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USDA Wheat Outlook


12 December 2013

USDA Wheat Outlook - December 2013USDA Wheat Outlook - December 2013


USDA Wheat Outlook

Projected U.S. wheat supplies for 2013/14 are raised 10 million bushels this month with higher projected imports. Record production and higher exports for Canada are expected to add to wheat supplies in the United States. Imports are raised 5 million bushels each for hard red spring (HRS) and soft red winter (SRW) wheat. Projected exports for all wheat are unchanged, but minor adjustments are made by class with SRW wheat exports raised 5 million bushels and HRS wheat exports lowered an offsetting amount. Projected ending stocks are raised 10 million bushels. The 2013/14 projected season-average farm price is lowered 10 cents at the midpoint with the range narrowed to $6.65 to $7.15 per bushel as near record world supplies and increased export competition reduce price prospects for U.S. wheat.

A sharp increase in wheat supplies in Canada and Australia is expected to intensify competition facing U.S. exports during the latter part of 2013/14. Despite strong export commitments, U.S. wheat export prospects are unchanged, reflecting increased competitor supplies and the slowing pace of sales. With global consumption projected only slightly higher, global ending stocks rise significantly, putting additional downward pressure on wheat prices.

Domestic Outlook

Projected 2013/14 Supplies Raised 10 Million Bushels This Month

Projected 2013/14 supplies are raised 10 million bushels this month to 3,008 million bushels. Production and carryin stocks are unchanged, but imports are raised to 10 million bushels to 160 million bushels with expected higher hard red spring (HRS) and soft red winter (SRW) imports from Canada, up 5 million bushels each.

Projected 2013/14 Supplies Down From 2012/13

 Total U.S. wheat supply for 2013/14 is down 123 million bushels from 2012/13 to 3,008 million bushels. Supplies of hard red winter (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 Unchanged This Month

Projected 2013/14 total U.S. wheat use is unchanged from November. Exports, at 1,100 million bushels, are unchanged in total, but HRS exports are lowered 5 million bushels while SRW exports are raised by 5 million bushels. The class changes are based on export pace to date.

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

Projected total use for 2013/14 is 2,433 million bushels, up 19 million bushels from 2012/13. Domestic use is expected to be down 73 million bushels from 2012/13 while exports are projected up 93 million bushels. Domestic use is down because feed and residual use is expected to fall 78 million bushels from 2012/13 to 310 million bushels. While feed use appears to have been high during the summer quarter of 2013/14, such use is expected to decrease with large supplies of lower priced corn available for feeding since the fall corn harvest. Total food use is expected higher with population growth and expected lower flour extraction than in 2012/13.

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

The projected 2013/14 U.S. wheat ending stocks are raised 10 million bushels from November to 575 million bushels because of the raised imports of HRW and SRW. Total ending stocks for 2013/14 are expected to decrease by 20 percent from 2012/13. Stocks of HRW, SRW, and white are expected down 44 percent, 28 percent, and 7 percent, respectively. Stocks of durum and HRS are expected up 34 percent and 23 percent, respectively.

2013/14 Price Range Projection

average farm price range is projected at $6.65 to $7.15 per bushel, from $6.70 to $7.30 per bushel in November. The 2013/14 range is down from the record $7.77 per bushel reported for 2012/13.

Winter Wheat Conditions Are Favorable

s National Agricultural Statistics Service (NASS) as of November 24 in Crop Progress are more favorable compared to last year at this time. For all winter wheat, only 8 percent was rated poor to very poor while 62 percent was rated good to excellent. A year ago at this time, 26 percent was rated poor to very poor and 33 percent was rated good to excellent. In all the States, except Texas, the percent of the crop rated poor to very poor was 6 percent or less. In Texas, 28 percent of crop was rated poor to very poor.

USDA Winter 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 Output Boosted This Month

World wheat production forecast for 2013/14 soared 5.0 million tons this month to 711.4 million, exceeding the record wheat output of 2011/12 by 14.1 million tons and surpassing that year’s record yield by 0.09 tons/hectare (or 2.9 percent).

The largest increase in 2013/14 wheat production is a 4.3-million-ton rise to 37.5 million for Canada, based on the November farm surveys results published by Statistics Canada. The increase confirmed USDA’s previous assessments of a remarkable record-setting growing season and excellent harvest weather with the additional benefit of later-than-usual autumn freezes. Area harvested for wheat is up slightly this month to 10.4 million hectares, and the off-the-charts yields are 21 percent higher than the previous record of 2011/12 (and more than a quarter higher than the average of the last 5 years).

Australian 2013/14 wheat production is projected 1.0 million tons higher this month at 26.5 million, the third largest wheat crop in the country’s history, with area slightly lower this month, down 0.2 million hectares to 13.5 million. Wheat production for the previous 2012/13 crop year is also revised up 0.4 million tons to 22.5 million, with a 0.5-million-hectare lower wheat area. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) raised their production forecast for the current 2013/14 year to 26.2 million tons, while the Australian Bureau of Statistics (ABS) upgraded the production estimate for the previous 2012/13 crop year.

Last month we reviewed the growing conditions in all Australian States in detail (see http://usda01.library.cornell.edu/usda/ers/WHS//2010s/2013/WHS-11-13- 2013.pdf). To sum up, the growing conditions have been very favorable in the Western Australia (particularly in the southern and central parts of the State), and in the eastern producing States of South Australia and Victoria along the southern coast of the continent. However, precipitation was far from sufficient in parts of Queensland and New South Wales, particularly around the border between the two States. By the end of November, the wheat harvest had been virtually completed in these two States, and is currently moving into the south of the continent and to Western Australia, the regions that have benefited the most from the country’s favorable weather. About 50 percent of the country’s total wheat area has been harvested, with better-than-expected results.

Wheat production in the European Union is adjusted slightly down this month by 0.2 million tons to 143.1 million, with partly offsetting changes for Denmark (down 0.45 million tons), France and Netherlands (up 0.1 million tons each). South African wheat production is also slightly adjusted, reflecting the new estimates of the National Crop Estimates Committee (NCEC).

Changes in world wheat beginning stocks are pretty small, up 0.2 million tons, adding only slightly to already expanded supplies. Beginning stocks are up 0.5 million tons in Australia, reflecting the higher 2012/13 wheat production estimate, and down 0.3 million tons in Kazakhstan, based on an adjustment of wheat food and feed consumption series for a number of years. Small offsetting changes are made for beginning stocks for the EU and South Africa.

World Wheat Use Up Slightly, Feed Use Trimmed

ton reduction in wheat feed use is forecast for the EU, as wheat is being partly replaced with corn and rye in feeding, thereby creating the potential for additional wheat exports. Projected feed and residual use is up in Canada by 0.2 million tons, reflecting increased wheat availability. In Egypt and Korea, wheat feeding is also up 0.2 million tons, each, with higher projected imports of low quality wheat. Wheat feed use is trimmed 0.1 million tons in Kazakhstan as a result of a consumption series revision. Reflecting higher projected wheat imports, food use is projected higher in Bangladesh and Syria, up 0.2 million tons each, and by a slight amount in Azerbaijan.

World Wheat Ending Stocks Prospects Up 2.4 Percent This Month

use ratio is still under 26 percent, on par with the last year, and the lowest since 2007/08. Increased 2013/14 wheat production prospects are boosting ending stocks this month for Canada, up 2.6 million tons to 9.9 million, the highest level in 20 years; and for Australia, up 1.0 million tons to 4.8 million. With higher projected imports, wheat ending stocks are projected higher 0.3 million tons for both Egypt (where stocks are still the lowest in 6 years) and Mexico. Projected ending stocks are also up 0.3 million tons for the United States, reflecting higher wheat import prospects from Canada. Smaller offsetting changes in wheat ending stocks are projected for Azerbaijan, Bangladesh, the EU, Kazakhstan, and South Africa.

World Wheat Trade Breaks the Record

vis the US dollar by almost 20 percent, thereby increasing prices for imports, Egypt imported just 8.3 million tons of wheat. This year the Egyptian economy and import potential is expected to be supported by sizeable financial assistance pledged by Saudi Arabia, United Arab Emirates (UAE), and Kuwait.

Imports are also increased for Mexico and Bangladesh, up 0.3 million tons each, in both cases based on pace and the prospect of a higher share of competitively priced Canadian wheat in their imports. Wheat imports are also up 0.2 million tons each for Azerbaijan, with higher inflow from Russia and Kazakhstan; for South Korea, which increased purchases of feed-quality wheat from India, Russia, and Ukraine; for Syria, where rebels control most of the farmland, while the Government has to provide food for the population in the Government-controlled part of the country; and for Turkey, a country where wheat flour exports are one of the main elements of demand. Turkish wheat exports are also projected up this month by 0.2 million tons. A very small increase is made for Mozambique, where some additional wheat import activity has recently been reported.

Export prospects are boosted for Canada and the EU, up 1.0 million tons each, to 22.5 and 25.0 million tons, respectively. For Canada, an increase in wheat exports for the local marketing year (August-July) is even larger, up 1.5 million tons to reach 23.0 million. The difference between the local and international trade year exports for Canada reflects expectation that record wheat stocks will allow Canada to export an additional 0.5 million tons of wheat in July 2014, compared to July 2013. Projected exports for Canada are the highest since 1991/92. Although logistical problems (especially the railway system) could hold back export activity, the mammoth crop should find its way to world markets. Given the lower quality of this year’s Canadian wheat, it is possible that it could be competitive in countries such as Egypt that usually do not import from Canada, given the typically high quality of Canadian wheat output.

For the EU, projected exports almost reached the previous record of 2008/09. A vigorous pace of wheat exporting and export licensing, coupled with higher projected corn imports for feeding, suggest a shift from feeding to exporting wheat. Wheat exports are also up 0.2 million tons to 3.7 million for Turkey, due to the registered pace of flour and pasta shipments (see above).

Despite a boost to wheat supplies, the wheat export projection for the international trade year is unchanged for Australia. Nonetheless, a 0.5-million-ton increase in wheat exports is projected for its local marketing year that starts in October, reaching 19.5 million tons (19.0 million tons for the international trade year). This projection is based on expectations that July-September 2014 wheat exports will exceed those during July-September of 2013.

U.S. trade year imports are up 0.25 million tons to 4.2 million this month, which is 0.8 million tons higher than last year. The projection is based on the expectation that some additional wheat from the Canadian Prairies will move into the United States, and end up being blended with domestic wheat.

The U.S. wheat export forecast for 2013/14 is unchanged this month at 30.0 million tons. Exports have been very strong in the first months of the season, but have been slowing down. Ample wheat supplies in Canada and Australia, as well as strong exports from the EU, are the reasons why the United States is losing market share in its customary markets, specifically Mexico, Nigeria, and Japan.

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