Wheat Outlook: Record Spring Wheat Yields; All Exports Boosted

Vastly improved weather from a year ago has helped lift the projected yield for U.S. other spring wheat to a new high of 47.6 bushels per acre. Record yields combine with a 27-percent increase in projected harvested area to raise other spring production to more than 613 million bushels.

Expanded U.S. spring wheat production, a lower season-average all wheat farm price, and reduced production from foreign competitors—EU (down 4.4 million tons from June forecast), Australia (down 2 million), Russia (down 1.5 million), and Ukraine (down 1 million)— increase opportunities to market the 2018/19 crop.

Consequently, U.S. marketing-year exports are raised 25 million bushels this month to 975 million, up nearly 75 million from 2017/18.

Domestic Outlook

Domestic Changes at a Glance:

  • Based on the USDA-NASS Acreage and July Crop Production reports, U.S. all-wheat production in 2018 is up 8 percent and nearly 141 million bushels from 2017.
  • Other spring wheat production is up 32 percent from 2017/18 based on a 27-percent increase in projected harvested area and expected record-high yields.
    • Year-to-year growth in other spring wheat production is largest in Montana (up 49 percent) and North Dakota (up 50 percent).
  • Winter wheat production is raised slightly from the June projection and is now forecast at 1,881 million bushels.
    • Hard red winter wheat production is increased 10.3 million bushels from the June forecast; soft red winter wheat production is reduced 12.3 million bushels; white winter wheat production is raised 3.0 million bushels.
  • U.S. 2018/19 all-wheat supplies are lifted 74 million bushels this month, largely on production increases as well as a 20-million-bushel increase in carry-in stocks.
  • Expanded supplies result in a 10-million-bushel increase in all-wheat feed and residual use, now projected at 130 million bushels for the new marketing year.
  • Reduced wheat production for several foreign competitors helps to boost U.S. exports by 25 million bushels this month to 975 million.
  • Expanded wheat supplies more than fulfill the combined 35-million-bushel increase for total use, resulting in a near 40-million-bushel boost to 2018/19 all-wheat carry-out.
  • Higher ending stocks and a lower corn price—down 10 cents this month—put downward pressure on the U.S. all-wheat season-average farm price (SAFP).
    • For 2018/19, the U.S. all-wheat SAFP is $5.00 per bushel, versus $4.73 per bushel in 2017/18.
  • The first balance sheets for the five classes of wheat were released in the July World Agricultural Supply and Demand Estimates report.

First 2018/19 Balance Sheets by Wheat Class Released in July WASDE

In concert with USDA-NASS’s release of 2018/19 wheat-by-class projected production, the July WASDE contained the first forecasts of wheat-by-class supply and utilization for the new marketing year. Wheat-by-class supplies and distribution are reflective of vastly different production scenarios, as compared to 2017, and expectations of generally more favorable wheat export prospects.

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Planted area and production of hard red winter (HRW) wheat and winter wheat altogether are down in a number of key States. Declines in Montana, Oklahoma and Texas reflect drops in harvested area. While HRW production is forecast down more than 92 million bushels, all domestic categories of use are projected up.

In its July 6 release, Plains Grains Incorporated reports that, to date, samples from the 2018/19 hard red winter wheat crop averaged 12.8 percent protein as compared to 11.4 percent for the 2017/18 crop. Exports are forecast to fall slightly in 2018/19, based largely on reduced supplies.

However improved international marketing prospects, due to reduced production from major global competitors, help to buffer U.S. export prospects from further declines. In 2018/19, growth in domestic HRW use is expected to combine with reduced supplies to lower ending stocks by 164 million bushels.

Based on greater planted/harvested area and improved yields, hard red spring wheat production is forecast nearly 200 million bushels higher from 2017/18. Last year, drought in the Northern Plains reduced other spring yields to 41 bushels per acre.

On July 18, 2017, U.S. Drought Monitor indicated that a substantial portion of eastern Montana, western North Dakota, and northern South Dakota were in D4—the most severe form of drought. The latest Drought Monitor (July 10, 2018) indicates that all of the regional D4 and D3 drought has abated, leaving just a few pockets of abnormally dry area in North Dakota.

Improved conditions and the expectation of a substantial increase in domestic HRS production are expected to curtail demand for supplementary spring wheat imports, largely sourced from the Western Provinces of Canada. HRS imports are forecast to fall by approximately 20 million bushels in 2018/19.

With more abundant U.S. supplies and projected growth for global food, seed, and industrial use, U.S. exports of HRS in 2018/19 are forecast up 42 million bushels from 2017/18 levels.

At 302.8 million bushels, production of the 2018/19 soft red winter (SRW) crop is about 4 percent larger than the previous year (table 2) though down slightly month-to-month. Lower beginning stocks offset production gain and SRW supplies are projected to decline very slightly in 2018/19.

Domestic use is expected to remain largely steady, with a slight increase in feed and residual use projected. Year-to-year exports are projected to rise by 34 million bushels.

Aggregate white wheat production is forecast to rise slightly, up about 5 million bushels from last year, exclusively on expanded production of soft white winter wheat (SWW). Production of SWW is forecast to rise more than 8 million bushels on greater harvested area in the key Pacific Northwest growing region.

Production of all other classes of white wheat are down a collective 3.8 million bushels.

2018    HRW     SRW     HWW    SWW
Planted area (million acres)    23.22     5.84    0.60    3.03
Harvested area (million acres)    16.86    4.53     0.53     2.90
Yield (bushels/acre)    38.7    69.59     40.73    72.39
Production (million bushels)    657.37    302.81    21.05    211.32

2017    HRW    SRW    HWW    SWW
Planted area (million acres)    23.42    5.73    0.58    2.94
Harvested area (million acres)    17.64    4.31    0.52    2.81
Yield (bushels/acre)    42.53    67.66    45.45    72.29
Production (million bushels)    750.33    292.15    23.72    203.22

A production cut in Australia is expected to support U.S. exports of white wheat into key Asian markets in 2018/19. Further, the recent announcement of a GMO contamination in Alberta, Canada may support additional sales of U.S. wheat to Japan. Canadian wheat sales to Japan have been halted in the wake of an investigation into the scope of the contamination.

Despite a 322,000-acre decline in area planted, durum wheat production is set to rebound by nearly 20 million bushels, or 36 percent, for the 2018/19 marketing year, based on improved yields. In 2017, yields per acre were estimated at 16 and 24 bushels in Montana and North Dakota; for 2018, yields are projected at 32 and 39 bushels per acre, respectively.

The boost in yields is aided by improved weather and soil moisture. Improved domestic production is expected to reduce demand for Canadian durum; U.S. imports of the grain are forecast to drop by 11 million bushels in 2018/19.

Reduced domestic use, down 4 million bushels, partially offsets gains in the export market—up 7.5 million bushels—and results in a near-5-million bushel increase in 2018/19 ending stocks.

Grain Stocks Report Reveals Sluggish HRW Use in Final Quarter of 2017/18 Marketing Year

The June 29 USDA-NASS Grain Stocks report was largely viewed as neutral by the industry and did not contain any major surprises for wheat. The USDA-NASS forecast for June 1 stocks raised carryout for the 2017/18 marketing year by approximately 20 million bushels.

This increase, and the location of stocks, compelled a 40-million-bushel expansion in projected HRW ending stocks and a corresponding reduction to feed and residual use.

The net lift in carryout from the 2017/18 marketing year raises beginning stocks for 2018/19. Larger beginning stocks combine with an increase in all wheat production to boost supplies for the new marketing year by 74 million bushels. Advances in export use offset some of the supply gains, resulting in a net 39-million-bushel increase in 2018/19 ending stocks.

Despite increased stocks, the stocks-to-use ratio for 2018/19, at 46.2 percent, is greatly improved from the 55.6 percent realized for the 2017/18 crop.

Greater slack in the balance sheet, as compared to last month, along with a 10-cent-per- bushel decrease in the 2018/19 corn price, put downward pressure on the all-wheat price, now projected at $5.00/bushel at the midpoint with a range of $4.50 to $5.50.

This compares to the preliminary marketing-year average (MYA) of $4.73 per bushel that farmers are reported by NASS to have received in 2017/18. (Previously, the final U.S. MYA price was reported in the late June edition of the USDA-NASS Agricultural Prices report; this MYA price will now be released in the August report.)

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