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USDA Wheat Outlook


15 January 2014

USDA Wheat Outlook - 14 January 2014USDA Wheat Outlook - 14 January 2014


USDA Wheat Outlook

U.S. wheat supplies for 2013/14 are unchanged this month, but lower expected use raises projected ending stocks 33 million bushels. Feed and residual use is lowered 60 million bushels reflecting disappearance for June-November as indicated by the December 1 stocks released in the Grain Stocks report. Feed and residual use is lowered for hard red winter (HRW), hard red spring (HRS), and soft red winter (SRW) wheat. Seed use is raised 1 million bushels, based on the winter wheat planted area reported today in the Winter Wheat Seedings report. Wheat exports are projected 25 million bushels higher, with an increase for HRW, on the strong pace of sales and shipments and lower expected competition in Brazil’s milling wheat market. The 2013/14 season-average farm price is projected 10 cents lower at the midpoint with the range narrowed to $6.60 to $7.00 per bushel.

U.S. wheat exports are projected higher as a shift in Brazil’s wheat imports benefits the United States at the expense of Argentina and Paraguay. Wheat exports are projected at a record-high level for the European Union, and are also increased for Russia. Foreign wheat feed and residual is down, as the EU shifts to barley feeding.

Domestic Outlook

Projected 2013/14 Supplies Are Unchanged This Month

Projected total 2013/14 supplies, at 3,008 million bushels, are unchanged this month. There are small offsetting import class changes. Hard red winter (HRW) imports are raised 5 million bushels and durum imports are lowered 5 million bushels based on pace to date.

Projected 2013/14 Supplies Down From 2012/13

Total U.S. wheat supply for 2013/14 is down 123 million bushels from 2012/13. 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 Down 34 Million Bushels This Month

Projected 2013/14 total U.S. wheat use is down from December as sharply lower feed and residual use offsets higher exports. Based on the December 1 stocks report by the National Agricultural Statistical Service (NASS) in the January 10 Grain Stocks, projected total feed and residual use is lowered by 60 million bushels to 250 million bushels. The by-class reductions are: HRW, 25 million bushels; HRS spring, 5 million bushels; and SRW, 30 million bushels. The other two classes are unchanged. Projected exports, at 1,125 million bushels, are up 25 million bushels from December based on the pace of sales and shipments to date and expectations for stronger shipments to Brazil. Seed use is raised 1 million bushels based on NASS’ Winter Wheat Seedings report.

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

Projected total use for 2013/14 is 2,399 million bushels, down 15 million bushels from 2012/13 as lower feed and residual use more than offsets higher exports. Domestic use is expected to be down 132 million bushels from 2012/13 while exports are projected up 118 million bushels. Domestic use is down because feed and residual use is expected to fall 138 million bushels from 2012/13. Feed and residual use during the summer quarter of 2013/14 was not as high as NASS’ first quarter stocks report (September 30 Grain Stocks) implied. Total food use is expected higher with population growth and expected lower flour extraction rate than in 2012/13.

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

The projected 2013/14 U.S. wheat ending stocks are raised 33 million bushels from December to 608 million bushels. These projected ending stocks are down 110 million bushels from 2012/13. Total ending stocks for 2013/14 are expected to decrease by 15 percent from 2012/13. Stocks of HRW, white, and SRW are expected down 43 percent, 6 percent, and 5 percent, respectively. Stocks of HRS and durum are expected up 26 percent and 14 percent, respectively.

2013/14 Price Range Projection

The 2013/14 season-average farm price range is projected at $6.60 to $7.00 per bushel, from $6.65 to $7.15 per bushel in December. The 2013/14 range is down from the record $7.77 per bushel reported for 2012/13.

Winter Wheat Seedings Down

NASS’ Winter Wheat Seedings reported that planted area for harvest in 2014 is estimated at 41.9 million acres, down 3 percent from 2013. HRW seeded area is up 0.5 million acres from 2013 to 30.1 million acres. Relatively high insurance guarantees and favorable weather during planting season were factors encouraging farmers to seed more HRW acres. SRW seeded area is down 1.6 million acres to 8.4 million acres. Late-harvested row crops likely contributed to the reduced SRW acres.

White winter wheat seedings totaled 3.39 million acres. Hard white (HW) and soft white (SW) seeded acres are .37 million acres and 3.01 million acres, respectively. This year’s HW seeded area is up 0.01 million acres from 2013 while the SW seeded area is down 0.12 million acres from 2013.

Durum wheat seedings in Arizona and California for 2014 harvest are estimated at 70 thousand acres and 75 thousand acres respectively. The 2013 Arizona and California acreages were 80 thousand acres and 75 thousand acres, respectively.

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

World Wheat Production Projected Up This Month

World wheat production in 2013/14 is projected to reach 712.7 million tons, up 1.2 million this month after soaring by 5.0 million tons last month. This latest increase puts 2013/14 global output further ahead of the previous record year in 2011/12, now surpassing it by 15.4 million tons. The largest increase this month is for China, up 1.0 million tons to 122.0 million. The revision is based on recent preliminary information from the China National Grain and Oils Information Center (CNGOIC) about grain area and production by type of crop in 2013/14. With the wheat area estimate slightly down, the increase indicates record yields that have kept growing for over a decade now. The continuous growth (with an exception in 2009/10, when wheat yields were slightly lower than in 2008/09) is supported by improved management and widespread modernized irrigation practices. Though CNGOIC numbers are not official, their information comes from the Government, and usually closely approximates the official Chinese National Bureau of Statistics (NBS) final numbers that will be published later in the year. The NBS has just released its finalized wheat production data for 2012/13, which turned out to be just a trifle (23,000 tons) higher than the previously projected 121.0 million tons.

According to the preliminary estimates of the Russian central statistical agency, wheat production in 2013/14 reached 52.1 million tons, up 0.6 million from last month. With 54.4 million tons of wheat being harvested in so-called “bunker” (before drying) weight, the result indicates an unusually high (almost 96 percent) “bunker-to-clean” conversion coefficient. The conversion coefficient depends on the level of moisture in the grain, as well as other losses on the way to grain elevators, and as a rule is lower in the years with abundant moisture. This year, excessive precipitation in the Central and Volga districts (where the harvest was disrupted because of incessant rains), as well as in Siberia, was expected to result in somewhat lower conversion rates. On the other hand, the ongoing farm-level improvements in technology and management have probably reduced grain losses, counterbalancing the effect of excessive moisture. Wheat production in Tajikistan (a Former Soviet Union country located in Central Asia north of Afghanistan) is up 0.3 million tons to 0.9 million, and is also up 0.1 million tons to 0.3 million in Armenia, based on news releases from these countries’ Ministries of Agriculture.

In Argentina, where wheat harvesting is almost over, wheat production is reduced further this month for the 2013/14 marketing year, down 0.5 million tons to 10.5 million due to lower estimated area harvested, down 0.2 million hectares to 3.5 million. The previous reduction in Argentine wheat output was made in November 2013. The reasons behind the current drop in wheat output stay the same, the only difference being that the estimates of the crop size are getting more accurate (for a detailed explanation see the Wheat Outlook November issue, p.7: (http://usda01.library.cornell.edu/usda/ers/WHS/2010s/2013/WHS-11-26-2013.pdf). Another small reduction is made for the European Union (EU), where wheat production in 2013/14 is down slightly by 0.2 million tons to 142.9 million. The reduction is based on the downward production revision by the Ministry of Agriculture of the United Kingdom (down 0.2 million tons to 11.9 million), and official data for Finland and Denmark that indicated slightly lower wheat output in the two countries.

Changes in 2013/14 world wheat beginning stocks are minor this month, with the total up 0.3 million tons, adding slightly to global supplies. Beginning stocks are up 0.2 million tons in Paraguay, reflecting lower 2012/13 wheat exports; and up 0.1 million tons in Tajikistan following an upward 2012/13 production update. A tiny upward adjustment is made for 2013/14 Chinese beginning stocks reflecting the final number for the 2012/13 wheat output.

European Union Continues To Shift Away from Wheat Feeding

Foreign consumption of wheat in 2013/14 is projected up 0.5 million tons this month to 668.7 million. This adjustment mainly reflects local marketing-year adjustments to imports and exports, as changes to feed and food use are mostly offsetting (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 http://usda01.library.cornell.edu/usda/ers/FDS//2010s/2013/FDS- 06-14-2013.pdf). Global wheat consumption is projected down 1.1 million tons, with U.S. domestic consumption down 1.6 million.

A 1.0-million-ton reduction in wheat feed use is forecast for the EU in a further shift away from wheat to coarse grains in feeding. This month’s reduction in EU wheat feeding is being fully replaced with barley (higher estimate for EU barley production and lower projected exports this month boosted EU barley supplies), thereby creating potential for additional wheat exports. Projected feed and residual use is also down 0.1 million tons in the Philippines, where a further shift to corn feeding is expected. Partly offsetting is an increase (tripling) in estimated wheat feeding in Paraguay, up 0.2 million tons to 0.3 million. The wheat crop in the country was substantially damaged by July-August frosts, reducing harvested area, and the surviving wheat is mainly low quality feed grade grain that is likely to benefit Paraguayan livestock. Wheat use is projected slightly up in Tajikistan and Armenia.

With increased wheat imports, food use is projected higher in Egypt and Japan, up 0.2 and 0.1 million tons, respectively. Smaller increases in wheat food use are projected for several countries.

Foreign ending stocks are projected to increase this month, up 1.7 million tons. In addition to a 1.0-million-ton increase in Chinese wheat stocks currently projected at 58.0 million tons, ending wheat stocks are up in the interval of 0.1-0.3 million tons in Egypt, Syria, Japan, Russia, and Tajikistan, and by even smaller amounts in several other countries. Stocks are projected slightly down for the EU (by 0.2 million tons, or less than 2 percent) and the Philippines. Wheat ending stocks in the United States are projected up 0.9 million tons, or 6 percent.

World Wheat Trade Further Up, EU Breaks the Record

Projected world wheat trade for the international 2013/14 July-June trade year is increased this month by 1.3 million tons to reach 155.6 million tons, pushing the record established last month even further, and surpassing the previous record trade of 2011/12 by 1.8 million tons.

Wheat imports for 2013/14 are projected higher this month for Egypt, up another 0.5 million tons to 10.5 million, supported by the fast pace of wheat purchases and recent General Authority for Supply Commodities (GASC) tenders (see the Wheat Outlook December issue, p.5: http://usda01.library.cornell.edu/usda/ers/WHS//2010s/2013/WHS-12-12- 2013.pdf). Smaller increases of wheat import prospects in a range of 0.1-0.2 million tons are made for Japan, which is stepping up its purchases of feed-quality wheat mainly from Ukraine; for Syria, with additional shipments from Ukraine and the EU (Romania and France); for Turkey, with larger Russian wheat supplies and in anticipation of a possible poor wheat harvest next year; and for Paraguay, which is atypical for this South American wheat exporter, but quite reasonable this year given the country’s reduced wheat supplies, particularly for milling quality wheat. Import prospects are also slightly raised for a number of countries. Partly offsetting those increases are import reductions in the Philippines (because of lower wheat feeding – see above) and in Tajikistan (higher wheat production estimate), down 0.2 million tons each.

Export prospects are boosted for the EU and Russia, up 1.0 million tons and 0.5 million tons, to 26.0 and 16.5 million, respectively. For the EU, projected exports broke the previous record of 2008/09 by 0.6 million tons, mainly aided by the whopping amounts exported from Romania to Egypt and other North African countries, to the Middle East, but also to unusual destinations like Bangladesh, Sri Lanka, Vietnam, and Philippines. Russia had already exported more than 12.0 million tons of wheat by the end of December 2013, and with additional wheat available in the country, the expected slowdown of its wheat exports will be more gradual.

The shift among exporters in the Western Hemisphere continues, as Argentine wheat supplies are projected lower, and the Government has been virtually shutting down wheat exports since July 2013 in an attempt to avoid high inflation and ensure an adequate level of wheat supplies.The Government is not allowing the holders of previously issued export licenses to fulfill them now, and has recently blocked wheat that has been already sold from leaving the country. Argentine wheat export prospects are down 0.5 million tons to 3.0 million this month, the lowest level in 36 years (since 1977/78). Neighboring Paraguay is also struggling because of an insufficient amount of quality wheat supplies, and its wheat exports are projected down 0.2 million tons to 0.5 million.

U.S. Wheat Exports Up Despite Slowing Sales

Argentina and Paraguay are the countries that routinely provide most of the imported wheat for Brazilian millers (7.7 million tons projected this year). In the absence of the shipments from these two countries, Brazil its turning mainly to the United States for its milling needs. This is occurring even though costs of such imports are driven up by the import tariff. Given that the United States is not a member of the Mercosur bloc, Brazil applies a tariff to imported U.S. wheat, while wheat from Argentina and Paraguay is tariff-free. Since July, when Argentina effectively stopped exporting wheat, Brazil switched to buying U.S. HRW wheat, importing about 0.5 million tons monthly. By the beginning of the new year, Brazil had purchased more than 3.0 million tons of U.S. wheat. Reduced competition in South America is enhancing U.S. wheat export prospects. Though the pace of U.S. wheat exports and sales has been slowing down, this was anticipated, as wheat exports were expected to be frontloaded. On the other hand, the slowdown has been smaller than earlier expected. As a result, the July-June trade-year forecast for U.S. wheat exports is raised 0.5 million tons to 30.5 million, while the June-May local marketing year forecast is up 25 million bushels to 1.125 million.

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