Wheat Outlook: Price Raised on Improving Export Prospects

Image from Oklahoma State University

Winter wheat yield projections are raised 0.3 bushels per acre, month-to-month, giving 2018/19 production a 6-million-bushel boost. U.S. all wheat supplies for 2018/19 are lifted by an additional 10 million bushels, carried in from the 2017/18 marketing year on reduced export use. In contrast, export prospects for 2018/19 are improved by 25 million bushels to 950 million. Dry conditions in Russia and the resulting reduced production outlook create opportunities for U.S. wheat in international markets. Increased use tightens the 2018/19 all wheat balance sheet.

Along with a 10-cent increase in the season-average farm price for corn, these factors support an equivalent increase in the all wheat season-average farm price, now projected at $5.10 per bushel for 2018/19.

Domestic Outlook

Domestic Changes at a Glance:

  • U.S. 2018/19 all wheat supplies are raised 16 million bushels this month on higher forecast winter wheat production and a 10-million-bushel increase in carryin from the 2017/18 marketing year.
    • All wheat production is now projected up nearly 87 million bushels from the 2017/18 production estimate.
    • Year-to-year production changes by State are largest for Kansas, Texas, and Oklahoma.
  • Winter wheat production for the new crop year is raised from the May forecast on a 0.3- bushel-per-acre yield increase.
    • Winter wheat production for 2018/19 is 72 million bushels lower than in 2017/18.
    • The USDA, National Agricultural Statistics Service (NASS) revised assessment of harvested area prospects by class will be released in the July Crop Production report.
  • Exports for 2018/19 are raised 25 million bushels this month to 950 million on reduced Russian supplies, which creates marketing opportunities for U.S. wheat.
  • Other use categories are unchanged this month; the slight increase in total wheat supplies is more than offset by an increase in exports.
  • U.S. all wheat ending stocks for 2018/19 are reduced 9 million bushels to 946 million.
    • Old crop ending stocks are raised 10 million bushels from the May forecast on reduced export prospects due to rising transportation costs associated with higher crude oil prices.
    • On June 29, USDA, NASS will release the Grain Stocks report, providing indications of disappearance through the fourth quarter of the 2017/18 marketing year.
  • Increased tightness in the U.S. all wheat balance sheet combines with a 10-cent-perbushel increase in the season-average farm price (SAFP) to provide support for a 10- cent increase in the wheat SAFP.
    • For 2018/19, the U.S. all wheat SAFP is $5.10 per bushel and compares to the newly revised 2017/18 SAFP of $4.75 per bushel.

Dry Conditions in the High Plains Notwithstanding, Winter Wheat Production Lifted

The USDA, NASS June Crop Production report provides the second survey-based winter wheat production forecast for the 2018/19 marketing year. U.S. winter wheat production is forecast at 1,198 million bushels, up about 6 million bushels month-to-month but down 71 million bushels from 2017.

The U.S. winter wheat yield is projected at 48.4 bushels per acre, up 0.3 bushels from the May forecast but down 1.8 bushels per acre from the 50.2 farmers realized in 2017. Despite the modest aggregate yield increase, lingering drought across a large swath of the High Plains hard red winter (HRW) wheat-growing region is still limiting 2018/19 yields.

Year-to-year, yields are down in several key winter wheat-growing States: Colorado (down 3 bushels per acre), Kansas (down 9 bushels per acre), Oklahoma (down 8 bushels per acre), and Texas (down 2 bushels per acre). Collectively, these four States are expected to harvest 53 percent of the 2018 winter wheat crop.

The 2018 winter wheat area harvested forecast is unchanged from the May projection of 24.769 million acres. July’s USDA, NASS Crop Production report will include revised projections for winter wheat harvested area and production.

By class, hard red winter (HRW) production is currently projected down 100 million bushels to 650, a 13-percent drop from 2017 on both lower harvested area and yields. Soft red winter (SRW) production is projected up 23 million bushels or 8 percent above the 2017 estimate. A sizable proportion of projected SRW production is grown in Illinois, Ohio, Michigan, and Missouri.

These States largely avoided the dryness that has affected much of the HRW growing area. Production of white winter wheat in 2018 is expected to exceed the 2017 harvest by approximately 2 percent. Soft white winter wheat (SWW) production is concentrated in the Pacific Northwest (PNW).

For Idaho, the latest PNW Crop Progress and Condition report describes winter wheat in the area as “looking good, with a thick stand.” In Oregon, the recent cooler temperatures and limited moisture are noted in the same publication to have benefitted the winter wheat crop. In the Idaho, Oregon, and Washington, the proportion of the crop rated “good” to “excellent” totaled 81 percent, 74 percent, and 84 percent, respectively.

Other Spring Wheat and Durum Production

In July, USDA-NASS, will release its first survey-based projection of other spring wheat and durum (not desert) production for the 2018/19 marketing year. Current projections are based on plantings intentions reported in the March Prospective Plantings report and 10-year trend yields and harvested-to-planted ratios.

Full report.

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