 million tons to 6.0 million. This reflects a change in the government policy that lowered the minimum export price of wheat to $260/ton from $300/ton at the end of October. The Government is trying to make Indian wheat more competitive and at least partly unload some of the country’s bulging wheat stocks.

In the Western Hemisphere, a big reduction is made in wheat exports for Argentina, down 1.5 million tons to just 3.5 million, though the country’s wheat output is reduced by 1.0 million tons only. It is expected that, in an attempt to moderate the skyrocketing domestic food prices, the Government will be cautious in its wheat export policy, and will strive to increase Argentine wheat stocks rather than allowing additional exports. Partly offsetting is an increase in wheat exports in

Canada, up 1.0 million tons to 21.5 million. Canada has a record wheat crop, as well as improved export opportunities in the United States, South America, Asia, and North Africa. The country also has a record canola (rapeseed) crop, with good

export potential. However, the Canadian transport (railways) and logistical system for exporting these crops is constrained, and faces difficulties handling high export levels for both crops. Consequently, a higher figure could be justified for Canadian wheat exports if the logistics were less constraining.

Wheat exports are also projected up for a total of 0.2 million tons for Uzbekistan

(higher crop), Georgia, and Nigeria.

For the United States, the export projection for the 2013/14 wheat international trade year (July-June) remains unchanged this month at 30 million tons, up 8 percent compared to a year ago. Census data for July through August 2013 (September 2013 Census data are delayed because of the government shutdown), inspections for September and October, and outstanding sales as of October 31 indicate that total commitments have reached 19.0 million tons, up from 13.0 million tons last year. Despite a strong start, U.S. wheat exports are expected to substantially slow down, a development that in fact is already being observed in weekly sales.

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