Wheat Outlook: Stocks Tighten on Rising Domestic Use; Exports Hold Steady

Photo: Kansas State University

The latest USDA, National Agricultural Statistics Service (NASS) Grain Stocks report indicates second quarter all wheat ending stocks totaled 1,834 million bushels with implied September-November disapperance of 512 million bushels, 35 percent above the same period in 2018/19. Surging use in the second quarter is attributed to stronger exports year-to-year and higher-than-expected feed and residual use.

All wheat exports were raised last month to the current 975-million-bushel estimate on the observed pace of sales and brightened marketing opportunities. U.S. export prospects remain mostly favorable on developments in trade relations, the surging pace of durum exports, and cuts in production and exports for Russia and Australia.

However, on improving price competitiveness, wheat exports for the European Union are forecast to rise two million tons and are expected to inhibit further expansion of U.S. wheat sales abroad.

Domestic Outlook

Domestic Changes at a Glance:

  • The latest USDA, NASS Grain Stocks report indicates higher-than-expected disappearance through the first half of the marketing year, as reflected in the newly-issued December 1 stocks estimate.
    • At 1,834 million bushels, second quarter ending stocks are about 50 million bushels lower than previously forecast.
  • Feed and residual use is increased 10 million bushels on stronger-than-expected September-November disappearance.
  • All wheat ending stocks for 2019/20 are lowered 9 million bushels on higher net use.
  • USDA, NASS reports winter wheat seedings for the 2020/21 marketing year are expected to total 30.8 million acres, down 1 percent from 2019 (fig. 2).
    • The only lower total winter wheat planted area on record was in 1909.
  • Hard red winter wheat plantings are estimated down 3 percent from 2019, soft red winter wheat sowings are up 8 percent year-to-year, and white winter wheat seeded area is down 4 percent, relative to last year.
  • The U.S. season-average farm price is unchanged and remains at $4.55 per bushel.
    • To date, approximately 70 percent of the 2019/20 wheat crop has been marketed.

NASS Forecasts 2020 Winter Wheat Seedings to be Lowest in 110 years

Based primarily on survey data obtained from 78,600 farm operators during the first two weeks of December, USDA, NASS estimates that winter wheat seeded area for 2020 will total 30.8 million acres, down 1 percent from 2019. Area planted is forecast to fall year-to-year in Colorado (down 12 percent), Montana (down 20 percent), Oregon (down 5 percent), and Washington (down 3 percent). Notably, for major winter wheat producing States, Kansas and Oklahoma, area planted to winter wheat is unchanged year-to-year.

By class, hard red winter (HRW) wheat area planted is forecast to total 21.8 million acres, down from 22.5 million acres in 2019. HRW area planted is forecast to be record-low in Nebraska and Utah. Soft red winter (SRW) area planted totals 5.64 million acres, up 8 percent on expanded seedings in most SRW-producing States. SRW production was substantially below-average in 2019/20 and ending stocks are the tightest since 2007/08.

Under assumption of normal weather, the surge in SRW plantings is expected to aid in replenishing supplies in the outyear. White winter wheat seeded area is forecast at 3.37 million acres, down 4 percent from 2019. Winter white wheat production typically comprises about 85 percent of all white wheat and about 12 percent of total all wheat production.

Stocks Report Reveals Strong Second Quarter Use

USDA, NASS’ latest Grain Stocks report indicated September to November disappearance of 512 million bushels, the largest second quarter disappearance since the 2010/11 marketing year and 132 million bushels ahead of 2018/19. Exports in the second quarter have been robust and supported an earlier (December) upward revision of the all wheat export figure. In recent weeks, U.S. wheat prices have strengthened as key competitor EU’s prices have become relatively softer, limiting further upward potential for U.S. exports, which remain at 975 million bushels this month.

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With Census trade data available through November, second quarter imports and exports by class can be calculated. During that period of time a total of 236 million bushels of U.S. wheat were exported, the most since the second quarter of 2016/17. While most classes of wheat, except SRW, are forecast to see a rise in exports year-to-year, the pace of durum sales to date has been exceedingly positive and supports a near doubling of exports in 2019/20 relative to the year prior.

In 2019/20, abundant durum carryin from the year prior has helped to create substantial exportable supplies, despite production that was the lowest since 2011/12. A sizable reduction in EU durum production has created a number of sales opportunities, most notably to the pasta-making capital of the world: Italy. More than 15 million bushels of durum were exported in the second quarter of 2019, with about three-fourths of those exports bound for Italy.

On the basis of stronger-than-expected wheat disappearance, the 2019/20 all wheat feed and residual estimate is raised 10 million bushels to 150 million. Hard red spring and soft red winter wheat feeding are both raised 5 million bushels.

Wheat Price Holds Steady on Seasonal Price Improvement

The all-wheat season average farm price (SAFP) remains projected at $4.55 per bushel. Futures prices advanced some on promising trade developments and expectations of lower winter wheat sowings, year-to-year, while cash prices firmed in accordance with anticipated price movements. With an estimated 70 percent of the 2019/20 wheat crop marketed through the end of December, month-to-month cash price strengthening would need to be substantial to markedly advance the SAFP.

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