Wheat Outlook: Global Production Down Sharply ; U.S. Exports Lifted

Photo: Texas AgriLife Extension

Global 2018/19 wheat production is cut 6.6 million metric tons this month on a sharp decline in production in the European Union (EU). This opens further opportunities for U.S. exports, especially in the second half of the marketing year. The U.S. 2018/19 export forecast is lifted 50 million bushels from the July forecast to 1,025 million.

Based on the revised export forecast, the U.S. share of global wheat exports is forecast at nearly 16 percent in 2018/19, compared to 12.6 percent for the 2017/18 marketing year.

Domestic Outlook

Domestic Changes at a Glance:

  • Based on the USDA, National Agricultural Statistics Service (NASS) August Crop Production report, U.S. all-wheat production in 2018 is down very slightly (about 4 million bushels) from the previous month.
  • All-wheat food use for 2017/18 is raised 1.4 million bushels from the July forecast to 964.4 million, based on data released in the August 1 USDA, NASS Flour Milling Products report.
  • Projected food use for 2018/19 is raised 5 million bushels to a record 970 million on the enhanced 2017/18 estimate, population growth, and favorable economic indicators.
  • Increased availability of corn and sorghum, as well as, a rising wheat-to-corn price ratio provide support for a 10 million bushel cut the 2018/19 wheat feed and residual figure.
  • U.S. all-wheat exports are raised 50 million bushels on tightening global production and reduced exportable supplies, especially for the EU.
  • Ending stocks are reduced by 50 million bushels to 935 million, down 15 percent from 2017/18 and the lowest since 2014/15.
  • A tightening stocks-to-use ratio (43 percent), primarily the result of higher projected exports, provides support for a 10-cent-per-bushel increase in the season-average farm price, despite a 20 cent month-to-month decline in the comparable corn price.

Wheat Production by Class Updated in August Crop Production Report

Forecasts of U.S. all-wheat and wheat-by-class production were updated in USDA, NASS’s August Crop Production report. Reported NASS data are gleaned from objective yield and farm operator surveys, conducted between July 25 and August 6, and include farmers in the States that typically account for 75 percent of U.S. production. The USDA, NASS Small Grains Annual report, published at the end of September, will provide the next update to wheat-by-class production.

The August all-wheat production forecast is lowered less than 1 percent from the July forecast and is 8 percent higher than in 2017. The all-wheat yield is lowered 0.1 bushel per acre from the July forecast and up 1.1 bushels per acre from the 46.3 bushels per acre that farmers harvested in 2017. At 39.6 million acres, area harvested is projected slightly down (-150,000 acres) from the previous forecast while still above the 37.6 million acres harvested in 2017.

The August Crop Production report indicated that winter wheat production is projected less than 1 percent below the July forecast and, at 1.19 billion bushels, is down about 6 percent from 2017. The all winter wheat yield projection is currently forecast at 47.9 bushels per acre, down only fractionally from July.

The 2018 winter wheat harvest is nearing completion, with USDA, NASS estimating that on August 6 an estimated 92 percent of the 2018 winter wheat crop had been harvested (based on 18 key reporting States). Total winter wheat harvested area is forecast at 24.8 million acres, down slightly from last month’s NASS forecast and down about 2 percent from 2017.

Hard red winter (HRW) wheat production is up about 1 percent this month from the July forecast. Protein levels for the 2018 hard red winter wheat crop are much improved from the previous 2 years. Plains Grains, Inc. reports that average protein levels, at 12.5 percent based on 406 tested samples, are much improved from 2017 and compare to 11.4 percent for the 2017 season (based on 488 samples tested).

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The August USDA, NASS forecast for soft red winter (SRW) wheat production was down 4 percent from the July forecast and down 11 million bushels from the 2017 production estimate on sharply lower yields. Aggregate white wheat production is forecast to rise slightly, up about 5 million bushels from 2017, exclusively on expanded production of soft white winter (SWW) wheat. Production of SWW is forecast to rise more than 8 million bushels (year-to-year) on greater harvested area in the key Pacific Northwest growing region.

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    2.89
Yield (bushels/acre)    38.7    69.59    40.73    72.39
Production (million bushels)    661.23    291.81    21.01    215.15

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

After boosting 2018/19 hard red spring (HRS) yields to record levels last month, yields are trimmed slightly following a period of dryness in the Northern Plains, resulting in several production changes by State. Whereas drought conditions had largely abated earlier in the crop year, in this key production area, a lack of rain in recent weeks has downgraded the outlook for HRS yields.

Boosted by record yield outlooks for other spring wheat in Idaho and Montana, the U.S. other spring wheat yield remains record-high and is up 6.6 bushel per acre from the 2017 estimate. The current other spring wheat forecast is the third-highest on record at 614 million bushels. The next objective survey of the spring wheat crop will be reported in the September 28 USDA, NASS Small Grains Summary report.

Durum wheat, which is largely grown in the same region where hard red spring wheat production is concentrated, likewise saw yields trimmed from July to August. At 39.9 bushels per acre, the 2018 durum yield forecast is 0.8 bushels below the July forecast but 14.2 bushels above last year’s drought-affected yield. Area harvested for grain is unchanged from last month, and production for 2018 is forecast at 73.4 million bushels.

Wheat Food Use for 2018/19 Projected to Reach Record High

Since August 2017, monthly wheat food use has been tracking ahead of 2016/17 volumes. With the release of the August 1 USDA, NASS Flour Milling Products report, the full picture of food use for the 2017/18 marketing year was made clear. In December 2017, monthly U.S. wheat food use surged.

As real personal consumption expenditures on nondurable goods continued to rise through the final quarter of 2017 and into the first two quarters of 2018, monthly food use correspondingly remained higher than for the previous year, ultimately lifting the aggregate figure to 964.4 million bushels.

Based on income and consumption forecasts from the U.S. Bureau of Economic Analysis and expectations of continued population growth, the 2018/19 food use figure is adjusted upward by 5 million bushels to 970. If realized, this will be record-high food use, surpassing the 2017/18 record.

Strengthening Demand and Tightening Stocks Boost Prices by 10 Cents

The season-average farm price (SAFP) for all wheat is raised 10 cents this month to $5.10 per bushel on expectations of a tighter balance sheet and strengthening cash prices. While premiums for high protein spring wheat began to erode in June, the evolving global wheat market, which has seen production prospects trimmed significantly, is expected to provide support for wheat prices through the balance of the marketing year, despite sharp declines for corn and sorghum prices.

Wheat competes with corn and sorghum in domestic feed markets. However, wheat feed and residual is projected to account for only 5.5 percent of total use in the 2018/19 marketing year.

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