Wheat Outlook: U.S. Planted Area Projected to Rise in 2018

revealed a substantial year-to-year increase in 2018 planting intentions for other spring wheat, up 15 percent from 2017 to 12.627 million acres. Rising prices for spring wheat have encouraged sowings, while more favorable returns from cotton and other grains have weakened farmer interest in planting durum. Durum planting intentions are down 13 percent from last year to 2.0 million acres.

The revised forecast for winter wheat, at 32.7 million acres, is up slightly from both the January projection and the 2017 estimate. On net, the all wheat planted area projection of 47.3 million acres for 2018 heralds a modest recovery.

However, if realized, it will be the second-lowest level of U.S. wheat sowings on record and reflects an extremely competitive global wheat market.

Russia—by far the world’s dominant wheat exporter this marketing year—is now forecast to export an unprecedented 38.5 million tons, raised 1 million tons this month largely on reduced EU exports. Russia is expected to remain a formidable force in the global wheat market in the year to come.

Domestic Outlook

Domestic Changes at a Glance:

  • U.S. all wheat feed and residual use is trimmed 30 million bushels on sluggish use in the third quarter, as implied in the March USDA-NASS Grain Stocks report.
  • Reduced usage lifts ending stocks to 1,064 million bushels.
  • The 2017/18 ending stocks figure exceeds the 5-year average by more than 220 million bushels, though it remains below the 2016/17 figure (1,180 million bushels).
  • With the vast majority of the 2017/18 wheat crop marketed, the mid-point season average farm price is unchanged from March and remains at $4.65/bushel.
  • The USDA-NASS Prospective Plantings report projects 2018/19 all wheat planted area to total 47.3 million acres.
    • If realized, 2018/19 all wheat planted area will exceed the 2017/18 estimate by nearly 1.3 million acres.
    • NASS’s current forecast largely affirms the direction of change in planted area described in the February Grains Outlook presentation delivered at the USDA Agricultural Outlook Forum.

U.S. Feed and Residual Lowered; Ending Stocks Up 30 Million Bushels

The U.S. 2017/18 all wheat balance sheet is little changed this month with the exception of modest updates to 2017/18 feed and residual and ending stocks. The March 29 USDA-NASS Grain Stocks report implied lower-than-expected third quarter feed and residual use.

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Annual wheat feed and residual use was lowered 30 million bushels from the March World Agricultural Supply and Demand Estimates (WASDE) to 70 million, the lowest level since 2007/08.

Domestic prices for hard red winter wheat have generally strengthened in recent months, while other feedstuffs and feed grains, including corn, sorghum, distillers’ dried grains, cottonseed meal, and soy hulls have remained competitively priced. In particular, as the wheat/corn price ratio has increased, the value of feeding wheat has fallen, putting downward pressure on the marketing-year estimate.

Hard red winter (HRW)—the most common source of feed wheat— absorbs a 25 million bushel cut for a revised 2017/18 feed and residual estimate of 20 million bushels. Hard red spring (HRS) feed and residual is lowered by the remaining 5 million bushels of the total 30 million bushels reduction. Updates to food and seed use will follow, as necessary, after the May 1 release of the quarterly Flour Milling Products and the May Crop Production reports.

Reduced feed and residual use boosts ending stocks to 1,064 million bushels, well above the 5-year average of 843 million bushels, while still lower than last year’s ending stocks of 1,181 million bushels. Third quarter ending stocks were raised more than 28 million bushels from the previous projection.

On March 1, USDA-NASS reported that 1,494 million bushels of wheat were held on and off U.S. farms. At the same time a year prior, 1,658 million bushels of wheat were held in all positions. The Grain Stocks report was viewed as neutral and largely matched industry expectations ahead of the report.

The NASS report also included a revision to second quarter (Q2) all wheat stocks, resulting in a slight (129,000 bushel) reduction in Q2 all wheat and HRW stocks.

U.S. all wheat exports are unchanged this month and remain at 925 million bushels or 24.5 million tons. Global competition pushed the average March U.S. HRW (FOB) wheat price lower this month, down $25 per ton to $230; however, the price remains above comparable prices for the European Union, Black Sea Region, and Argentina.

HRW exports are lowered 10 million bushels this month to 370 million. Despite a $5 per ton, month-to-month price advance for soft white wheat, demand for all white remains strong on multiple tenders from Japan and provides support for a 10 million bushel boost to the 2017/18 white wheat export projection.

Winter Wheat Conditions Continue to Cause Concern

With condition ratings available from USDA-NASS through the week ending April 8, a clearer picture of the impact of unfavorable growing conditions for the winter wheat crop is emerging. In the Southern Plains, the months-long drought continues to intensify.

On April 8, in Kansas, Texas, and Oklahoma, the portion of the crop rated “good” to “excellent” totaled just 13, 14, and 10 percent, respectively—far below ratings for the previous year.

In Oklahoma and Northern Texas, already stressed winter wheat was damaged further by a freeze on April 7. In the Northern High Plains, including Montana and North Dakota, where a modest amount of winter wheat is grown, dry conditions were eased some by the arrival of snow, which provided an insulating cover as monthly temperatures fell between 5 and 10 degrees below normal.

Key soft red winter wheat growing regions have recently dealt with an abundance of moisture and cooler temperatures that are reported to have saturated some fields and slowed growth. Ratings in Ohio, Illinois, and Indiana reflect the challenging growing conditions, with the proportion of the crop rated “good” to “excellent” for the week ending April 8 falling 9, 22, and 12
points, respectively, below the same week in 2017.

In aggregate, just 38 percent of the 2018 winter wheat crop is currently rated “good” to “excellent,” a 23-point decline compared to the same week in 2017. The percent of winter wheat rated “good” to “excellent” dropped by 2 percentage points between April 1 and April 8.

In the April 10, USDA, Office of the Chief Economist (OCE) Weekly Weather and Crop Bulletin, the condition index places the 2018 winter wheat crop in the lower tier of years that include 1996, 2002, 2006, 2011, 2013, and 2014. The week-to-week decline in winter wheat rating puts the 2018 index on par with the 2002 index for the same week.

Ratings for “very poor” are not included in the index calculations, and other ratings are linearly scaled from 1 to 4, with “excellent” ratings given the greatest weight. In week 14 of both 2002 and 2018, 14 percent of the winter wheat crop was rated “very poor.”

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