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USDA Wheat Outlook


12 March 2014

USDA Wheat Outlook - 12 March 2014USDA Wheat Outlook - 12 March 2014


USDA Wheat Outlook

Global wheat production and use forecasts are increased slightly. World wheat trade is up 2.9 million tons this month, and 4.6 million tons ahead of the 2011/12 record. The European Union wheat exports continue to set records while even less wheat is used for animal feed— the lowest EU wheat feeding since 1995/96. Russian exports are also projected higher. U.S. wheat exports are unchanged.

There are no changes to the 2013/14 U.S. all wheat supply and use projections this month. A 15-million-bushel increase in projected hard red spring wheat exports is offset by a decrease for soft red winter wheat, with both changes reflecting the pace of sales and shipments. Projected ending stocks for both classes are adjusted accordingly. The projected season-average farm price for all wheat is raised 10 cents on the bottom end of the range to $6.75 to $6.95 per bushel based on recent strength in prices.

 

 Domestic Outlook

Projected 2013/14 Supplies Are Unchanged This Month

Projected total 2013/14 supplies, at 3,018 million bushels, are unchanged this month. There are no by-class supply changes.

Projected 2013/14 Supplies Down From 2012/13

Total U.S. wheat supply for 2013/14 is down 113 million bushels from 2012/13 as reduced production and lower beginning stocks more than offset higher imports. Supplies of HRW and durum are down year to year, while supplies are up for the other classes. Hard red winter (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. Soft red winter (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, at 2,459 million bushels, is unchanged this month. There are offsetting by-class export changes. Projected SRW exports are lowered 15 million bushels while hard red spring (HRS) exports are raised 15 million bushels based on pace.

Projected 2013/14 Use Is Up From 2012/13

Projected total use for 2013/14 is up 45 million bushels million bushels from 2012/13 as higher exports more than offset lower domestic use. Domestic use is expected to be down 122 million bushels from 2012/13 while exports are projected up 168 million bushels. Domestic use is down because feed and residual use is expected to fall 138 million bushels from 2012/13. Total food use is expected 15 million bushels higher with population growth and expected lower flour extraction rate than in 2012/13.

Projected 2013/14 Total Ending Stocks Unchanged From February, But Down From 2012/13

The projected 2013/14 U.S. total wheat ending stocks, at 558 million bushels, are unchanged from February. These projected ending stocks are down 160 million bushels from 2012/13. Projected ending stocks of HRW and SRW are changed from February because of the changes in projected exports for these two classes. Total ending stocks for 2013/14 are expected to decrease by 22 percent from 2012/13. Stocks of HRW and white are expected down 47 percent and 22 percent, respectively. Stocks of SRW, HRS, and durum are expected up 3 percent, 6 percent and 14 percent, respectively.

2013/14 Price Range Projection Narrowed

The 2013/14 season-average farm price range is narrowed to $6.75 to $6.95 per bushel, from the $6.65 to $6.95 per bushel projected in February. The 2013/14 range is down from the record $7.77 per bushel reported for 2012/13.

USDA Agricultural Projections to 2023

Each year, USDA updates its 10-year baseline projections of supply and utilization for major field crops grown in the United States, including wheat. This report is available at www.ers.usda.gov/topics/farm-economy/agricultural-baselineprojections. aspx.

International Outlook

World Wheat Production Revised Up Slightly

Projected 2013/14 world wheat production is up 0.8 million tons this month to 712.7 million, further raising the historical record. In Australia, 2013/14 production is up 0.5 million tons to 27.0 million this month. The harvest in Australia is virtually complete. The increase reflects the latest estimates of the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), a research bureau within the Australian Department of Agriculture, which took stock of near-perfect conditions throughout the growing season in Western Australia (WA), the largest wheat-producing State. Wheat production in WA reached 10.5 million tons, up 58 percent on the year. In South Australia (SA), which produces roughly half as much wheat as WA, this year’s output increased 38 percent. Close to record wheat yields and production in WA and SA are the main drivers behind the country’s higher estimated production.

On February 14, 2014, the Indian Ministry of Agriculture (MOA) released the final estimate for wheat production for the current 2013/14 year, and pegged the number at 93.5 million tons, which is 1.1 million tons higher than the previous estimate. The harvest was completed in April-May 2013, and this is the third bumper crop in a row in India. Harvest of the 2014/15 new crop is going to start within a month.

Several other small production changes reflect the countries’ official revisions and partly offset the above increases. Chinese wheat production is down 0.3 million tons to 121.7 million. Wheat output in Uruguay and Paraguay is down 0.3 and 0.2 million tons to reach 1.7 and 0.8 million, respectively. Small and almost offsetting adjustments are made for wheat output in Poland and France.

A slight change in 2013/14 beginning wheat stocks comes from 2012/13 production revisions in Georgia and Moldova.

EU and Russian Wheat Feeding Are Reduced Further

Small changes are projected for the global wheat use for 2013/14, with an increase of 0.8 million tons for total disappearance. Wheat feed and residual use is virtually unchanged at 135.0 million tons, as the changes in feed use are offsetting, while global food consumption is projected higher.

Wheat feeding in the EU is reduced by another 1.5 million tons to 48.0 million this month, as the region is expected to go further in switching to corn feeding with higher corn imports, while aggressively exporting additional wheat. Wheat feeding is also reduced for Russia, down 0.5 million tons to 13.0 million. Despite an expanding livestock sector—poultry and hog inventories are growing fast while cattle inventories are still slowly declining—the feed efficiency of Russian livestock production continues to improve, as livestock herds here are getting more and more concentrated in the modernized farms. Another reason for lower wheat feeding is that with strong growth of Russian sunflower seed, soybean, and corn production in the last decade, the share of grains in feeding in general, and of wheat in particular, has become smaller, which allows the country to feed comparatively modest amounts of grain when export opportunities arise. South Korea is also projected to further lower its wheat feeding, down 0.2 million tons to 1.9 million. Wheat feeding is also slightly reduced for Serbia, as a result of higher projected exports.

The largest offsetting change in wheat feed and residual use is an increase for India, up 1.3 million tons to 4.8 million. No data or estimates are available for wheat feeding in this country, and our estimates reflect what would be a typical amount of residual loss or waste given the overstretched storage capacities in the country. Wheat food use in India is also projected up 1.0 million tons this month. This is mainly because, given the country’s huge wheat stocks, the Government is expected to at least partly deliver on its promise to improve the public distribution system of food for the poor. Wheat feeding is projected up 0.4 million tons in Australia, based on higher wheat output and drought in Eastern Australia that is reducing sorghum production and pushing cattle and sheep off pasture and into feed lots. In Iran, with higher projected wheat imports, wheat feeding is up 0.4 million tons, while wheat food consumption is projected 0.1 million tons higher. Food use is projected up 0.2 million tons in Iraq, reflecting higher wheat imports. Wheat consumption is slightly revised for Lebanon, Morocco, Mozambique, Nepal, New Zealand, Serbia, and United Arab Emirates.

With virtually equal increases in wheat supplies and consumption this month, global ending wheat stocks are essentially unchanged (increased less than 0.1 million tons) this month at 183.8 million tons. Projected ending stocks are down 1.2 million tons in India (increased output is more than offset by higher projected consumption), and in China, down 0.3 million tons (lower production). Stocks are projected higher in Iran and Saudi Arabia, up 0.5 million tons each, as well as in Syria, up 0.3 million tons, and Algeria and Paraguay, each up 0.2 million tons, with all reflecting higher wheat imports. Even smaller changes in stocks are made for a number of other countries.

European and Russian Exports Push Record World Trade Even Higher

World wheat trade for the international 2013/14 July-June trade year is projected up 2.9 million tons this month to 158.4 million, further increasing the record. The EU continues this year’s wheat exports marathon (see a discussion in the February issue of wheat outlook: http://usda01.library.cornell.edu/usda/ers/WHS//2010s/2014/WHS-02-12- 2014.pdf), importing even more corn, which frees additional quantities of wheat to be shipped abroad. EU wheat exports for 2013/14 are projected up 1.5 million tons this month to reach 29.0 million. Last week’s robust pace of wheat export licensing brought EU wheat export commitments to a level that is almost 55 percent higher than last year. The region is expanding its exports to Algeria (France and Germany), Saudi Arabia (Germany and Lithuania), Syria (France and Romania), Libya (Germany and Romania), Korea (Romania), as well as to Iran and Sub-Saharan Africa, which more than offset a reduction in French exports to Egypt. Wheat exports are also projected higher for the EU neighbor Serbia, up 0.3 million tons to 1.1 million, which is exporting mainly to neighboring Romania.

Russian wheat exports for 2013/14 are projected up 1.0 million tons to 17.5 million. It appears that Russia is currently well positioned to export additional quantities of wheat. Several developments are expected to support higher Russian exports: (1) the conclusion of grain intervention purchases that allow traders to commit to future contracts with more confidence; (2) ruble devaluation that amounted to more than a 20 percent decline vis-à-vis the U.S. dollar since the end of October; and (3) unusually warm weather that alleviates the seasonal logistical difficulties. Winning the last two Egyptian tenders reinforces the increased outlook.

Wheat exports are projected up 0.3 million tons to 4.0 million for Turkey, reflecting its large recent flour shipments to Syria; and down 0.2 million tons to 0.3 million for Paraguay, with lower wheat output and a dismal pace of shipments. Wheat imports for 2013/14 are projected higher this month for Iran, up another 1.0 million tons to 6.0 million, supported by the fast pace of European exports. Wheat imports are also up 0.5 million tons to 1.0 million for Russia, based on the evidence of higher volumes of deliveries from Kazakhstan to the bordering Russian (Siberian) regions. Imports are also up 0.5 million tons to 3.2 million for Saudi Arabia, as the government has been expanding its wheat storage capacities and increasing its wheat reserves.

Smaller increases of wheat import prospects in a range of 0.1-0.3 million tons are made for Syria, with additional over-the-border trade with Turkey; for Morocco, based on its pace of wheat imports stimulated by the zero import tariff in place until April; for Turkey, which is continuing to import from Russia at a higher pace than expected before; as well as for Iraq, Paraguay, and several other countries.Partly offsetting those increases are import reductions in South Korea, Sri Lanka, Pakistan, and several other countries in the range of 0.1-0.2 million tons. Smaller adjustments of wheat imports based on production revisions and pace of shipments are made for several countries.

U.S exports for the 2013/14 international trade year (July/June) are unchanged this month, as Census and commitments data are in line with the current forecast of 31.5 million tons.

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