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USDA Wheat Outlook


17 January 2012

USDA Wheat Outlook: Projected U.S. Ending Stocks Down SlightlyUSDA Wheat Outlook: Projected U.S. Ending Stocks Down Slightly

U.S. wheat ending stocks for 2011/12 are projected slightly lower this month as reductions in expected domestic use mostly offset higher projected exports.
USDA Wheat Outlook

Food use is projected 5 million bushels lower based on flour production data recently reported by the North American Millers' Association for July-September 2011. Feed and residual use is projected 15 million bushels lower as December 1 stocks, reported in the January Grain Stocks from USDA, National Agricultural Statistics Service (NASS), indicate lower-than-expected disappearance during September- November. Seed use is raised 4 million bushels based on the winter wheat planted area reported in NASS's Winter Wheat Seedings. Projected exports are raised 25 million bushels based on the pace of sales and shipments to traditional markets. Increases for hard red winter, white, and soft red winter wheat more than offset a reduction for hard red spring wheat. Ending stocks are projected 8 million bushels lower at 870 million. The 2011/12 season-average farm price is lowered 10 cents per bushel on each end of the range to $6.95 to $7.45 per bushel.

World wheat production in 2011/12 is projected up, adding another 2.5 million tons to world supplies this month, with 1.5 million tons of additional wheat coming from Kazakhstan. Projected global stocks are up this month by 1.5 million tons to 210.0 million, the second-highest on record. U.S. 2011/12 export prospects are increased, reflecting commitments data for more than half the year.

Domestic Situation and Outlook

2011/12 Supplies

Total projected supplies for 2011/12, at 2,982 million bushels, are unchanged from December. Supplies for 2011/12 are 297 million bushels below 2010/11. Lower beginning stocks and production were only slightly offset by higher expected imports year to year.

Projected supplies of hard red winter (HRW), hard red spring (HRS), and durum are down year to year, mostly because of reduced production. HRW production is down from last year because of reduced harvested area and lower yields. Year to year, the planted area for the 2011 HRW crop is slightly smaller than 2010, but the rate of abandonment is up sharply and yields are down from the previous year due to the severe drought on the Central and Southern Plains. HRS and durum production are down from a year ago with lower planted and harvested areas and lower yields. Excessive moisture and cool temperatures on the Northern Plains resulted in late seeding and prevented plantings.

Projected supplies of soft red winter (SRW) and white are up from 2010/11, mostly because of larger production. SRW production is up from last year because of larger harvested area and higher yields. The 2011 crop area recovered from 2010, when a rain-delayed row-crop harvest and low prices reduced SRW seedings in the fall of 2009. Due to excellent weather conditions through much of the season, production was up significantly from the previous year, with production in many of the SRW States up more than 100 percent from 2010. White wheat production was up due to both higher area and yield.

All-wheat 2011 production is estimated at 1,999 million bushels, unchanged from December, but down 208 million bushels from 2010. All-wheat harvested area is estimated at 45.7 million acres, unchanged from December and down 1.9 million acres from last year. The U.S. all-wheat estimated yield is 43.7 bushels per acre for 2011, unchanged from December, but down 2.6 bushels from the record high of 46.3 bushels in 2010.

Estimated 2011/12 carry in stocks of HRS and SRW are down sharply year to year. The carry in stocks for the other classes are nearly unchanged. Projected all-wheat imports for 2011/12 are unchanged from December, but up 23 million bushels year to year, mostly due to higher HRS and durum imports. Imports of HRS and durum are projected higher year to year because of tighter U.S. supplies for these classes of wheat.

There are small class changes for projected imports this month from December based on pace to date. Projected SRW imports are raised 5 million bushels. Imports of durum and HRS are lowered 3 million bushels and 2 million bushels, respectively, offsetting the SRW increase.

2011/12 Use

Domestic use of wheat for 2011/12 is projected at 1,161 million bushels, down 16 million bushels from December, but 34 million bushels higher than last year. Food use for 2011/12 is projected at 935 million bushels, down 5 million bushels from December, but up 9 million bushels from 2010/11. The lower projected food use is based on flour production data recently reported by the North American Millers' Association (NAMA) for the 3rd quarter of 2011. The NAMA data is used because the Census Bureau ended its quarterly mill grind report. Projected seed use is down 4 million bushels from December based on the Winter Wheat Seedings report. Feed and residual use is projected at 145 million bushels, down 15 million bushels from December based on the January Grains Stocks report. Projected feed and residual use for 2011/12 is 13 million bushels above feed and residual use for 2010/11.

Projected exports for 2011/12 are up 25 million bushels from December based on continued strength in shipments and sales to traditional markets. At 950 million bushels, projected exports are down 339 million bushels from 2010/11 because of higher production in several major exporting countries and relatively high U.S. prices.

The by-class export changes this month are: HRW, up 15 million bushels; HRS, down 10 million bushels; SRW, up 5 million bushels; and white, up 15 million bushels. Exports of durum are unchanged. These by-class changes are based largely on the export pace to date.

Projected total U.S. ending stocks for 2011/12, at 870 million bushels, are down 8 million bushels from December, but up 8 million bushels from 2010/11.

All wheat ending stocks are up 1 percent from 2010/11. Durum, HRS, and HRW ending stocks are down from 2010/11 by 34 percent, 25 percent, and 12 percent, respectively. SRW and white ending stocks are up from 2010/11 by 51 percent and 32 percent, respectively.

2011/12 Price Range Is Lowered

The 2011/12 season-average farm price range is projected at $6.95 to $7.45 per bushel, down from $7.05 to $7.55 for December, based on recent farm prices reported for wheat and expected corn prices for the remainder of the June-May wheat marketing year. This compares with $5.70 for the previous year and the record high of $6.78 for 2008/09.

Winter Wheat Seedings Up

NASS' Winter Wheat Seedings reported that planted area for harvest in 2012 is estimated at 41.9 million acres, up 3 percent from 2011 and 12 percent above 2010. More acres were seeded this year due to higher prices and an acreage rebound in Kansas, Oklahoma, and Texas where dry conditions had limited 2011 planted acres.

HRW wheat seeded area is about 30.1 million acres, up 6 percent from 2011. Acreage is above last year's level in all States in the HRW growing area except California, Montana, Nebraska, and South Dakota. The dry fall limited planting in South Dakota, while winter wheat seeded area in Nebraska is a record low.

SRW wheat seeded area is about 8.37 million acres, down 2 percent from last year. While large acreage increases from last year are estimated in the Southeast, large acreage decreases occurred in most States in the Corn Belt and Northeast, primarily due to a late row crop harvest. In Ohio, a record small low area was planted due to wet soil conditions during the fall of 2011.

White winter wheat seeded area totals nearly 3.49 million acres, down 3 percent from 2011. Planted acreage in the Pacific Northwest (Idaho, Oregon, and Washington) is down from last year. Seeding started off slow but by the end of October was at or ahead of the 5-year average in all three States.

Durum wheat seedings in Arizona and California for 2012 harvest are estimated at 230,000 acres, up 15 percent from the 2011 and 24 percent above 2010.

Current Winter Wheat Crop Conditions Better Than Last Year

Winter wheat crop conditions in the Central and Southern Plains are better this year than last year at this time. In the Central Plains, Nebraska's winter wheat crop at the end of December 2011 rated 74 percent good to excellent and only 1 percent poor to very poor. A year ago at this time, 42 percent of the crop was rated good to excellent and 14 percent poor to very poor. In Kansas, 53 percent of the State's winter wheat crop rated good to excellent and 9 percent poor to very poor. Last year at this time, 27 percent of the Kansas crop was rated good to excellent and 33 percent poor to very poor.

In the Southern Plains, Oklahoma's winter wheat crop at the end of December 2011 rated 63 percent good to excellent and 7 percent poor to very poor. A year ago at this time, 37 percent of the crop was rated good to excellent and 19 percent poor to very poor. In Texas, 25 percent of the State's winter wheat crop rated good to excellent and 38 percent poor to very poor. Last year at this time, 20 percent of the Texas crop was rated good to excellent and 45 percent poor to very poor.

USDA Wheat Baseline, 2011-20

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, and the analysis underlying the wheat projections for 2011-20, is available at http://www.ers.usda.gov/briefing/wheat/2011baseline.htm/.

International Situation and Outlook

World Wheat Production Is Projected Higher

World wheat production in 2011/12 is projected up 2.5 million tons this month to 691.5 million, up 1 percent from the previous record in 2009/10. The main contributor to the latest increase is Kazakhstan, where wheat production is projected 1.5 million tons higher this month at 22.5 million, exceeding the country's previous production record in 1979, when area sown for wheat was 20 percent higher. USDA started to break out individual countries of the Former Soviet Union in its database beginning in 1987. Kazakh 1979 data are from a Soviet-era statistical source. The Kazakh statistical agency has just finalized the wheat harvest numbers, incorporating losses from cleaning and drying of harvested grain (clean weight vs. bunker weight), and took stock of historically high wheat yields that for the most part were generated by exceptional weather conditions throughout the growing season. Another upward FSU revision is for Russia, up 0.2 million tons to 56.2 million, as the country's statistical agency (RosStat) has just published the preliminary crop production data.

Wheat production is also up 0.8-million tons in Brazil, where the wheat crop has already been harvested, and the latest indicators from the government statistical agency show a production estimate of 5.8 million tons.

Global Stocks Are Projected at Near-Record High

Beginning 2011/12 wheat stocks added 0.2 million tons to supplies this month, due to two 2010/11 revisions: the wheat production estimate in Uruguay is up 0.1 million tons to 1.3 million, and the estimate of Paraguayan wheat exports is down 0.1 million tons to 0.9 million.

Despite a 1.2-million-ton increase in projected 2011/12 global wheat use to 681.4 million, larger production and beginning stocks edge up world wheat ending stocks 1.5 million tons this month to 210.0 million. This is the second-highest level on record, following 1999/2000 when ending wheat stocks were about 0.5 million tons higher, although the stocks-to-use ratio was above 36 percent versus the current 31 percent. Even so, large world wheat supplies are putting additional pressure on wheat prices and intensifying export competition. Feed and residual use is up 1.0 million tons in Kazakhstan, as record-high supplies are expected to put pressure on domestic prices, thereby increasing incentives to feed more wheat. At the same time, a good part of the additional crop is expected to be wasted, as storage capacities in the country are both insufficient and inefficient. A small change is also made for U.S. wheat domestic use.

Ending stocks are projected to increase this month in Brazil and Kazakhstan, up 0.8 and 0.5 million tons, respectively, reflecting higher projected wheat supplies. For both countries, these are the highest stocks on record. Ending stocks are up in Australia by 0.5 million tons on lower export expectations. Ending stocks in Uruguay and Paraguay are also up 0.1 million tons, each mirroring changes in their beginning stocks. Partly offsetting is a stocks' reduction in Russia, down 0.3 million tons to 11.9 million, as a production increase only partly offsets higher projected exports. Ending stocks are also down 0.2 million tons in the United States.

World Trade Prospects for 2011/12 Unchanged, U.S. Exports Up

No changes are projected for the level of global wheat trade in 2011/12 for the July-June international trade year, as trade changes this month are fully offsetting.

Projected increases in U.S. and Russian exports are offset by a decline in Australian exports. In the first half of the current marketing year, Russia has already exported about 15 million tons of wheat, and has contracted out another 1.5 million. Even though Russian wheat export activity is expected to slow in the face of rising domestic prices and logistical difficulties that are becoming arduous with winter, the level of current commitments suggests a 0.5-million-ton wheat export increase to 19.5 million. At the same time, the pace of Australian wheat shipments is currently more consistent with an export projection of 20.5 million tons, 1.0 million tons lower than previously projected. Australia is facing tough competition in North Africa and the Middle East. For the local October-September marketing year, Australian exports are reduced 0.5 million tons to 21.0 million, half of the decrease for the July-June trade year, on expectations that exports in the third quarter (July-September) of 2012 will be stronger than in 2011.

For the 2010/11 marketing year, adjustments are made for wheat exports in Paraguay, down 0.1 to 0.9 million, and a tiny reduction for India's wheat imports, both reflecting official trade data.

U.S. exports for the July-June trade year are up this month by 0.5 million tons to 25.0 million (up 25 million bushels to 950 million bushels for the June-May local marketing year). Current commitments (which are comprised of census data for July through November, grain inspections for December 2011, and outstanding sales that, in general, provide fairly strong outlook for the next 2 months' exports) are down about 6.8 million tons, or 28 percent, from last year at this time. In 2010/11, the United States exported 36.0 million tons of wheat. This month's increase in projected U.S. exports is supported by robust shipments to Nigeria; to the countries of the Western Hemisphere, such as Mexico; and to the countries of East and Southeast Asia, such as Japan and the Philippines.

January 2012

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