Wheat Outlook: Northern Plains Dryness Drives U.S. Production Lower

Challenging growing conditions for Other Spring and Durum wheat in the Northern Plains are reflected in lower yield projections, cutting 2017/18 U.S. production by 64 million bushels this month, to 1,760 million.

As a result, U.S. wheat exports are projected down 25 million bushels from June, to 975 million, and imports are raised 10 million bushels to 14 million. Foreign wheat supplies are projected higher, and a shift in the export shares of major exporters is likely. Russia is projected to become the top world wheat exporter for the first time in history.

Domestic Outlook

Domestic Highlights

  • All wheat production for 2017/18 is projected at 1,760 million bushels, down 64 million bushels from last month’s projection.
  • Total area harvested is reduced 0.4 million acres to 38.1 million.
  • All wheat yield is lowered 1 bushel per acre on lower Durum and Other Spring yields, more than offsetting a slight increase for Winter wheat.
  • At 57.5 million bushels, Durum production is down 45 percent from 2016 on both lower harvested area and yields.
  • Other Spring wheat production is lowered this month to 422.9 million bushels, on yields that are projected down nearly 7 bushels per acre compared to 2016.
  • Carryin for 2017/18 is increased by 23 million bushels to 1,184 million.
  • Net reduced all wheat supplies support a 20 million bushel reduction to 2017/18 feed and residual.
  • Exports are lowered 25 million bushels on lower domestic supplies and continued strong competition from global wheat exporters, including Russia.
  • Numerous, mostly slight, 13-month changes and back-year trade revisions are made this month and are reflected in revised wheat historical tables, available on the ERS Wheat Data page.
  • Despite reduced production, other supply and use changes result in a net 13.8 million bushel increase in ending stocks.
  • At 938.2 million bushels, 2017/18 ending stocks are 21 percent lower than in 2016/17 but still well above the 5-year average of 844 million bushels.
  • The all wheat price is raised 50 cents to $4.80 per bushel this month.
  • The first projections of 2017/18 wheat by class were released in the July WASDE.

U.S. Wheat Production Lower

As the 2017/18 all wheat crop matures and is harvested, refined notions of production are reported by USDA’s National Agricultural Statistics Service (NASS). This month, NASS lowered all wheat harvested area by 412,000 acres to 38.1 million. Wheat harvested area this low has not been observed since the 1880s. In addition to fewer projected harvested acres, the all wheat yield is lowered 1.1 bushel per acre this month to 46.2 bushels.

While lower than last year’s record of 52.6 bushels per acre, the all wheat yield for 2017/18 is nearly on par with the 5-year average of 46.6 bushels.

Reduced harvested area and yield combine to lower production by 64 million bushels from the June forecast. At 1,760 million bushels, all wheat production is 24 percent lower than in 2016/17. The last time total wheat production was lower than the 2017/18 forecast was in 2002/03.

In that year, just 45.8 million acres of wheat were harvested and challenging weather conditions in key winter and spring wheat growing states produced a yield of just 35.0 bushels per acre. Difficult weather conditions have plagued this year’s wheat crop, most recently the drought-stricken Hard Red Spring and Durum wheat crops in the Northern Plains.

Winter Wheat Yield Raised, Production Raised Slightly

The month USDA-NASS released the July Crop Production report, providing the third survey-based forecast of the 2017/18 marketing year. The report revealed winter wheat’s resiliency following a period of weather challenges earlier in the season; production is projected at 1,279 million bushels, up about 2 percent from June but down more than 23 percent and 392 million bushels from 2016.

Production in each of the top five winter wheat-producing States—Kansas, Washington, Oklahoma, Colorado, and Montana—is projected down in 2017. Collectively, the top five States are forecast to contribute nearly 260 million fewer winter wheat bushels in the new marketing year.

Based on the objective yield survey, the U.S. winter wheat yield is forecast at 49.7 bushels per acre, up from 48.9 bushels forecast last month. If realized, this will be the second-highest yield on record for the United States, behind the record-setting 55.3 bushels per acre that farmers realized for the 2016/17 marketing year.

Grain Commentary

Improving yields in Kansas, in particular, aided in the recovery of winter wheat yields. Month-to-month, beneficial rains and mild weather contributed to a 3 bushel per acre lift in Kansas winter wheat yields to 47 bushels per acre. Yields gains in Colorado, Washington, and a handful of other winter wheat-reporting States also contribute to the net gain.

Despite rebounding month-to-month all winter wheat production, individual classes of winter wheat are projected to experience reduced production in 2017, as compared to the year previous. Hard Red Winter (HRW) output is projected down 324.2 million bushels to 757.5 million.

Soft Red Winter (SRW) production is projected down 11.5 percent to 305.6 million bushels, a near 40 million bushel decline. SRW yields are down about 0.6 bushels per acre to 68.84 bushels and compare to the 5-year average of 63.6. Areas of SRW production, concentrated largely to the east of the Great Plains, have been intermittently affected by wet conditions.

2016/17    HRW    SRW
Planted area (million acres)    26.59    6.02
Harvested area (million acres)    21.86    4.98
Yield (bushels/acre)    49.5    69.40
Production (million bushels)    1,081.69    345.23

2017/18    HRW    SRW
Planted area (million acres)    23.82    5.61
Harvested area (million acres)    18.88    4.44
Yield (bushels/acre)    41.88    68.84
Production (million bushels)    757.52    305.64

Aggregate Hard and Soft White Winter wheat (HWW and SWW) production, at 216.2 million bushels, is 28.4 million bushels lower than in 2016. The steepest proportional reduction is for HWW, down more than 27 percent from the previous year. However, the sharpest volume decline is projected for SWW, down 21.5 million bushels and about 10 percent from the year prior.

2016/17    HWW    SWW
Planted area (million acres)    0.515    3.016
Harvested area (million acres)    0.474    2.908
Production (million bushels)    25.476    219.136

2017/18    HWW    SWW
Planted area (million acres)    0.469    2.946
Harvested area (million acres)    0.409    2.823
Production (million bushels)    18.546    197.659

Durum Production Down 47 percent in 2017

The June 30 USDA-NASS Acreage report indicated a sharp decline in Durum harvested area for 2017, down 21 percent from 2016. This month, NASS’s Crop Production report provided a double whammy to Durum production projections and revealed yields that are projected down 13.1 bushels per acres from 2016.

Yield declines are noted for three of the four major Durum-producing States, most notably for Montana and North Dakota, where approximately 76 percent of the 2017 Durum crop is growing. Durum yields in Montana are projected at just 23 bushels per acre (down 18 bushels per acre year-to-year). In North Dakota yields are slightly better at 27 bushels per acre (down 13.5 bushels per acre year-to-year).

Desert Durum production is down marginally compared to 2016, largely on reduced area harvested. Desert Durum production is projected at 12.6 million bushels and accounts for about 22 percent of total projected Durum production, up from 13 percent in 2016.

Other Spring Wheat Production Sharply Down for 2017/18

This month, NASS released the first survey-based projections of Other Spring and Durum yields. The July Crop Production report reflects the expanding drought in the Northern Plains. Other Spring wheat production for 2017 is forecast at 423 million bushels, down more than 111 million bushels and 21 percent from 2016. To find a smaller Other Spring wheat crop, one has to go back 15 years to the 2002/03 marketing year, when Other Spring production was just 388.9 million bushels.

Other Spring wheat area harvested is unchanged from the June 30 Acreage report and remains at 10.497 million acres, down 806,000 acres from 2016. Reduced harvested area is driven largely by area reductions for drought-stricken North and South Dakota. Area harvested projections for Montana (2.1 million acres), Minnesota (1.27 million acres), and Idaho (415,000 acres) are up year-to-year, though not enough to offset losses elsewhere.

2016/17 Ending Stocks Updated

Following the June 30 release of USDA-NASS’s Grain Stocks report, which included all wheat and Durum stocks, fourth quarter stocks by class were updated for the 2016/17 marketing year. Higher-than average combined stocks in key HRW-growing States supports an above-average proportional distribution of stocks to this class.

HRS stocks were somewhat higher than industry expectations, though carryout is nearly 40 million bushels below the 2015/16 estimate. Ending stocks of SRW are up year-to- year on higher June 1 stocks in a number of key SRW-growing States. White wheat ending stocks are revised modestly up from the June WASDE and are up more than 40 percent from 2015/16 figures, in part due to transportation challenges including poor weather and infrastructure repairs.

Durum stocks came in well below pre-report expectations and are lowered from near 50 million bushels to 36 million, an indication of stronger-than-forecast fourth quarter use. The next USDA-NASS Flour Milling Products report is due out on August 1 and will provide additional detail on all wheat and Durum food use in the fourth quarter. Historical tables will be updated to include by class by quarter distributions for the 2016/17 marketing year following the release of the August WASDE.

2017/18 Prices Strengthen on Protein, Quality Premiums

With net reduced supplies this month and rising prices for high-quality wheat, the all wheat price projection is lifted 50 cents at the mid-point. For several weeks, wheat cash and futures prices have generally been on the rise and supported by reports on the size of the Other Spring and Durum crops as well as the lower quality HRW crop.

Survey-based reports of HRW harvest progress and protein levels show improvement in recent weeks as the harvest has moved through Kansas and Oklahoma and into Colorado and Nebraska. According to one industry survey, at 11.3 percent the moving average protein level is just 0.1 percent higher than the below-average protein levels exhibited by the 2016 crop.

At 65 percent harvested as of the week ending July 9, including 93 percent complete in Kanas, increases in the aggregate average protein level of the HRW crop will become increasingly difficult unless grain of exceptional quality remains to be harvested and/or tested.

Full report.



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