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Wheat Outlook: Global Exports Raised on Expanded Russian, U.S. Sales

Ernst Undesser
From USDA November 17, 2017

Wheat Outlook: Global Exports Raised on Expanded Russian, U.S. Sales

Texas A&M AgriLife Communications photo by Kay Ledbetter

Global wheat exports are raised 250,000 metric tons this month to 182.2 million on strengthening Russian sales and improving U.S. prospects, more than offsetting cuts for Australia and Brazil. Russian exports are raised 500,000 tons to 33.0 million due to the robust early pace of trade.

State-owned Russian Railways has introduced a rail tariff discount to encourage additional grain shipments. A substantial sale of U.S. wheat to Iraq, the first since the 2011/12 marketing year, helps to lift U.S. exports by 500,000 tons to 26.5 million tons on a trade-year basis and 25 million bushels to 1,000 million on a marketing-year basis.

The full increase in U.S. exports is attributed to sales of hard red winter wheat. While higher month-to-month, the pace of sales to date lags slightly behind 2016/17, when exports reached more than 1,055 million bushels.

Domestic Outlook

Domestic Highlights

  • The November 1 USDA, National Agricultural Statistics Service (NASS) Flour Milling Products report provided flour production data through the first 4 months of the 2017/18 marketing year.
    • Through September, the estimated pace of food use indicates use is on track to reach the current 950 million bushel marketing-year projection.
  • Expectations for strengthened export sales provide support for a 25-million-bushel increase.
    • Recent substantial sales to Iraq and Ethiopia are not reflected in October inspections data.
  • Ending stocks for 2017/18 are lowered 25 million bushels this month to 935 million, on increased use.
  • The all-wheat season-average farm price is unchanged at $4.60 per bushel.
    • Wheat marketings have been light, despite limited price rallies for high protein wheat.

All-Wheat Exports Lifted on Recent Sales; Food Use Unchanged After NASS Report

Recent export sales to Iraq, Japan, Morocco, Ethiopia, and others, which are not fully reflected in the U.S. Census Bureau’s October 26 marketing year-to-date export inspections report, provide support for a 25-million-bushel increase in the 2017/18 all-wheat export projection. The full 25-million-bushel increase is attributed to expanded hard red winter (HRW) exports, now projected to reach 415 million bushels.

While higher month-to-month, total HRW exports for 2017/18 are projected at 40 million bushels below the 2016/17 estimate. The pace of trade to date, as reported by the U.S. Census Bureau, implies several minor import shifts by class: HRW and white wheat (WW) (each lowered -1 million bushels), soft red winter (SRW) and durum (each raised +1 million).

On a trade-year basis, U.S exports are raised 500,000 tons to 26.5 million, based largely on revitalized sales to Iraq. Prior to the recent sales rally, the United States had not sold wheat to Iraq since June 2015, when a modest volume was shipped.

Aggregate U.S. wheat shipments to Iraq in excess of 500,000 metric tons were last reported for the 2011/12 marketing year.

Based on wheat ground for flour data contained in the November 1 release of the USDA, NASS Flour Milling Products report, the current all-wheat 2017/18 food use projection of 950 million bushels is unchanged this month. NASS revisions lift 2016/17 food use very slightly. Please see the USDA, Economic Research Service (ERS) Wheat Data landing page for updated tables.

With flour milling data now available through September, food use through the first four months of the marketing year can be calculated and compared with previous years. Recent monthly food use has tracked closely with 3-year averages. First-quarter food use for 2017/18 is just 1.2 million bushels above the 2016/17 estimate for the same time period.

Marketing-year food use for 2016/17 is estimated at 948.9 million bushels, a substantial decline from the 957.1 million bushels utilized for food in 2015/16 and reflective of the effects of declining per capita consumption offsetting population growth.

A multiyear trend of declining per capita consumption is expected to continue through at least 2017/18 and to counterbalance the effects of an approximate 2-million-person increase in the U.S. population.

Proportions of wheat by class in the annual food use projection are adjusted slightly this month. The recently expanded production forecast for hard red spring (HRS), indicated in the Small Grains Summary, along with supplementation via imports from Canada, provide support for a 5-million-bushel increase in food use.

Further, this year’s below-average HRW protein levels (11.6 percent per Plains Grains, Inc.) come on the heels another low-protein crop, straining high-protein supplies and providing upward pressure on the proportional use of HRS in the mill grind. Strong WW export sales, currently projected at 210 million bushels for 2017/18 versus 163 million for 2016/17, are projected to pull 5 million bushels out of 2017/18 food use.

The U.S. season average all-wheat price forecast is unchanged this month and remains at $4.60 per bushel. Recent price rallies for high protein wheat, in particular, have not led to substantially increased HRW or HRS marketings. More generally, wheat prices in October declined relative to September, offsetting potential gains.

Full report.

Ernst Undesser
From USDA November 17, 2017