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Grain Market Outlook

Wheat Market Outlook in March 2015

March 18, 2015


Summary

Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on March 10, 2015, U.S. wheat market prices have traded in a generally higher yet volatile pattern.  For the “current crop” 2014/15 marketing year the USDA projected that a) World wheat production, supplies, and total use would be at record high levels, b) World wheat export trade would be 3.1% lower than a year ago but still the second highest on record, and c) World wheat ending stocks and percent ending stocks-to-use would be at their highest levels in four marketing years.  For the U.S., the USDA lowered its projection of “current crop” MY 2014/15 wheat exports to the lowest level since MY 2009/10.  Wheat prices in the U.S. are projected at a four year low due to reduced U.S. exports and domestic livestock wheat feeding, and growing ending stocks.  

No other major production problems in competing World wheat exporting countries have yet emerged to the degree that the prevailing “large crop-over-supply” situation in World wheat markets has changed.  However, there are continued concerns about potential wheat export supply availability from the Black Sea region, and the ongoing possibility of crop problems developing in 2015 among major World wheat producers / exporters.  United States’ wheat exports have been limited by a recent strong positive trend in the U.S. dollar.

USDA U.S. Wheat Forecast for “Current Crop” MY 2014/15: The USDA maintained its projection of lower 2014 U.S. wheat production, reduced total use, increased ending stocks and % stocks-to-use, and lower prices in “current crop” MY 2014/15 vs a year ago.  The USDA’s projected “current crop” MY 2014/15 scenario is for a 2.026 billion bushel (bb) 2014 U.S. wheat crop, 2.776 bb total supplies, 900 million bushel (mb) exports, 2.085 bb total use, 691 mb ending stocks, 33.1% ending stocks-to-use, and a forecast U.S. price of $6.00 /bu ($5.90 to $6.10) – compared to $6.87 in MY 2013/14, $7.77 (record) in MY 2012/13, and $7.24 in MY 2011/12.    

USDA U.S. Wheat Forecast for “Next Crop” MY 2015/16: At the 2015 USDA Agricultural Outlook Forum, the USDA projected that supply-demand balances and prices in “next crop” MY 2015/16 would be as follows:  55.5 million acres (ma) planted, 47.0 ma harvested, 45.2 bu/ac yield, 2.125 bb production, 2.966 bb total supplies, 975 mb exports, 2.204 bb total use, 762 mb end stocks, 34.6% S/U, and a $5.10 /bu U.S. average price.

KSU U.S. Wheat Forecast for “Next Crop” MY 2015/16: KSU projections of “next crop” MY 2015/16 supply-demand balances and prices are represented in two alternative “Trend Yield” and “Short Yield” scenarios as follows.  A) “Trend Yield” Scenario: 60% prob. of 55.500 ma planted, 46.668 ma harvested, 45.9 bu/ac trend yield, 2.142 bb production, 2.983 bb total supplies, 1.050 bb exports, 2.254 bb total use, 729 mb end stocks, 32.3% S/U, and $5.75 /bu U.S. average price. B) “Short Yield” Scenario: 40% prob. of 55.500 ma planted, 46.668 ma harvested, 43.5 bu/ac low yield, 2.030 bb production, 2.876 bb total supplies, 1.025 bb exports, 2.224 bb total use, 652 mb end stocks, 29.3% S/U, and $6.25 /bu U.S. avg. price.  Key factors in these KSU forecasts are the levels of U.S. wheat yields and production, and a moderate recovery in U.S. wheat exports. 

USDA World Wheat: World wheat total supplies of 912.3 mmt in “current crop” MY 2014/15 are up from 891.7 mmt in MY 2013/14, and 855.4 mmt in MY 2012/13.  Projected World wheat ending stocks in “current crop” MY 2014/15 of 197.7 mmt (27.7% S/U) are up from 187.5 mmt (26.6% S/U) in MY 2013/14, and from 175.6 mmt (25.8% S/U) in MY 2012/13.  For perspective, these figures can be compared to the historic World wheat ending stocks and ending stocks-to-use minimums of 129.7 mmt and 21.1% S/U in MY 2007/08.  

I. U.S. Wheat Market Situation & Outlook

I-A. March USDA Reports & “Current Crop” MY 2014/15 Projections

On March 10th the USDA World Agricultural Outlook Board (WAOB) released its March 2015 World Agricultural Supply and Demand Estimates (WASDE) report – containing U.S. and World wheat supply-demand and price projections for both the 2013/14 as well as for “current crop” 2014/15 marketing years. The U.S. wheat “current crop” 2014/15 marketing year began on June 1, 2014 and will last through May 31, 2015, with the “new crop” 2015/16 marketing year beginning on June 1, 2015. 

I-B. CME Hard Red Winter Wheat Futures & U.S. Dollar Index Trends

Since market highs of $7.07 ¼ per bushel on December 18, 2014, the CME MAY 2015 Kansas hard red winter wheat futures contract has trended sharply lower – falling first to a low of $5.35 on February 2, 2015.  Then after rising to a high of $5.83 ¼ on February 17, 2015, MAY 2015 futures fell again to $5.16 ¼ on March 5th.   CME MAY 2015 Kansas HRW Wheat futures prices responded to the release of the March 10th USDA reports by trading higher for the day.  MAY 2015 HRW wheat efutures prices opened at $5.30 ¾ on Tuesday, March 10th.  The USDA reports were released at midday (i.e., 11 a.m., central time).  That day prices traded as low as $5.22 ½ and as high as $5.39 ¼ per bushel during the session before closing $0.05 ½ higher for the day at $5.36 /bu (Figure 1).  

Since the March 10th USDA report, CME MAY 2015 Kansas HRW wheat futures have traded in a generally higher but increasingly volatile pattern due to a) weather and winter wheat development concerns in the U.S. central and southern plains region, b) volatility in the U.S. dollar – impacting U.S. wheat export prospects, and c) repositioning of futures traders.  Although concerns about Black Sea geopolitical conflicts and future availability of wheat exports from that region of the World are legitimate, they have at least not yet tangibly affected the World wheat export trade to the degree that U.S. wheat exports and prices have been positively affected.   Recently, CME MAY 2015 Kansas HRW Wheat has risen to a high of $5.57 ½ on Monday, March 16th, before closing at $5.42 ¾ on Tuesday, March 17th.     

Figure 1. MAY 2015 & JULY 2015 CME Kansas Wheat Futures Price Charts (electronic trade)

Similarly, CME JULY 2015 Hard Red Winter wheat efutures prices opened at $5.35 on Tuesday, March 10th – the day of the release of the USDA reports at midday (i.e., 11 a.m., central time), and traded in a low-high range of $5.27 ¾ to $5.43 ¾ during the session before closing $0.05 lower for the day at $5.27 ¾ /bu (Figure 1).   Since then, JULY 2015 HRW wheat efutures prices have also generally risen but in a volatile manner, with lows of $5.41 ¼ on March 11th and $5.39 ¾ on Monday, March 16th, up to a high of $5.62 before closing at $5.48 ½ on Tuesday, March 17th.       

The U.S. Trade Weighted U.S. Dollar Index has been generally trending higher since mid-July 2011, but has trended all that much more sharply higher since early July 2014 (Figure 2).  After an index value of 75.69 on July 1, 2014 the calculated U.S. trade weighted dollar index trended up to a high of 93.3723 on Friday, February 13, 2015 – and increase of 23.4%.  

Figure 2. Daily U.S. Trade Weighted Dollar Index (Source: St. Louis Federal Reserve Bank, FRED)

 

This trend in the value of the U.S. trade weighted dollar index is significant to the U.S. wheat market, because a higher U.S. dollar exchange rate relative to other major currencies generally makes it more expensive for foreign buyers of U.S. wheat to exchange their country’s currencies for U.S. dollars – which they would then in turn use to purchase U.S. wheat exports (i.e., which are denominated or “priced” in U.S. dollars).  Although this is not the only factor negatively impacting U.S. wheat exports, it is a very important one – working against U.S. wheat being an affordable, competitive alternative export seller in World wheat trade.

I-C. U.S. Wheat Production

U.S. All Wheat Acreage, Yield & Production

In its March 10th Crop Production report the USDA made no changes in regards to 2014 U.S. wheat planted and harvested acreage, yields, and production – both in terms of aggregate U.S. wheat and for specific wheat classes or types (i.e., winter wheat, other spring wheat, and durum). 

The USDA’s current projections are for 2014 U.S. wheat total planted acreage to be 56.822 million acres (ma), up from 56.236 ma in 2013, 55.294 ma in 2012, and 54.277 ma in 2011 (Table 1 and Figures 3-4).   In addition, the USDA projected 2014 U.S. wheat harvested acreage to be 46.381 ma, up from 45.332 ma in 2013, down from 48.758 ma in 2012, and up from 45.687 ma in 2011.  The 2014 proportion of harvested-to-planted acreage for all U.S. wheat is projected to be 81.6%, up from 80.6% in 2013, but down from 88.2% in 2012, and 84.2% in 2011 (Table 1 and Figure 4).  The proportion of harvested-to-planted U.S. wheat acreage in 2013 of 80.6% was the lowest since 81.6% in 2006 and 76.0% in 2002.

The projected 2014 U.S. average wheat yield of 43.7 bushels per acre (bu/ac) is down from the record high of 47.1 bu/ac in 2013, the previous record of 46.2 bu/ac in 2012, and 46.1 bu/ac in 2010, but is up marginally from the recent year’s low of 43.6 bu/ac in 2011 (Table 1 and Figure 5).   

Taking these harvested acreage and yield projections together, the USDA forecast 2014 U.S. wheat production to be 2.026 billion bushels (bb) (Table 1 and Figure 6).  However, this projection of 2.026 bb for 2014 is still down from 2.135 bb in 2013, and 2.252 bb in 2012, while being up from 1.993 bb in 2011.   

2015 Winter Wheat Seedings

In its January 12th Winter Wheat Seedings report the USDA National Agricultural Statistics Service (NASS) projected that U.S. winter wheat seedings in the fall of 2014 for harvest in 2015 have been 40.452 ma, the third lowest amount since U.S. winter wheat seedings for harvest in 1973.  The projection of 40.452 ma for harvest in 2015 is down 1.95 ma (down 4.6%) from 42.399 ma in 2013/14, and down 2.78 ma (down 6.4%) from 43.230 ma in 2012/13.   Winter wheat seedings in the U.S. have also been below 41.0 ma in years 2005 (40.418 ma), 2006 (40.565 ma), 2010 (37.335 ma – the record low since 1973), and now in 2015 (40.452 ma).  

Approximate breakdowns in 2015 U.S. winter wheat seeded acreage by class in comparison to the 2011-2014 period are as follows:

Hard Red Winter (HRW) Wheat 2015         = 29.50 ma (vs 30.5 ma2014, 29.7 ma2013, 29.6 ma2012, 28.5 ma2011)

Soft Red Winter (SRW) Wheat 2015            =   7.50 ma (vs   8.5 ma2014, 10.0 ma2013,    8.0 ma2012,   8.5 ma2011)

White Winter (WW) Wheat 2015              =   3.48 ma (vs   3.4 ma2014,   3.5 ma2013,    3.3 ma2012,   3.6 ma2011)

All Winter Wheat 2015                                                   = 40.45 ma (vs 42.4 ma2014, 43.2 ma2013, 40.9 ma2012, 40.6 ma2011)

Hard Red Winter Wheat seeded acreage of 29.50 ma in the U.S. in 2015 is the lowest amount since 28.5 ma in 2011.  Soft Red Winter Wheat seeded acreage of 7.50 ma in the U.S. in 2015 is the lowest amount since 4.9 ma in 2011. White Winter Wheat seeded acreage of 3.48 ma in the U.S. in 2015 is within the range of U.S. White Wheat over the 2011-2014 period, i.e., 3.3-3.6 ma.

The March 31st USDA NASS Prospective Plantings report will provide more information on U.S. wheat acreage, for hard red winter, soft red winter, and durum wheat varieties planted in fall 2014 for harvest in 2015 – as well as for other types of spring wheat planted in the U.S. for harvest in the current calendar year.   

I-D. U.S. Wheat Total Supplies

Total supplies of 2.776 bb are projected by the USDA for “current crop” MY 2014/15, resulting from beginning stocks of 590 mb, projected 2014 production of 2.026 bb, and projected imports of 160 mb (Table 1 and Figure 6).   

Forecast U.S. wheat beginning stocks of 590 mb in “current crop” MY 2014/15 are down 17.8% from 718 mb in beginning stocks in MY 2013/14, and down from 743 mb in MY 2012/13.  This is the lowest level of U.S. wheat beginning stocks since 306 mb in MY 2008/09 (following the historically tight U.S. wheat ending stocks situation that developed in MY 2007/08).  This projected decline in U.S. wheat beginning stocks into the “current crop” 2014/15 marketing year is a continuance of the pattern of steadily tighter U.S. wheat supplies over the last four marketing years (since the recent high in beginning stocks of 976 mb in MY 2010/11).  

Projected U.S. wheat imports of 160 mb for “current crop” MY 2014/15 are unchanged from February, but down 20 mb from January, and would be the second highest amount on record, less than the record high of 169 mb in MY 2013/14.  Since MY 1973/74 the next highest amounts of U.S. wheat imports have been: 1) 127 mb in MY 2008/09; 2) 123 mb in MY 2012/13; 3) 122 mb in MY 2006/07; and 4) 119 mb in MY 2009/10. 

Nearly all of U.S. wheat imports come from Canada because of favorable geographic location / logistics.  Large Canadian wheat supplies over the last two years have been a major factor in this increase in U.S. wheat imports.  Canada produced a record large wheat crop of 37.5 million metric tons (mmt) (or 1.378 billion bushels in 60 lb/bu units) in MY 2013/14.  The next largest Canadian wheat crops since 1960 that were over 30.0 mmt were in 1990 (32.1 mmt), 1991 (32.0 mmt), and 1986 (31.4 mmt).  Projected Canadian wheat production in the “current crop” 2014/15 marketing year is lower – down to 29.3 mmt (1.077 bb).  This amount of Canadian wheat production is larger than the most recent 10 year average (years 2004-2013) of 26.5 mmt (973 mb).  

Total supplies of U.S. wheat of 2.776 bb in “current crop” MY 2014/15 are unchanged from February but down 20 mb from the January WASDE report, and are down to the lowest amount of U.S. wheat supplies since the 2006/07 and 2007/08 marketing years.  Over the last eight (8) marketing years, U.S. wheat total supplies have been 2.501 bb in MY 2006/07, 2.620 bb in MY 2007/08, 2.945 bb in MY 2008/09, 2.984 bb in MY 2009/10, 3.236 bb in MY 2010/11, 2.968 bb in MY 2011/12, 3.118 bb in MY 2012/13, 3.021 bb in MY 2013/14, and 2.776 bb in “current crop” MY 2014/15.

I-E. U.S. Wheat Total Use & Use by Category

Food Use: Projected U.S. wheat food use of 960 mb in “current crop” MY 2014/15 has been trending consistently higher over time due to a) steady growth in the U.S. population, and b) associated increases in demand for processed wheat products.  This projected amount of 960 mb in food use in “current crop” MY 2014/15 continues the steady upward trend following from 952 mb in MY 2013/14, 945 mb in MY 2012/13, and from 941 mb in MY 2011/12 (Table 1 and Figure 7). 

Seed Use: Forecast seed use of 75 mb in “current crop” MY 2014/15 (down 1 mb) is down marginally from 77 mb in MY 2013/14, and compares to 73 mb in MY 2012/13, and 76 mb in MY 2011/12 (Table 1 and Figure 7).  The USDA’s forecast U.S. wheat seed use extends the historic pattern of there being a relatively small but inelastic demand for U.S. wheat seed, driven primarily by a) the amount of U.S. wheat seed needed to plant adequate U.S. wheat acreage each year (from both commercial and on-farm seed sources), and b) the need for adequate wheat seed stocks to cover possible U.S. seed wheat production shortfalls from year to year. 

Exports: Projected U.S. wheat exports of 900 mb in “current crop” MY 2014/15 are unchanged from February, but down 25 mb from the January WASDE report.  This projection of 900 mb of U.S. wheat exports in “current crop” MY 2014/15 is down sharply from 1.176 bb in MY 2013/14, down to the lowest amount since 879 mb in MY 2009/10 (Table 1 and Figure 7). 

The sharp increase in the value of the U.S. dollar relative to other World currencies along with the likelihood of fully adequate foreign wheat supplies for export trade purposes, are factors that have caused lower U.S. wheat exports.  That said, the uncertain impact on World wheat trade in the future from geopolitical conflicts (between Russian and Ukraine), and the potential for dry or adverse weather conditions in other major World wheat production areas are all factors that may eventually support increased U.S. wheat exports and higher World wheat prices in the later stages of the “current crop” 2014/15 marketing year.  

Cumulative U.S. wheat export shipments through March 5th – the 40th week of the “current crop” 2014/15 marketing year for U.S. wheat – totaled 633.2 mb, which is 70.4% of the USDA’s projected “current crop” MY 2014/15 exports of 900 mb with 76.9% (40 of 52 weeks) of the marketing year completed.  “Current crop” MY 2014/15 ends on May 31, 2015.  United States’ wheat export shipments will need to average 22.2 mb per week through the remainder of the “current crop” 2014/15 marketing year to attain the USDA’s March 10th WASDE projection of 900 mb.  Wheat export shipments by the U.S. of 17.8 mb and 15.8 mb during the weeks ending February 26th and March 5th, respectively, were “behind pace” to meet the USDA forecast of 900 mb in the “current crop” 2014/15 marketing year.  (Source: USDA Foreign Agricultural Service U.S. Weekly Export Sales report - http://apps.fas.usda.gov/export-sales/esrd1.html).

In addition, when accounting for unshipped forward sales of exports of 184.5 mb in U.S. wheat for “current crop” MY 2014/15 (that had not yet been shipped as of March 5th), total U.S. wheat shipped plus outstanding shipments added up to 817.7 mb (i.e., 633.2 mb shipped plus 184.5 mb forward sales).  This amounts to 90.9% of the USDA’s projection of 900 mb for “current crop” MY 2014/15 with 76.9% of the marketing year having already occurred (i.e., 40 of 52 weeks). 

If a sharp, unexpected increase in U.S. wheat exports were to occur during the remainder of the “current crop” 2014/15 marketing year, U.S. wheat price prospects could improve considerably as U.S. wheat supply-demand balances would tighten on a bushel-for-bushel basis.  The potential exists during the remainder of “current crop” MY 2014/15 (i.e., through May 2015) for wheat production problems in major wheat producing and exporting countries such as Australia, Russia, Ukraine, parts of the European Union, Canada, Argentina, and even the United States.  The potential impact on U.S. wheat supply-demand balances and prices for “current crop” 2014/15 will be discussed in the “KSU Forecast” section below.  As noted in an earlier section, the higher value of the U.S. Dollar relative to other World currencies is being cited as a major factor that has been limiting U.S. wheat exports and market price prospects (see Figure 2).

Feed & Residual Use: The USDA projected that U.S. feed and residual use would be 150 mb in “current crop” MY 2014/15, down from 226 mb for MY 2013/14, the recent high of 370 mb in MY 2012/13, and from 162 mb in MY 2011/12 (Table 1 and Figure 7).  Domestic U.S. wheat feeding has trended lower across MY 2013/14 and “current crop” MY 2014/15 due to sizable 2013 and 2014 U.S. corn and grain sorghum crops – which has led to more abundant competitive U.S. feedgrain supplies for domestic livestock feeding at lower market prices than during “drought stricken” MY 2012/13.  Subsequently, over the last two U.S. wheat marketing years, there has been and continues to be lower cross-market demand for U.S. wheat in U.S. livestock feed rations – causing U.S. wheat usage to be at least 75 to 150 mb less than they would have been otherwise (i.e., if wheat feed use was in the range of 225 to 300 mb as it had been during the MY 2012/13 and MY 2013/14).

Total U.S. Wheat UseTotal use of U.S. wheat for “current crop” MY 2014/15 is projected to be 2.085 bb (up 1 mb from February), which would be the 3rd smallest amount of U.S. wheat total usage since MY 2004/05 (Figure 7).  U.S. wheat total use has varied from 2.234 bb in MY 2004/05, 2.154 bb in MY 2005/06, 2.045 bb in MY 2006/07, 2.314 bb in MY 2007/08, 2.288 bb in MY 2008/09, 2.008 bb in MY 2009/10, 2.373 bb in MY 2010/11 (the 2nd largest amount during the 11 year period), 2.226 bb in MY 2011/12, 2.400 bb in MY 2012/13 (the 3rd largest amount during the 11 year period), to the largest amount in this period of 2.431 bb in  MY 2013/14, and finally to 2.084 bb in “current crop” MY 2014/15.  Total usage of U.S. wheat in MY 2012/13 and MY 2013/14 were boosted by higher than usual livestock feeding of wheat in reaction to extremely tight U.S. corn and grain sorghum supplies – which in turn led to substitutionary demand for U.S. wheat in domestic livestock feed rations and support for U.S. wheat prices.

I-F. U.S. Wheat Ending Stocks, % Stocks-to-Use & Prices

United States’ wheat ending stocks for the “current crop” 2014/15 marketing year are projected to be 691 mb, down 1 mb from February, up 4 mb from January, and up 37 mb from the December 2014 WASDE projection of 654 mb (Table 1 and Figure 6).  This amount of U.S. wheat ending stocks is still markedly larger than 306 mb in MY 2007/08 – the historic “tight stocks” marketing year in recent years.  Over the last eight marketing years, U.S. wheat ending stocks were a record low 306 mb in MY 2007/08, 657 mb in MY 2008/09, 976 mb in MY 2009/10, 863 in MY 2010/11, 743 mb in MY 2011/12, 718 mb in MY 2012/13, an estimated 590 mb in MY 2013/14, and now a projected amount of 691 mb in “current crop” MY 2014/15.

Percent (%) ending stocks-to-use for U.S. wheat of 33.1% in “current crop” MY 2014/15 is down only marginally from 33.2% in February, but up from 32.57% in January, and from 30.55% in the December 2014 WASDE report (Table 1 and Figures 7-8).  Since the historic 67 year low of 13.2% in MY 2007/08, U.S. wheat ending stocks-to-use has varied widely over time, being 28.7% in MY 2008/09, 48.6% in MY 2009/10, 36.4% in MY 2010/11, 33.4% in MY 2011/12, 29.9% in MY 2012/13, 24.3% for MY 2013/14, to now a projected level of 33.1% in “current crop” MY 2014/15.   

U.S. average wheat prices for “current crop” MY 2014/15 are projected to be in the range of $5.90-$6.10 per bushel (“/bu”) (midpoint = $6.00 /bu) – narrower by $0.05 /bu on both ends of the range from a month ago, but with the midpoint of $6.00 /bu being unchanged (Table 1 and Figures 7-8).  Starting with the record tight U.S. and World wheat ending stocks marketing year of 2007/08, U.S. wheat prices have varied in the following manner over time: $6.48 per bushel in MY 2007/08, $6.78 in MY 2008/09, $4.87 in MY 2009/10, $5.70 in MY 2010/11, $7.24 in MY 2011/12, the record high of $7.77 in MY 2012/13, $6.87 in MY 2013/14, and now a forecast range of $5.90-$6.10 /bu (midpoint = $6.00 /bu) in “current crop” MY 2014/15.     

How Marketing Year Average Prices are calculated by USDA: The following illustrative table (see below) shows the type of calculations used by the USDA to make projections of the U.S. wheat marketing year average price for the “current crop” 2014/15 marketing year. 

These calculations show how monthly average U.S. wheat prices for the June 2014 through May 2015 period are weighted by the percent of average sales each month and summed together to calculate the marketing year average price for “current crop” MY 2014/15.  Scenarios represented are for a “+$0.50 /bu” and an “$8.00 /bu” scenario during April-May, 2015. 

The March 2, 2015 estimate for “current crop” MY 2014/15 marketing year average price equaled $5.98 per bushel – calculated prior to the USDA March 10th WASDE forecast of $6.00.  The “+$0.50 /bu” 2015 scenario for “current crop” MY 2014/15 is up to $6.03 due to the potential uptrend in MAY 2015, and JULY 2015 Kansas Wheat futures over the April-May 2015 time period.  

 

Month

% Avg. Sales by Month

3/2/2015

Scenario

+$0.50 /bu

Scenario

“$8.00 Spring 2015 $ Shock” Scenario

June 2014

13.0%

$6.50

$6.50

$6.50

July

19.3%

$6.16

$6.16

$6.16

August

13.3%

$5.98

$5.98

$5.98

September

9.1%

$5.74

$5.74

$5.74

October

6.3%

$5.71

$5.71

$5.71

November

4.9%

$6.05

$6.05

$6.05

December

6.6%

$6.11

$6.11

$6.11

January 2015

7.6%

$6.14

$6.14

$6.14

February Forecast

5.2%

$5.51

$5.51

$5.51

March Forecast

6.0%

$5.50

$5.75

$5.75

April Forecast

4.6%

$5.50

$6.00

$8.00

May Forecast

4.1%

$5.54

$6.04

$8.00

Totals

100.0% of Grain Sales

$5.98 MYA

U.S. Wheat $

$6.03 MYA

U.S. Wheat $

$6.21 MYA

U.S. Wheat $

 Potential Impact of a Late March-May 2015 Price Rally: Even if World wheat markets were to jump sharply higher in coming months due to either a) Black Sea Region wheat export issues, b) major Hard Red Winter wheat production problems in the U.S. central and southern Great Plains or Soft Red Winter wheat in the eastern Corn Belt, and/or c) other unexpected foreign wheat production problems, the rally in wheat prices would likely not have a significant impact on the “current crop” MY 2014/15 average price.

If a “price shock” occurred in the U.S. and World wheat market leading to a strong rally up to say $8.00 /bu during the late March-May 2015 time period, there would be a positive impact on the “current crop” MY 2014/15 average U.S. wheat prices. However, this sharp price increase but would only raise “current crop” MY 2014/15 marketing year average prices by about $0.21 per bushel, i.e., an increase in the USDA’s March 10th projection of $6.00 up to approximately $6.21 per bushel.  The cumulative weight in terms of the proportional quantity of U.S. wheat sales of a late March-April 2015 average price of $8.00 per bushel would only be 14.7% (6.0% for March + 4.6% for April + 4.1% for May) of the total marketing year average price – based on USDA monthly marketing year average weights.  With 85.3% of the price determined by June 2014 through February 2015 prices, potentially sharply higher prices of late March-May 2015 would have a limited impact on the marketing year average price.  Instead, the impact of high prices would likely be felt during the more heavily weighted June-August 2015 period in the coming “next crop” 2015/16 marketing year for U.S. wheat.

I-D. KSU Wheat Market Scenarios for “Next Crop” MY 2015/16

Both USDA and Kansas State University Extension forecasts of U.S. wheat supply-demand balances and prices for the “next crop” 2015/16 marketing year are provided below.   The direction of U.S. and World wheat markets through May 2015 (i.e., the remainder of “current crop” MY 2014/15), and from June 2015 through May 2016 for “next crop” MY 2015/16, will depend primarily on how total World wheat supplies balance with total demand.  From the perspective of the United States, the opportunity for sharp improvements in U.S. wheat export demand for the remainder of “current crop” MY 2014/15 appear to be limited given the high value of the U.S. dollar and its negative impact on U.S. wheat export sales in competition with other major wheat exporting countries.  However, it is still possible that the geopolitical conflict that is occurring in the Black Sea Region between wheat exporters Russia and Ukraine could significantly disrupt the flow of wheat export shipments from that region, or that geopolitical conflicts in the Middle East could escalate to the point of causing volatility in World energy and grain markets.

In making a projection of U.S. wheat supply-demand and prices for “next crop” MY 2015/16, the primary focus here will be on uncertainty associated with 2015 U.S. production and total supplies, and how potential variation in supplies may impact U.S. wheat total usage, ending stocks, ending stocks-to-use, and prices. 

In the USDA and KSU forecasts that follow, total U.S. wheat planted acreage in 2015 of 55.500 ma is assumed.  This is the amount of U.S. wheat planted acreage forecast at the 2015 USDA Agricultural Outlook Forum in Arlington on February 19-20, 2015.  Assuming that the winter wheat planted acreage used by the USDA in this forecast equaled that in the January 12, 2015 USDA NASS Winter Wheat Seedings report of 40.452 ma, then it may be assumed that U.S. other spring wheat planted acres will be in the range of 13.250-13.500 ma, with durum wheat acreage of approximately 1.770-1.780 ma.  Total U.S. wheat harvested acres is assumed to equal the long term (2000-2014) U.S. average of 84.1% - up from 81.6% in 2014. 

Regarding 2015 U.S. wheat yields, both a long term (1973-2014) trend line yield of 45.9 bushels per acre, and a lower yield projection of 43.5 bu/ac reflecting possible ongoing drought and winter wheat freeze damage.   These USDA and Kansas State University projections of “next crop” 2015/16 supply-demand balances and prices are shown in Table 1, with the following scenarios represented:

A. USDA “Next Crop” MY 2015/16 U.S. Wheat Projection – Yield = 45.2 bu/ac

The USDA U.S. wheat supply-demand and price projections for “next crop” MY 2015/16 reflect projected 2015 U.S. wheat yields of 45.2 bushels per acre.  These projections of 2015 U.S. wheat planted and harvested acreage are found in Table 1 and Figure 4.  Projections of 2015 probability-weighted U.S. wheat yields by the USDA are found in Table 1 and Figure 5.  The USDA’s projected total supplies of U.S. wheat and total usage and ending stocks of U.S. wheat in “next crop” MY 2015/16 are shown in Table 1.  Probability-weighted USDA forecasts of U.S. wheat average prices for “next crop” MY 2015/16 are based on projections of U.S. wheat % ending stocks-to-use shown in Table 1 and Figures 8-9.  

 USDA “Next crop” 2015/16 KSU Scenario for U.S. Wheat Supply-Demand

- U.S. Planted Area (mln. acres or ‘ma’)   = 55.500 ma                ò  2.3% (‒1.322 ma) vs 2014

- U.S. Harvested Area (ma)                  = 47.000 ma                ñ  1.3% (+0.619 ma) vs 2014

- U.S. Wheat Yield (bu./acre)                = 45.2 bu/ac                ñ  1.5 bu/ac from 43.7 bu/ac in 2014

- U.S. Production (billion bu. or ‘bb’)       =   2.125 bb                 ñ  4.9% (+99 mb) vs 2014

- Total Supplies (bb)                           =   2.966 bb                 ñ  6.8% (+190 mb) vs MY 2014/15

- Exports                                              =   0.975 bb                 ñ  8.3% (+ 75 mb) vs MY 2014/15

- Total Use                                          =   2.204 bb                 ñ  5.7% (+119 mb) vs MY 2014/15

- End Stocks                                         =   0.762 bb                 ñ10.3% (+ 71 mb) vs MY 2014/15

- % Ending Stocks/Use                      = 34.57%                     vs 33.14% S/U in MY 2014/15

- U.S. Wheat Price                             = $5.10 /bu                 vs $6.00 /bu in MY 2014/15

The USDA projected that for “next crop” MY 2015/16 final 2015 U.S. wheat production will be 2.125 bb – up 4.9% from 2.026 bb in 2014 (Table 1 and Figure 5).  This USDA estimate projects a “moderate” recovery in U.S. wheat exports in “next crop” MY 2015/16, up to 975 mb, i.e., up 75 mb (up 8.3%) from than the USDA’s March WASDE forecast of 900 mb for “current crop” MY 2015/16.  Total use of U.S. wheat in “next crop” MY 2015/16 is projected by the USDA to be 2.204 bb, up 119 mb (+5.7%) from 2.085 bb projected by the USDA in “current crop” MY 2014/15.  

With these USDA projections, U.S. wheat ending stocks would equal 762 mb, with % ending stocks-to-use estimated to be 34.57% for “next crop” MY 2015/16 (Table 1 and Figure 5).  The USDA projected that U.S. wheat average prices would be average $5.10 per bushel for “next crop” MY 2015/16 – down to the lowest level since $4.87 /bu in MY 2009/10 (Table 1 and Figures 8-9). 

B. KSU “Next Crop” MY 2015/16 U.S. Wheat Projection – Trend Yield = 45.9 bu/ac

Projections by Kansas State University of U.S. wheat supply-demand and price projections for “next crop” MY 2015/16 reflect 1973-2014 trend line wheat yields of 45.9 bushels per acre for 2015.  These KSU projections of 2015 U.S. wheat planted and harvested acreage are found in Table 1 and Figure 4.  Projections of 2015 probability-weighted U.S. wheat yields are found in Table 1 and Figure 5.  Projected total supplies of U.S. wheat in “next crop” MY 2015/16 are shown in Table 1 and Figure 6.  Projected total usage and ending stocks of U.S. wheat in “next crop” MY 2015/16 are shown in Table 1 and Figure 7. Probability-weighted KSU forecasts of U.S. corn average prices for “current crop” MY 2014/15 are based on projections of U.S. wheat % ending stocks-to-use shown in Table 1 and Figures 8-9.  

“Next crop” 2015/16 KSU Scenario for U.S. Wheat S-D @ 45.9 bu/a – 60% Probability

- U.S. Planted Area (mln. acres or ‘ma’)   = 55.500 ma                ò  2.3% (‒1.322 ma) vs 2014

- U.S. Harvested Area (ma)                  = 47.000 ma                ñ  1.3% (+0.619 ma) vs 2014

- U.S. Wheat Yield (bu./acre)                = 45.9 bu/ac                ñ  2.2 bu/ac from 43.7 bu/ac in 2014

- U.S. Production (billion bu. or ‘bb’)       =   2.142 bb                 ñ  0.8% (+17 mb) vs 2014

- Total Supplies (bb)                           =   2.983 bb                 ñ  7.5% (+207 mb) vs MY 2014/15

- Exports                                              =   1.050 bb                 ñ16.7% (+150 mb) vs MY 2014/15

- Total Use                                          =   2.254 bb                 ñ  8.1% (+169 mb) vs MY 2014/15

- Ending Stocks                                    =   0.729 bb                 ñ  5.5% (+ 38 mb) vs MY 2014/15

- % Ending Stocks/Use                      = 32.34%                     vs 33.14% S/U in MY 2014/15

- U.S. Wheat Price                             = $5.75 /bu                 vs $6.00 /bu in MY 2014/15

It is estimated here in this first KSU forecast that there is a “6 out of 10” or 60% chance that for “next crop” MY 2015/16 final 2015 U.S. wheat production will be 2.142 bb – up 5.7% from 2.026 bb in 2014 (Table 1 and Figure 5).  These KSU estimates project a recovery in U.S. wheat exports in “next crop” MY 2015/16, up to 1.050 bb, i.e., 150 mb (+16.7%) higher than the USDA’s March WASDE forecast of 900 mb for “current crop” MY 2014/15.  Total use of U.S. wheat in “next crop” MY 2015/16 is projected to be 2.254 bb, up 169 mb (+8.1%) from 2.085 bb projected by the USDA in “current crop” MY 2014/15.  

With these KSU projections, U.S. wheat ending stocks would equal 729 mb, with % ending stocks-to-use estimated to be 32.34% for “next crop” MY 2015/16 (Table 1 and Figure 5).  Based on historic stocks-to-use vs price relationships, U.S. wheat average prices are projected to be $5.75 per bushel for “next crop” MY 2015/16 – down $0.25 /bu from the USDA projection of $6.00 for “current crop” MY 2014/15 (Table 1 and Figures 8-9). 

This KSU projection of U.S. wheat prices of $5.75 /bu. for “next crop” MY 2015/16 is decidedly more optimistic in terms of projected prices than from other sources such as the USDA or FAPRI, both of which are forecasting MY 2015/16 U.S. wheat prices to be closer to $5.00 per bushel.  The key factor in this projection is the assumption of a moderate recovery in U.S. wheat exports to a level approximating recent year’s levels, i.e., 1.050 bb rather than the USDA’s March 2015 WASDE report forecast of 900 mb for “current crop” MY 2014/15.  If U.S. wheat exports in “next crop” MY 2015/16 are 950 mb in this scenario (i.e., 100 mb lower than the 1.050 bb projection), then ending stocks are 829 mb, % ending stocks to use are 38.49%, and marketing year average prices would be projected to be $5.00 /bu or less all else being equal.  

C. KSU “Next Crop” MY 2015/16 U.S. Wheat Projection – Low Yield = 43.5 bu/ac

It is estimated here in this second KSU forecast that there is a “4 out of 10” or 40% chance that for “next crop” MY 2015/16 final 2015 U.S. wheat production will be 2.030 bb – marginally larger (up 4 mb) from 2.026 bb in 2014 (Table 1).  These KSU estimates project a recovery in U.S. wheat exports in “next crop” MY 2015/16, up to 1.025 bb, i.e., 125 mb (+13.9%) higher than the USDA’s March WASDE forecast of 900 mb for “current crop” MY 2014/15.  Total use of U.S. wheat in “next crop” MY 2015/16 is projected in this scenario to be 2.224 bb, up 139 mb (+6.7%) from 2.085 bb projected by the USDA in “current crop” MY 2014/15.  

With these KSU projections, U.S. wheat ending stocks would equal 652 mb, with % ending stocks-to-use estimated to be 29.32% for “next crop” MY 2015/16 (Table 1 and Figure 5).  Based on historic stocks-to-use vs price relationships, U.S. wheat average prices would be projected to rise $0.25 to $6.25 per bushel for “next crop” MY 2015/16 (Table 1 and Figures 8-9). 

“Next crop” 2015/16 KSU Scenario for U.S. Wheat S-D @ 43.5 bu/a – 40% Probability

- U.S. Planted Area (mln. acres or ‘ma’)   = 55.500 ma                ò  2.3% (‒1.322 ma) vs 2014

- U.S. Harvested Area (ma)                  = 47.000 ma                ñ  1.3% (+0.619 ma) vs 2014

- U.S. Wheat Yield (bu./acre)                = 43.5 bu/ac                ò  0.2 bu/ac from 43.7 bu/ac in 2014

- U.S. Production (billion bu. or ‘bb’)       =   2.030 bb                 ñ  0.2% (    +4 mb) vs 2014

- Total Supplies (bb)                           =   2.876 bb                 ñ  3.6% (+100 mb) vs MY 2014/15

- Exports                                              =   1.025 bb                 ñ13.9% (+125 mb) vs MY 2014/15

- Total Use                                          =   2.224 bb                 ñ  6.7% (+139 mb) vs MY 2014/15

- Ending Stocks                                    =   0.652 bb                 ò  5.6% (‒ 39 mb) vs MY 2014/15

- % Ending Stocks/Use                      = 29.32%                     vs 33.14% S/U in MY 2014/15

- U.S. Wheat Price                             = $6.25 /bu                 vs $6.00 /bu in MY 2014/15

As with the earlier KSU forecast representing higher 2015 yields and production, this KSU alternative, lower production projection of U.S. wheat prices of $6.25 /bu. for “next crop” MY 2015/16 is decidedly more optimistic in terms of projected prices than from other sources such as the USDA or FAPRI, both of which are for U.S. wheat prices to be closer to $5.00 per bushel.  Again, the key factor in this projection is the assumption of a moderate recovery in U.S. wheat exports to a level approximating recent year’s levels, i.e., 1.025 bb rather than the USDA’s March 2015 WASDE report forecast of 900 mb for “current crop” MY 2014/15.      

II. World Wheat Supply-Demand Trends

The USDA forecast that World wheat production in “current crop” MY 2014/15 will be up 1.2% from the 2013/14 marketing year that ended on May 31, 2014, and up 10.1% from two years ago in MY 2012/13 (Figure 10).  World wheat total supplies in “current crop” MY 2014/15 are forecast to be 912.3 mmt, up 20.9 mmt (up 2.3%) from 891.7 mmt a year ago, and up 56.9 mmt (up 6.6%) from 855.4 mmt two years ago.  Given these changes, World wheat total use in “current crop” MY 2014/15 is projected to increase 1.5% from MY 2013/14, and to be up 5.1% from MY 2012/13.  World wheat ending stocks in “current crop” MY 2014/15 are projected to increase by 5.5% from a year earlier in MY 2013/14, and by 12.6% from two years ago in MY 2012/13.  

Wheat producing areas of the World from which annual variations in wheat production historically have had a notable impact on wheat markets (i.e., caused market volatility) in the last several years include a) Russia, Ukraine and Kazakhstan in the Black Sea Region, b) Australia, c) the United States, d) Canada, e) the wheat production regions in the European Union, and f) China.  Whether World wheat markets improve from current levels or not in the near or longer term will largely depend on whether production and/or export problems can be avoided in these major wheat producing and exporting areas in year 2015.    

II-A. World Wheat Production by Country / Region

Projected World wheat production of 724.8 mmt in “current crop” MY 2014/15 would be the largest crop on record, being up 1.2% from the previous record high of 716.1 mmt for MY 2013/14.  This total for “current crop” MY 2014/15 of 724.8 mmt is also up 10.1% from 658.5 mmt in MY 2012/13, and marginally larger than the 3rd largest crop on record of 695.8 mmt in MY 2011/12.  World wheat production was in the range of 612.7-686.8 mmt during the previous MY 2007/08-MY 2010/11 period (Table 2 and Figure 10).  Foreign (non-U.S.) wheat production is projected to be 669.6 mmt in “current crop” MY 2014/15, up from 658.0 mmt in MY 2013/14, and up from 597.2 mmt in MY 2012/13. 

Table 2 provides a projected list of the major wheat producing countries or regions in the World in “current crop” MY 2014/15, the 2013/14 marketing year, and MY 2012/13, along with any changes that have occurred in their wheat production forecasts since the February 2015 WASDE report.  Year-over-year increases in wheat production are projected in Argentina (up 2.0 mmt to 12.5 mmt), the European Union (up 12.2 to 155.7 mmt), Brazil (up 0.6 to 5.9 mmt), China (up 4.1 to 126.0 mmt), Pakistan (up 1.0 to 25.0 mmt), India (up 2.3 to 95.9 mmt), Russia (up 6.9 to 59.0 mmt), and Ukraine (up 2.5 to 24.75 mmt).  Year-over-year declines in “current crop” MY 2014/15 production are projected for the United States (down 3.0 to 55.1 mmt), Australia (down 2.9 to 24.0 mmt), Canada (down 8.2 to 29.3 mmt), selected Middle Eastern Countries (down 1.5 to 17.4 mmt), North Africa (down 2.9 to 16.8 mmt), and Kazakhstan (down 0.9 to 13.0 mmt).  

In “current crop” MY 2014/15, the European Union is projected to be the largest World producer of wheat at 155.7 mmt, followed by China (126.0 mmt), India (95.9 mmt), Russia (59.0 mmt), the United States (55.1 mmt), Canada (29.3 mmt), Pakistan (25.0 mmt), Ukraine (24.75 mmt), Australia (24.0 mmt), Selected Middle Eastern Countries (17.4 mmt), North Africa (16.8 mmt), Kazakhstan (13.0 mt), Argentina (12.5 mmt), and Brazil (5.9 mmt).

II-B. World Wheat Exports by Country / Region

Global wheat exports in “current crop” MY 2014/15 are projected to be a 160.1 mmt, down 3.1% from 165.8 mmt in MY 2013/14, while also up 16.9% from 137.4 mmt in MY 2012/13 (Table 3).  Foreign (non-U.S.) wheat exports are projected to be 136.1 mmt in “current crop” MY 2014/15, up 1.7% from 133.8 mmt in MY 2013/14, and up 23.9% from 109.8 mmt in MY 2012/13. 

Table 3 provides a projected list of the major wheat exporting countries or regions in the World in the “current crop” 2014/15 marketing year, along with MY 2013/14 and MY 2012/13.  Year-over-year increases in wheat exports in “current crop” MY 2014/15 are projected for Argentina (up 4.3 mmt), Brazil (up 1.4 mmt), China, selected Middle Eastern countries, North Africa (marginal), Russia (up 1.5 mmt), and Ukraine (up 1.2 mmt).  However, decreased exports are projected for the United States (down 7.5 mmt), Australia (down 1.6 mmt), Canada, the EU, Pakistan, Southeast Asia, India (down 2.6 mmt), and Kazakhstan (down 2.1 mmt). 

The largest projected exporter of wheat in “current crop” MY 2014/15 is the European Union (31.5 mmt), followed by the United States (24.5 mmt), Canada (23.0 mmt), Russia (20.0 mmt), Australia (17.0 mmt), Ukraine (11.0 mmt), Argentina (6.5 mmt), Kazakhstan (6.0 mmt), India (3.5 mmt), Selected Middle Eastern countries (1.5 mmt), Brazil (1.5), and China (1.0 mmt).

II-C. World Wheat Imports by Country / Region

Global wheat imports in “current crop” MY 2014/15 are projected to be 157.5 mmt, up 0.5% from 156.65 mmt in MY 2013/14, and up 9.2% from 144.2 mmt in MY 2012/13 (Table 4).  Foreign (non-U.S.) wheat imports are projected to be 153.1 mmt in “current crop” MY 2014/15, up 0.7% from 152.1 mmt in MY 2013/14, and up 8.7% from 140.9 mmt in MY 2012/13. 

Table 4 provides a projected list of the major wheat importing countries or regions in the World in the “current crop” 2014/15 marketing year, along with MY 2013/14, and MY 2012/13.  While increased wheat imports are projected for the European Union (up 1.5 mmt), selected Middle Eastern countries (up 2.5 mmt), Pakistan, Southeast Asia (up 1.6 mmt), and Kazakhstan for “current crop” MY 2014/15, only marginal or no year-over-year changes in wheat imports in “current crop” MY 2014/15 are projected for Argentina, Australia, Canada, India, and Ukraine.   Decreased imports are projected for the United States, Brazil, China (down 5.3 mmt), North Africa (down 1.1 mmt), and Russia. 

North Africa (24.2 mmt) is projected to be the largest World wheat importer in “current crop” MY 2014/15, followed by Selected Middle Eastern countries (23.2 mmt), Southeast Asia (18.0 mmt), the Former Soviet Union (12 countries) (7.5 mmt), Brazil (6.7 mmt), the European Union (5.5 mmt), the United States (4.35 mmt), China (1.5 mmt), Pakistan (0.75 mmt), Canada (0.5 mmt), Russia (0.35 mmt), Kazakhstan (0.4 mmt), and Australia (0.15 mmt).  China is projected to see “current crop” MY 2014/15 wheat imports decrease to 1.5 mmt from 6.8 mmt in MY 2013/14, and from 3.0 mmt in MY 2012/13. 

II-D. World Wheat Domestic Feed Use by Country / Region

Global wheat domestic feed use in “current crop” MY 2014/15 is projected to be 140.1 mmt, up 7.3% from 130.6 mmt in MY 2013/14, and up 2.1% from 137.1 mmt in MY 2012/13 (Table 5).   Foreign (non-U.S.) wheat domestic feed use is projected to be 136.0 mmt in “current crop” MY 2014/15, up 9.3% from 124.4 mmt in MY 2013/14, and up 7.0% from 127.1 mmt in MY 2012/13. 

Table 5 provides a projected list of the major countries or regions in the World terms of wheat domestic feed use in the “current crop” 2014/15 marketing year, along with MY 2013/14, and MY 2012/13.  Year-over-year increases in wheat feed use in “current crop” MY 2014/15 are projected for Australia, the European Union (up 8.0 mmt), China (up 2.0 mmt), selected Middle Eastern countries, Pakistan, Southeast Asia, Russia, and Ukraine.  Declines in domestic wheat feeding are forecast for the United States (down 2.1 mmt), Canada, North Africa, and India, with little or no changes for Argentina, Brazil, and Kazakhstan. 

The European Union (56.0 mmt) is projected to be the largest World user of wheat for domestic feeding in “current crop” MY 2014/15, followed by China (23.0 mmt), Russia (13.0 mmt), Canada (4.5 mmt), India (4.5 mmt), selected Middle East countries (4.4 mmt), the United States (4.1 mmt), Australia (4.1 mmt), Ukraine (4.0 mmt), Southeast Asia (3.0 mmt), North Africa (2.3 mmt), Kazakhstan (2.0 mmt), Pakistan (1.2 mmt), Brazil (0.6 mmt), and Argentina (0.1 mmt). 

II-E. World Wheat Food, Seed & Industrial (FSI) Use by Country / Region

Global wheat food, seed and industrial (FSI) use in “current crop” MY 2014/15 is projected to be a 574.5 mmt, up 0.1% from 573.6 mmt in MY 2013/14, and up 5.9% from 542.65 mmt in MY 2012/13 (Table 6).  Foreign (non-U.S.) wheat FSI use is projected to be 546.3 mmt in “current crop” MY 2014/15, up 0.1% from 545.6 mmt in MY 2013/14, and up 6.1% from 514.9 mmt in MY 2012/13. 

Table 6 provides a projected list of the major countries or regions in the World in terms of wheat FSI use in the “current crop” 2014/15 marketing year, along with MY 2013/14, and MY 2012/13.  Year-over-year increases or no changes in wheat FSI use in “current crop” MY 2014/15 are projected for all countries except for the Ukraine (down 0.1 mmt). 

China (101.0 mmt) is projected to be the largest World FSI user of wheat in “current crop” MY 2014/15, followed by India (89.2 mmt), the European Union (68.5 mmt), North Africa (40.0 mmt), selected Middle Eastern countries (33.8 mmt), the United States (28.2 mmt), Pakistan (23.9 mmt), Russia (22.5 mmt), Southeast Asia (14.0 mmt), Brazil (11.0 mmt), Ukraine (8.0 mmt), Argentina (6.1 mmt), Canada (5.3 mmt), Kazakhstan (4.8 mmt), and Australia (3.4 mmt). 

II-F. World Wheat Total Use by Country / Region

Projected World wheat total use of 714.5 mmt in “current crop” MY 2014/15 is the highest amount on record, being up 1.5% from the previous record high of 704.2 mmt in MY 2013/14, up 5.1% from 679.8 mmt in MY 2012/13, and up from the range of 614.5-688.0 mmt during the MY 2007/08-MY 2011/12 period (Table 7 and Figure 10).  Foreign (non-U.S.) wheat total use is projected to be 682.3 mmt in “current crop” MY 2014/15, up 1.8% from 670.1 mmt in MY 2013/14, and up 6.3% from 642.0 mmt in MY 2012/13. 

Table 7 provides a projected list of the major countries or regions in the World in terms of total wheat use in the “current crop” 2014/15 marketing year, along with MY 2013/14, and MY 2012/13.  Year-over-year increases in wheat total use in “current crop” MY 2014/15 are projected for Argentina, Australia, the European Union (up 8.75 mmt), Brazil, China (up 2.5 mmt), selected Middle Eastern countries, Pakistan (up 1.0 mmt), Southeast Asia (up 1.1 mmt), Russia (up 1.4 mmt), and Ukraine.  Decreases in total wheat usage are forecast for the United States (down 1.9 mmt), Canada, North Africa, and India. No change is projected for Kazakhstan. 

The European Union (124.5 mmt) is projected to be the largest World user of wheat in “current crop” MY 2014/15, followed closely by China (124.0 mmt), India (93.7 mmt), North Africa (42.25 mmt), selected Middle Eastern countries (38.2 mmt), Russia (35.5 mmt), the United States (32.25 mmt), Pakistan (25.1 mmt), Southeast Asia (17.0 mmt), Ukraine (12.0 mmt), Brazil (11.6 mmt), Canada (9.8 mmt), Australia (7.5 mmt), Kazakhstan (6.8 mmt), and Argentina (6.15 mmt).

II-G. World Wheat Ending Stocks by Country / Region

Projected World wheat ending stocks of 197.7 mmt for “current crop” MY 2014/15 are up 5.5% from 187.5 mmt in MY 2013/14, and up 12.6% from 175.6 mmt in MY 2012/13, and is comparable to the range of 169.3-201.9 mmt over the MY 2008/09 through 2011/12 period (Table 8 and Figure 10).  The 37 year low in World wheat ending stocks occurred when supply-demand balances fell to 129.7 mmt in MY 2007/08.  Foreign (non-U.S.) wheat ending stocks are projected at 178.9 mmt in “current crop” MY 2014/15, up 4.4% from 171.4 mmt in MY 2013/14, and up 14.6% from 156.1 mmt in MY 2012/13. 

Table 8 provides a list of the major countries or regions in the World in terms of projected holdings of wheat ending stocks in the “current crop” 2014/15 marketing year, along with MY 2013/14, and MY 2012/13.  Year-over-year increases in wheat ending stocks in “current crop” MY 2014/15 are projected for the United States (up 2.7 mmt), the European Union (up 5.2 mmt), China (up 2.5 mmt), selected Middle Eastern countries, Southeast Asia, Russia (up 3.9 mmt), Kazakhstan, and Ukraine (up 1.8 mmt).  Decreases are projected for Argentina, Australia, Canada (down 3.1 mmt), Brazil, North Africa (down 1.85 mmt), and India (down 1.3 mmt).  A marginal decline is projected for Pakistan.

China (62.8 mmt) is projected to be the largest holder of wheat ending stocks in the World in “current crop” MY 2014/15, followed by the United States (18.8 mmt), India (16.5 mmt), the European Union (15.8), North Africa (11.6 mmt), selected Middle Eastern countries (11.0 mmt), Russia (9.1 mmt), Canada (6.6 mmt), Australia (5.8 mmt), Ukraine (5.5 mmt), Southeast Asia (3.7 mmt), Kazakhstan (2.6 mmt), Argentina (2.45 mmt), Pakistan (2.1 mmt), and Brazil (1.4 mmt).

II-H. World Wheat Ending Stocks-to-Use by Country / Region

Projected World wheat ending stocks-to-use of 27.7% for “current crop” MY 2014/15 are up from 26.6% in  MY 2013/14, and up from 25.8% in MY 2012/13 (Table 9 and Figure 11).  After falling to minimum levels of World wheat % ending stocks-to-use in MY 2006/07 (21.7% S/U) and MY 2007/08 (21.1% S/U), World wheat % S/U was 26.5% in MY 2008/09, 31.0% in MY 2009/10, 30.4% in MY 2010/11, 28.6% in MY 2011/12, 25.8% in MY 2012/13, and 26.6% in MY 2013/14, and are now projected to be 27.7% in “current crop” MY 2014/15.  The 37 year low in World wheat ending stocks-to-use occurred when supply-demand balances fell to 21.1% in MY 2007/08.  Foreign (non-U.S.) wheat ending stocks-to-use are projected at 21.9% in “current crop” MY 2014/15, up from 21.3% in MY 2013/14, and 20.8% in MY 2012/13. 

Table 9 provides a list of the major countries or regions in the World in terms of projected wheat percent (%) ending stocks-to-use in the “current crop” 2014/15 marketing year, along with MY 2013/14, and MY 2012/13.  Year-over-year increases in wheat ending stocks-to-use in “current crop” MY 2014/15 are projected for the United States, the European Union, China, selected Middle Eastern countries, Russia, Kazakhstan, and Ukraine.  Decreases are projected for Argentina, Australia, Canada, Brazil, North Africa, Pakistan, Southeast Asia, and India. 

China (50.2%) is projected to be the largest holder of wheat ending stocks-to-use in the World in “current crop” MY 2014/15, followed by the United States (33.1%), North Africa (27.2%), selected Middle Eastern countries (27.7%), Ukraine (23.8%), Australia (23.7%), Southeast Asia (20.7%), Kazakhstan (20.2%), Canada (20.1%), Argentina (19.4%), India (17.0%), Russia (16.3%), the European Union (10.1%), Brazil (10.6%), and Pakistan (8.2%).

Similar to the relationship between U.S. wheat ending stocks-to-use and U.S. average wheat prices (see Figure 9) since MY 1973/74, a negatively correlated market relationship has existed between U.S. wheat season average cash prices and World wheat % ending stocks-to-use – but with an adjustment or “structural jump” after MY 2009/10 (Figure 11).  Larger World wheat supply-demand balances (i.e., higher percentages of ending stocks-to-use) are typically associated with lower U.S. wheat prices, while smaller supply-demand balances are usually associated with higher U.S. wheat prices – all else being equal. 

As in Figure 9 earlier, U.S. wheat prices in Figure 11 are reported on a nominal basis (i.e., not adjusted for inflation).   Whereas the minimum U.S. wheat percent stocks-to-use since MY 1973/74 was 13.2% in the historic tight stocks year of MY 2007/08, the historic minimum in World wheat percent stocks-to-use occurred in that same marketing year at 21.1%.  Since that time, World wheat ending stocks-to-use have not fallen below 25.8% in MY 2012/13.

Table 1. U.S. Wheat Supply-Demand Balance Sheet: MY 2008/09 – “Next Crop” MY 2015/16
(March 10th USDA WASDE & adjusted Agricultural Baseline forecasts, & USDA-KSU 2015/16 Projections)

Item

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

2014/15

USDA

AdjustedKSU

2015/16

KSU

Trend Yield

2015/16

KSU

Lower Yield

2015/16

% Probability of Occurring

 

 

 

 

 

 

 

 

60%

40%

Planted Area (million acres)

63.617

59.017

52.620

54.277

55.294

56.236

56.822

55.500

55.500

55.500

Harvested Area (million acres)

56.036

49.841

46.883

45.687

48.758

45.332

46.381

47.000

46.668

46.668

% Harvested/Planted Area

88.1%

84.5%

89.1%

84.2%

88.2%

80.6%

81.6%

84.7%

84.1%

84.1%

Yield / harvested acre (bu/ac)

44.8

44.3

46.1

43.6

46.2

47.1

43.7

45.2

**45.9

**43.5

 

Million Bushels

Beginning Stocks

306

657

976

862

743

718

590

691

691

691

Production

2,512

2,209

2,163

1,993

2,252

2,135

2,026

2,125

2,142

2,030

Imports

127

119

97

112

123

169

160

150

150

155

Total Supply

2,945

2,984

3,236

2,968

3,118

3,021

2,776

2,966

2,983

2,876

 

 

Food Use

927

919

926

941

945

952

960

967

967

967

Seed Use

78

68

71

76

73

77

75

72

72

72

Exports

1,015

879

1,291

1,051

1,012

1,176

900

975

**1,050

**1,025

Feed & Residual Use

268

150

85

162

370

226

150

190

165

160

Total Use

2,288

2,008

2,373

2,226

2,400

2,431

2,085

2,204

2,254

2,224

 

 

Ending Stocks

657

976

863

743

718

590

691

762

729

652

% Ending Stocks-to-Use

28.72%

48.61%

36.37%

33.38%

29.92%

24.27%

33.14%

34.57%

32.34%

29.32%

U.S. Wheat Avg. Farm Price ($/bushel)

$6.78

$4.87

$5.70

$7.24

 

$7.77

 

$6.87

$5.90-$6.10 ($6.00)

$5.10

 

$5.75

$6.25


 

Figure 3. U.S. Wheat Planted Acreage – All Winter, Spring & Durum Wheat Classes (1973-2014) plus USDA Estimates for 2015 U.S. Winter Wheat & All U.S. Wheat Acres

Text Box: 2015 U.S. Winter Wheat acreage projected to be ò 4.6% vs 2014
USDA Estimate of All U.S. Wheat Acres in 2015 = 55.500 mln ac. (ò1.32 ma or 2.3%)

Figure 4. U.S. All Wheat Planted & Harvested Acreage (1973-2014) Plus KSU 2015 Projections

Figure 5. U.S. All Wheat Yield (1973-2014), and KSU 2015 Trend Projection (March 10, 2015)

Text Box: USDA 2015 Yield = 45.2 bu/ac
KSU 2015 trend: 45.9 bu/ac 
10 year Minimum = 38.6 bu/ac (2006)
10 year Maximum = 47.1 bu/ac (2013)
 

Figure 6. U.S. Wheat Total Supplies for MY 2004/05 – 2014/15 with KSU 2015/16 Projections
(WASDE data from March 10, 2015)


 

Figure 7. Trends in U.S. Wheat Use & Ending Stocks: MY 2004/05 - 2014/15 Plus KSU 2015/16 Projections
(March 10, 2015 USDA WASDE Report)

Figure 8. U.S. Wheat Ending Stocks vs U.S. Cash Prices: MY 2004/05 thru “Current Crop” MY 2014/15
(March 10, 2015 USDA WASDE Report & KSU forecasts for “next crop” MY 2015/16)

Figure 9. U.S. Wheat Price vs U.S. % Stocks-to-Use: MY 1973/74 thru “Current Crop” MY 2014/15 Plus USDA & KSU “Next Crop” MY 2015/16 Projections      

Text Box: 2011/12
Text Box: KSU “Next Crop” MY 2015/16
32.3% S/U, $5.75 /bu
Text Box: “Current Crop” MY 2014/15
33.2% S/U, $6.00 /bu

Figure 10. World Wheat Usage & Ending Stocks: MY 2007/08 thru “Current Crop” MY 2014/15                     
(March 10, 2015 USDA WASDE Report)

Text Box: Wheat Trade
133-166 mmt since MY 2008/09
 
160.6 mmt in MY 2014/15
Text Box: Wheat Usage
ñ12.1 mmt/yr 
(+2.0%/yr) 
since 2007/08
Text Box: Production
ñ14.0 mmt/yr (+2.3%/yr) 
since 2007/08
 
Text Box: End Stocks
197.7 mmt in “current crop” MY 2014/15
 
Up 68.0 mmt (+52%) since 
37 year low in 
MY 2007/08

Figure 11. U.S. Wheat Price vs % World Stocks-to-Use (MY 1973/74 through “Current Crop” MY 2014/15)       

Text Box: “New Crop” 2014/15 
27.8% S/U & $6.00/bu
Text Box: 2011/12
Text Box: 2012/13 
25.6% S/U & $7.77/bu
Text Box: “Old Crop” 2013/14 
27.0% S/U & $6.87/bu
Text Box: 2008/09
Text Box: 2011/12
Text Box: 2010/11
Text Box: 2007/08
Text Box: 2006/07 
Text Box: 2009/10
Text Box: 1986/87

 

Table 2. World Wheat Production Projections for “Current Crop” MY 2014/15, MY 2013/14, and MY 2012/13

World Wheat Production                                                 by Major Country / Region

Wheat Production: New Crop 2014/15     March 2015

Wheat Production: February 2015 New Crop 2014/15                   (1 month ago)

New Crop 2014/15 Production:               March Less February 2015                    

New Crop 2014/15 Production:                Percent (%)         March of February 2015

March Wheat Production: Last Year’s 2013/14          

February  Wheat Production: Last Year’s 2013/14

March Less February  Wheat  Production             for Last Year’s 2013/14

Current Crop 2014/15 Production             Less Last year’s 2013/14

% Current Crop 2014/15 Production of                         Last Year’s 2013/14

Wheat Production: 2012/13                           (2 years ago)

Current Crop 2014/15 Production             Less 2012/13

% Last Year’s 2014/15 Production       of 2012/13

 

mmt

mmt

mmt

Percent (%)

mmt

mmt

mmt

mmt

Percent (%)

mmt

mmt

Percent (%)

World

724.76

725.03

(0.27)

100.0%

716.10

716.14

(0.04)

8.66

101.2%

658.54

66.22

110.1%

United States

55.13

55.13

0.00

100.0%

58.11

58.11

0.00

(2.98)

94.9%

61.30

(6.17)

89.9%

Total Foreign

669.63

669.91

(0.28)

100.0%

657.99

658.03

(0.04)

11.64

101.8%

597.24

72.39

112.1%

Major Exporters

221.49

221.49

0.00

100.0%

218.47

218.55

(0.08)

3.02

101.4%

193.31

28.18

114.6%

Argentina

12.50

12.50

0.00

100.0%

10.50

10.50

0.00

2.00

119.0%

9.30

3.20

134.4%

Australia

24.00

24.00

0.00

100.0%

26.93

27.01

(0.08)

(2.93)

89.1%

22.86

1.14

105.0%

Canada

29.30

29.30

0.00

100.0%

37.53

37.53

0.00

(8.23)

78.1%

27.21

2.09

107.7%

European Union

155.69

155.69

0.00

100.0%

143.51

143.51

0.00

12.18

108.5%

133.95

21.74

116.2%

Major Importers

195.62

196.14

(0.52)

99.7%

194.10

194.06

0.04

1.52

100.8%

187.29

8.33

104.4%

Brazil

5.90

6.30

(0.40)

93.7%

5.30

5.30

0.00

0.60

111.3%

4.38

1.52

134.7%

China

126.00

126.00

0.00

100.0%

121.93

121.93

0.00

4.07

103.3%

121.02

4.98

104.1%

Selected Middle East

17.42

17.53

(0.11)

99.4%

18.96

18.92

0.04

(1.54)

91.9%

17.18

0.24

101.4%

North Africa

16.80

16.80

0.00

100.0%

19.72

19.72

0.00

(2.92)

85.2%

17.32

(0.52)

97.0%

Pakistan

25.00

25.00

0.00

100.0%

24.00

24.00

0.00

1.00

104.2%

23.30

1.70

107.3%

Southeast Asia

0.00

0.00

0.00

#DIV/0!

0.00

0.00

0.00

0.00

#DIV/0!

0.00

0.00

#DIV/0!

India

95.85

95.91

(0.06)

99.9%

93.51

93.51

0.00

2.34

102.5%

94.88

0.97

101.0%

Former Soviet Union - 12 Countries

112.65

112.35

0.30

100.3%

103.87

103.87

0.00

8.78

108.5%

77.80

34.85

144.8%

Russia

59.00

59.00

0.00

100.0%

52.09

52.09

0.00

6.91

113.3%

37.72

21.28

156.4%

Kazakhstan

13.00

13.00

0.00

100.0%

13.94

13.94

0.00

(0.94)

93.3%

9.84

3.16

132.1%

Ukraine

24.75

24.75

0.00

100.0%

22.28

22.28

0.00

2.47

111.1%

15.76

8.99

157.0%

 

Table 3. World Wheat Export Projections for “Current Crop” MY 2014/15, MY 2013/14, and MY 2012/13

World Wheat Exports                                                 by Major Country / Region

Wheat Exports: Current Crop 2014/15     March 2015

Wheat Exports: February  2014 Current Crop 2014/15                   (1 month ago)

Current Crop 2014/15 Exports:               March Less February  2014                    

Current Crop 2014/15 Exports:                Percent (%)         March of February  2014

March Wheat Exports: Last Year’s 2013/14          

February  Wheat Exports: Last Year’s 2013/14

March Less February  Wheat  Exports for Last Year’s 2013/14

Current Crop 2014/15 Exports Less Last year’s 2013/14

% Current Crop 2014/15 Exports of Last Year’s 2013/14

Wheat Exports: 2012/13                           (2 years ago)

Current Crop 2014/15 Exports Less 2012/13

% Last Year’s 2014/15 Exports       of 2012/13

 

mmt

mmt

mmt

Percent (%)

mmt

mmt

mmt

mmt

Percent (%)

mmt

mmt

Percent (%)

World

160.57

160.11

0.46

100.3%

165.77

165.81

(0.04)

(5.20)

96.9%

137.36

23.21

116.9%

United States

24.49

24.49

0.00

100.0%

32.01

32.01

0.00

(7.52)

76.5%

27.54

(3.05)

88.9%

Total Foreign

136.08

135.62

0.46

100.3%

133.76

133.79

(0.03)

2.32

101.7%

109.82

26.26

123.9%

Major Exporters

78.00

77.50

0.50

100.6%

75.98

75.98

0.00

2.02

102.7%

63.85

14.15

122.2%

Argentina

6.50

6.50

0.00

100.0%

2.20

2.20

0.00

4.30

295.5%

3.55

2.95

183.1%

Australia

17.00

17.00

0.00

100.0%

18.62

18.62

0.00

(1.62)

91.3%

18.66

(1.66)

91.1%

Canada

23.00

23.00

0.00

100.0%

23.24

23.24

0.00

(0.24)

99.0%

18.97

4.03

121.2%

European Union

31.50

31.00

0.50

101.6%

31.93

31.93

0.00

(0.43)

98.7%

22.68

8.82

138.9%

Major Importers

7.94

7.92

0.02

100.3%

5.26

5.26

0.00

2.68

151.0%

6.47

1.47

122.7%

Brazil

1.50

1.50

0.00

100.0%

0.08

0.08

0.00

1.42

1875.0%

1.58

(0.08)

94.9%

China

1.00

1.00

0.00

100.0%

0.89

0.89

0.00

0.11

112.4%

0.97

0.03

103.1%

Selected Middle East

1.53

1.53

0.00

100.0%

0.58

0.58

0.00

0.95

263.8%

0.69

0.84

221.7%

North Africa

0.55

0.55

0.00

100.0%

0.50

0.50

0.00

0.05

110.0%

0.61

(0.06)

90.2%

Pakistan

0.70

0.70

0.00

100.0%

0.75

0.75

0.00

(0.05)

93.3%

0.85

(0.15)

82.4%

Southeast Asia

0.86

0.84

0.02

102.4%

0.88

0.88

0.00

(0.02)

97.7%

0.77

0.09

111.7%

India

3.50

3.50

0.00

100.0%

6.05

5.90

0.15

(2.55)

57.9%

6.82

(3.32)

51.3%

Former Soviet Union - 12 Countries

37.66

37.74

(0.08)

99.8%

37.10

37.10

0.00

0.56

101.5%

25.38

12.28

148.4%

Russia

20.00

20.00

0.00

100.0%

18.53

18.53

0.00

1.47

107.9%

11.29

8.71

177.1%

Kazakhstan

6.00

6.00

0.00

100.0%

8.10

8.10

0.00

(2.10)

74.1%

6.29

(0.29)

95.4%

Ukraine

11.00

11.00

0.00

100.0%

9.76

9.76

0.00

1.24

112.7%

7.19

3.81

153.0%

 

Table 4. World Wheat Import Projections for “Current Crop” MY 2014/15, MY 2013/14, and MY 2012/13

World Wheat Imports                                                 by Major Country / Region

Wheat Imports: Current Crop 2014/15     March 2015

Wheat Imports: February  2014 Current Crop 2014/15                   (1 month ago)

Current Crop 2014/15 Imports:               March Less February  2014                    

Current Crop 2014/15 Imports:                Percent (%)         March of February  2014

March Wheat Imports: Last Year’s 2013/14          

February  Wheat Imports: Last Year’s 2013/14

March Less February  Wheat  Imports for Last Year’s 2013/14

Current Crop 2014/15 Imports Less Last year’s 2013/14

% Current Crop 2014/15 Imports of Last Year’s 2013/14

Wheat Imports: 2012/13                           (2 years ago)

Current Crop 2014/15 Imports             Less 2012/13

% Last Year’s 2014/15 Imports       of 2012/13

 

mmt

mmt

mmt

Percent (%)

mmt

mmt

mmt

mmt