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Grain Market Outlook

Wheat Market Outlook in February 2015

February 19, 2015


Summary

Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on February 10, 2014, U.S. wheat market prices traded in a volatile pattern – moving both higher and lower than the price range the day of the report.  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 3.4% 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 three marketing years, although still less than during the 2009/2010 through 2011/2012 period.  For the U.S., the USDA also lowered its projection of U.S. wheat exports for MY 2014/15 to the lowest level in 5 years.  Wheat prices in the U.S. are projected to be down to a four year low due to limited U.S. wheat exports and domestic livestock wheat feeding.  

The USDA projects that foreign wheat supplies are more than adequate to “mitigate” shortfalls in 2014 U.S. hard red winter wheat production in the Central and Southern plains states again in MY 2014/15 as in MY 2013/14.  Also, no other major production problems in competing World wheat exporting countries have yet emerged to the degree that the “large crop-over-supply” situation in World wheat markets has been changed.  However, there are developing concerns about wheat export supply availability from the Black Sea region, and the ongoing possibility of crop problems developing among major World wheat producers / exporters.  United States’ wheat exports have been reduced 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 (down 20 million bushels or ‘mb’ from January on reduced imports), 900 mb exports (down 25 mb), 2.084 bb total use (down 25 mb), 692 mb ending stocks (up 5 mb), 33.2% ending stocks-to-use (vs 32.6% last month), and a forecast U.S. price of $6.00 /bu (range of $5.85 to $6.15) – compared to $5.90-$6.30 ($6.10 midpoint) from January.    

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 scenarios, either “Trend Yield” or “Short Yield” scenarios, which are as follows.  A) “Trend Yield” Scenario: 60% prob. of 54.830 million acres (ma) planted, 46.105 ma harvested, 45.9 bu/ac trend yield, 2.116 billion bu. (bb) production, 2.958 bb total supplies, 1.050 bb exports, 2.260 bb total use, 698 mb end stocks, 30.9% S/U, $6.20 /bu U.S. average price. B) “Short Yield” Scenario: 40% prob. of 54.830 ma planted, 46.105 ma harvested, 43.5 bu/ac trend yield, 2.006 bb production, 2.858 bb total supplies, 1.025 bb exports, 2.224 bb total use, 634 mb end stocks, 28.5% S/U, $6.45 /bu U.S. average price.   The key assumption in these KSU projections is that there will be a moderate recovery in U.S. wheat exports. 

USDA World Wheat: World wheat total supplies of 912.5 mmt in “current crop” MY 2014/15 are up from 891.6 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 197.9 mmt (27.7% S/U) are up from 187.5 mmt (26.6% S/U) in MY 2013/14, and from 174.5 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. February USDA Reports & “Current Crop” MY 2014/15 Projections

On February 10th the USDA World Agricultural Outlook Board (WAOB) released its February 2015 World Agricultural Supply and Demand Estimates (WASDE) report – containing U.S. and World corn supply-demand and price projections for both the 2013/14 as well as for “current crop” 2014/15 marketing years. The “current crop” 2014/15 U.S. wheat marketing year will last from June 1, 2014 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 $8.62 per bushel on May 6, 2014 for the MARCH 2015 contract, Kansas hard red winter wheat futures trended sharply lower through the later part of September-early October – with the MARCH 2015 contract trading as low as $5.54 per bushel on October 1, 2014.  Following the early October low the MARCH 2015 contract trended higher through October – up to the $6.16-$6.17 range before trading lower again in early November (down to $5.70 ¼ on 11/10/2014) – after which wheat futures markets trended higher.  On Wednesday, December 18th CME Hard Red Winter Wheat futures traded as high as $7.05 ¾ per bushel – followed then by a downtrend in prices through late January-early February 2015, with MARCH 2015 Kansas hard red winter wheat futures declining as low as $5.33 on February 2nd

After a $0.24 ½ /bu move higher on February 3rd, MARCH 2015 Hard Red Winter Wheat futures prices responded to the release of the February 10th USDA reports by trading lower for the day.  MARCH 2015 HRW wheat efutures prices opened at $5.61 ¾ on Tuesday, February 10th. The USDA reports were released at midday (i.e., 11 a.m., central time).  Prices declined as high as $5.63 ½ and as low as $5.52 ¾ per bushel during the session before closing $0.09 ½ lower for the day at $5.54 /bu (Figure 1).   Since then, MARCH 2015 wheat traded in an essentially sideways pattern until February 17-18, when 1) weather and crop development concerns in the U.S., and 2) concerns about Black Sea geopolitical conflicts and future availability of wheat exports from that region of the World, caused prices to go as high as $5.82 ¼ before settling at $5.62 ¼ on 2/17, and then to trade as high as $5.70 and as low as $5.46 ¾ on 2/18, before closing at $5.48 for the day. 

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

Similarly, JULY 2015 Hard Red Winter wheat efutures prices opened at $5.68 ½ on Tuesday, February 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 $5.60 to $5.70 during the session before closing $0.08 ¾ lower for the day at $5.61 ¼ /bu (Figure 1).   Since then, JULY 2015 HRW wheat efutures prices have also risen from a low of $5.55 ¾ on February 11th up to a high of $5.86 on Tuesday, February 17th and then to a low of $5.53 ¾ on Wednesday, February 18th before closing at $5.55 ½ on that same day. 

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 89.71 on January 30, 2015, with the most recent index value of 89.31 on Tuesday, February 6th.  

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 (denominated or “priced” in U.S. dollars).  Although this is not the only factor that is negatively impacting U.S. wheat exports at this time, it is a very important one – working against U.S. wheat being an affordable, competitive alternative for buyers to consider in World wheat trade.

I-C. U.S. Wheat Production

U.S. All Wheat Acreage, Yield & Production

In its February 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 aggregate and by specific wheat class (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 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, the 2014 projection of 2.026 bb is still down from 2.135 bb in 2013, and 2.252 bb in 2012, while being up from 1.999 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 (‒ 4.6%) from 42.399 ma in 2013/2014, and down 2.78 ma (‒ 6.4%) from 43.230 ma in 2012/2013.   Winter wheat seedings in the U.S. have also been below 41.0 ma in year 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.

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 is down 17.8% from 718 mb in beginning stocks in MY 2013/14, and down from 743 mb in MY 2013/14.  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 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 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 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 are now projected to be 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 steady growth in the U.S. population and associated increases in demand for processed wheat products.  This projected amount of 960 mb in food use in “current crop” MY 2014/15 is trending steadily upward from 952 mb in MY 2013/14, from 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 74 mb in “current crop” MY 2014/15 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 over time, 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 down 25 mb from the January WASDE report, and are down sharply from 1.176 bb for 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 more than adequate foreign wheat supplies for export trade purposes, are both factors that have brought about this lower U.S. export projection.  That said, the risk of lower “current crop” MY 2014/15 Australian wheat production with the forecast onset of an El Nino weather pattern in coming months, as well as the uncertain impact on World wheat trade in the future from geopolitical conflicts (between Russian and Ukraine), and potential dry or otherwise adverse weather conditions in other major World wheat production areas are all factors that may by themselves or together 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 February 5th – the 36th week of the “current crop” 2014/15 marketing year for U.S. wheat – totaled 567.0 mb, which is 63.0% of the USDA’s projected “current crop” MY 2014/15 exports of 900 mb with 69.2% (36 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 20.8 mb per week through the remainder of the “current crop” 2014/15 marketing year to attain the USDA’s February 10th WASDE projection of 900 mb.  Wheat export shipments by the U.S. of 16.2 mb and 13.7 mb during the weeks ending January 29th and February 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 195.2 mb in U.S. wheat for “current crop” MY 2014/15 (that had not yet been shipped as of February 5th), total U.S. wheat shipped plus outstanding shipments added up to 762.2 mb (i.e., 567.0 mb shipped plus 195.2 mb forward sales).  This amounts to 84.7% of the USDA’s projection of 900 mb for “current crop” MY 2014/15 with 69.2% of the marketing year having already occurred (i.e., 36 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.  The potential exists during the remainder of “current crop” MY 2014/15 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 is being cited as a 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 6).  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 at lower market prices than during the “drought stricken” MY 2012/13 for feedgrains.  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.

Total U.S. Wheat UseTotal use of U.S. wheat for “current crop” MY 2014/15 is projected to be 2.084 bb, which would be the 3rd smallest amount of U.S. wheat total usage since MY 2004/05 (Figure 6).  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.

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 692 mb, up 5 mb from January and up 38 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 a projected amount of 692 mb in “current crop” MY 2014/15.

Percent (%) ending stocks-to-use for U.S. wheat of 33.2% in “current crop” MY 2014/15 is up marginally 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 from 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 33.2% 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 $5.85-$6.15 per bushel (“/bu”) (midpoint = $6.00 /bu) – down by $0.05 /bu on the lower end and by $0.15 /bu on the upper end of the price range from the January WASDE report, with the midpoint being down by $0.10 per bushel from a month ago (Table 1 and Figures 7-8).  Since 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 $5.85-$6.15 /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.   

 

Month

% Avg. Sales by Month

2/2/2015

Scenario

2/17/2015

Scenario

“Spring 2015 Price 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 Forecast

7.6%

$5.44

$5.91

$5.91

February Forecast

5.2%

$5.44

$5.91

$5.91

March Forecast

6.0%

$5.48

$5.92

$8.00

April Forecast

4.6%

$5.48

$5.92

$8.00

May Forecast

4.1%

$5.52

$5.87

$8.00

Totals

100.0% of Grain Sales

$5.91 MYA

U.S. Wheat $

$6.04 MYA

U.S. Wheat $

$6.34 MYA

U.S. Wheat $

 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 February 2nd and February 18th, using a combination of known prices (June through December), and futures-based projections (January through May). 

The February 2nd estimate for MY 2014/15 equaled $5.91 per bushel – calculated prior to the USDA February 10th WASDE forecast of $6.00 – which was down $0.10 from the previous month’s projection.  The February 18th estimate for MY 2014/15 is up to $6.04 due to an uptrend in MARCH 2015, MAY 2015, and JULY 2015 Kansas Wheat futures over the February 3rd-18th time period.

Impact of Potential March-May 2015 Price Rallies: Even if World wheat markets were to jump sharply higher in coming months due to either a) Black Sea Region wheat export issues, b) large winter wheat production problems in the U.S. central and southern Great Plains, 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 “shock” occurred in the U.S. and World wheat market leading to a strong rally during the March-May 2015 time period, there would be a positive impact on the “current crop” MY 2014/15 average U.S. wheat prices, but would only raise it by about $0.30 per bushel, from the USDA’s February 10th projection of $6.00 up to approximately $6.34 per bushel.  The cumulative weight of a 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).  With 85.3% of the price determined by June 2014 through February 2015 prices, the sharply higher prices of March-May 2015 would have a limited impact.  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

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 for the remainder of “current crop” MY 2014/15, and from June 2015 through May 2016 for “next crop” MY 2015/16 will depend of course 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.  It is still possible that the major geopolitical conflict that is occurring in the Black Sea Region between major wheat exporters Russia and Ukraine cold significantly disrupt the flow of wheat shipments from that area, or that 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 will be on uncertainty associated with 2015 U.S. production and total supplies. 

In the KSU forecast that follows, total U.S. wheat planted acreage in 2015 of 54.830 ma is assumed to be the amount of winter wheat planted acreage in the January 12, 2014 USDA NASS Winter Wheat Seedings report of 40.452 ma plus the five year 2010-2014 average of U.S. other spring wheat planted acres (12.602 ma), and of durum wheat (1.776 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 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. KSU “Next Crop” MY 2015/16 U.S. Wheat Projection – Trend Yield = 45.9 bu/ac

These KSU U.S. wheat supply-demand and price projections for “next crop” MY 2015/16 reflect the outcome under trend line wheat yields of 45.9 bushels per acre.  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.  

It is estimated here 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 2.116 bb – up 4.4% 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 February WASDE forecast of 900 mb.  Total use of U.S. wheat in “next crop” MY 2015/16 is projected here to be 2.260 bb, up 201 mb (+9.6%) from 2.084 bb projected by the USDA in “current crop” MY 2014/15.  

With these KSU projections, U.S. wheat ending stocks would equal 673 mb, with % ending stocks-to-use estimated to be 29.45% 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 $0.20 to $6.20 per bushel for “next crop” MY 2015/16 (Table 1 and Figures 8-9). 

 “Next crop” 2015/16 KSU Scenario for U.S. Wheat Supply-Demand – 60% Probability

- U.S. Planted Area (mln. acres or ‘ma’)   = 54.830 ma                ò  3.5% (‒1.992 ma) from 2014

- U.S. Harvested Area (ma)                  = 46.105 ma                ò  0.5% (‒0.726 ma)

- U.S. Wheat Yield (bu./acre)                = 45.9 bu/ac                ñ  2.2 bu/ac from 43.7 bu/ac in 2004

- U.S. Production (billion bu. or ‘bb’)       =   2.116 bb                 ñ  4.4% (+90 mb)

- Total Supplies (bb)                           =   2.958 bb                 ñ  6.6% (+182 mb) from MY 2014/15

- Exports                                              =   1.050 bb                 ñ16.7% (+150 mb)

- Total Use                                          =   2.260 bb                 ñ  8.4% (+176 mb)

- End Stocks                                         =   0.698 bb                 ñ  0.9% (+6 mb)

- % Ending Stocks/Use                      = 30.88%                     vs 33.20% S/U in MY 2014/15

- U.S. Wheat Price                             = $6.20 /bu                 vs $6.00, ñ$0.20/bu vs MY 2014/15

This KSU projection of U.S. wheat prices of $6.20 /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.  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., 1.075 bb rather than the USDA’s February 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 – 100 mb lower than the 1.050 bb projection, then ending stocks are 798 mb, % ending stocks to use are 36.94%, and marketing year average prices would be projected at approximately $5.70 /bu.   

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

It is estimated here 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 2.006 bb – down 1.0% or 20 mb 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 1.025 bb, i.e., 125 mb (+13.9%) higher than the USDA’s February WASDE forecast of 900 mb.  Total use of U.S. wheat in “next crop” MY 2015/16 is projected here to be 2.224 bb, up 140 mb (+6.7%) from 2.084 bb projected by the USDA in “current crop” MY 2014/15.  

With these KSU projections, U.S. wheat ending stocks would equal 634 mb, with % ending stocks-to-use estimated to be 28.51% 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 $0.45 to $6.45 per bushel for “next crop” MY 2015/16 (Table 1 and Figures 8-9). 

 “Next crop” 2015/16 KSU Scenario for U.S. Wheat Supply-Demand – 40% Probability

- U.S. Planted Area (mln. acres or ‘ma’)   = 54.830 ma                ò  3.5% (‒1.992 ma) from 2014

- U.S. Harvested Area (ma)                  = 46.105 ma                ò  0.5% (‒0.726 ma)

- 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’)       =   2.006 bb                 ò  1.0% (‒20 mb)

- Total Supplies (bb)                           =   2.858 bb                 ñ  3.0% (+82 mb) from MY 2014/15

- Exports                                              =   1.025 bb                 ñ13.9% (+125 mb)

- Total Use                                          =   2.224 bb                 ñ  6.7% (+140 mb)

- End Stocks                                         =   0.634 bb                 ò  8.4% (‒58 mb)

- % Ending Stocks/Use                      = 28.51%                     vs 33.20% S/U in MY 2014/15

- U.S. Wheat Price                             = $6.45 /bu                 vs $6.00, ñ$0.45/bu vs MY 2014/15

As with the earlier projection, this KSU projection of U.S. wheat prices of $6.45 /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., 1.050 bb rather than the USDA’s February 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 – 75 mb lower than the 1.025 bb projection, then ending stocks are 709 mb, % ending stocks to use are 32.99%, and marketing year average prices would be projected at approximately $6.05 /bu.    

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 912.5 mmt, up 20.9 mmt (up 2.3%) from 891.6 mmt a year ago, and up 57.1 mmt (up 6.7%) 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 12.7% from two years ago in MY 2012/13.  

Wheat producing areas of the World from which annual variations in wheat production 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 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 725.0 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 725.0 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 613-687 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 669.9 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 November WASDE report.  Year-over-year increases in wheat production are projected in Argentina (up 2.0 mmt to 12.0 mmt), the European Union (up 12.2 to 155.7 mmt), Brazil (up 1.0 to 6.3 mmt), China (up 4.1 to 126.0 mmt), Pakistan (up 1.0 to 25.0 mmt), India (up 2.4 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 3.0 to 24.0 mmt), Canada (down 8.2 to 29.3 mmt), selected Middle Eastern Countries (down 1.4 to 17.5 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 (17.5 mmt), North Africa (16.8 mmt), Kazakhstan (13.0 mt), Argentina (12.5 mmt), and Brazil (6.3 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 3.4% from 165.8 mmt in MY 2013/14, while also up 16.6% from 137.4 mmt in MY 2012/13 (Table 3).  Foreign (non-U.S.) wheat exports are projected to be 135.6 mmt in “current crop” MY 2014/15, up 1.4% from 133.8 mmt in MY 2013/14, and up 23.5% 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, Brazil, China, selected Middle Eastern countries, North Africa (marginal), Russia, and Ukraine.  However, decreased exports are projected for the United States, Australia, Canada, the EU, Pakistan, Southeast Asia, India, and Kazakhstan. 

The largest projected exporter of wheat in “current crop” MY 2014/15 is the European Union (31.0 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), China (1.0 mmt), and Brazil (1.0).

II-C. World Wheat Imports by Country / Region

Global wheat imports in “current crop” MY 2014/15 are projected to be 157.4 mmt, up 0.4% from 156.65 mmt in MY 2013/14, and up 9.1% from 144.2 mmt in MY 2012/13 (Table 4).  Foreign (non-U.S.) wheat imports are projected to be 153.0 mmt in “current crop” MY 2014/15, up 0.6% from 152.1 mmt in MY 2013/14, and up 8.6% 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, selected Middle Eastern countries, Pakistan, Southeast Asia, 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, North Africa, and Russia. 

North Africa (24.4 mmt) is projected to be the largest World wheat importer in “current crop” MY 2014/15, followed by Selected Middle Eastern countries (23.3 mmt), Southeast Asia (17.2 mmt), Brazil (6.7 mmt), the Former Soviet Union (12 countries) (7.6 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 139.7 mmt, up 7.0% from 130.5 mmt in MY 2013/14, and up 1.8% from 137.2 mmt in MY 2012/13 (Table 5).   Foreign (non-U.S.) wheat domestic feed use is projected to be 135.6 mmt in “current crop” MY 2014/15, up 9.0% from 124.4 mmt in MY 2013/14, and up 6.6% from 127.2 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 the European Union, China, selected Middle Eastern countries, Pakistan, Southeast Asia, Russia, and Ukraine.  Declines in domestic wheat feeding are forecast for the United States, Canada, North Africa, and India, with little or no changes for Argentina, Australia, 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), selected Middle East countries (4.7 mmt), Canada (4.5 mmt), India (4.5 mmt), the United States (4.1 mmt), Ukraine (4.0 mmt), Australia (3.6 mmt), Southeast Asia (2.7 mmt), North Africa (2.3 mmt), Kazakhstan (2.0 mmt), Pakistan (1.2 mmt), Brazil (0.7 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 575.0 mmt, up 0.2% from 573.6 mmt in MY 2013/14, and up 6.0% from 542.6 mmt in MY 2012/13 (Table 6).  Foreign (non-U.S.) wheat FSI use is projected to be 546.8 mmt in “current crop” MY 2014/15, up 0.2% from 545.6 mmt in MY 2013/14, and up 6.2% 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. 

China (101.0 mmt) is projected to be the largest World FSI user of wheat in “current crop” MY 2014/15, followed by India (89.5 mmt), the European Union (68.5 mmt), North Africa (40.1 mmt), selected Middle Eastern countries (33.9 mmt), the United States (28.1 mmt), Pakistan (23.9 mmt), Russia (22.5 mmt), Southeast Asia (13.8 mmt), Brazil (11.3 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 714.6 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 679.9 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 682.4 mmt in “current crop” MY 2014/15, up 1.9% from 670.0 mmt in MY 2013/14, and up 6.3% from 642.1 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 the European Union, Brazil, China, selected Middle Eastern countries, Pakistan, Southeast Asia, Russia, and Ukraine.  Marginal or no changes are projected for Argentina, Australia, North Africa, India, and Kazakhstan.  Decreases in total wheat usage are forecast for the United States and Canada.

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 (94.0 mmt), North Africa (42.4 mmt), selected Middle Eastern countries (38.6 mmt), Russia (35.5 mmt), the United States (32.2 mmt), Pakistan (25.1 mmt), Southeast Asia (16.6 mmt), Brazil (12.0 mmt), Ukraine (12.0 mmt), Canada (9.8 mmt), Australia (7.0 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 197.9 mmt for “current crop” MY 2014/15 is up 5.5% from 187.5 mmt in MY 2013/14, and up 12.7% from 175.5 mmt in MY 2012/13, and is comparable to the range of 196.8-201.9 mmt over the MY 2009/10 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 179.0 mmt in “current crop” MY 2014/15, up 4.4% from 171.4 mmt in MY 2013/14, and up 14.8% from 156.0 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, Australia, the European Union, China, selected Middle Eastern countries, Russia, Kazakhstan, and Ukraine.  Decreases are projected for Argentina, Canada, Brazil, North Africa, Southeast Asia, and India.  A marginal change 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), the European Union (16.3), India (16.3 mmt), North Africa (11.7 mmt), selected Middle Eastern countries (10.8 mmt), Russia (9.1 mmt), Canada (6.6 mmt), Australia (6.4 mmt), Ukraine (5.5 mmt), Southeast Asia (3.3 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 is 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 20.7% 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, Australia, the European Union, China, Russia, Kazakhstan, and Ukraine.  Decreases are projected for Argentina, Canada, Brazil, North Africa, Pakistan, Southeast Asia, and India.  No change is projected for selected Middle Eastern countries,

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 (33.2%), North Africa (27.3%), selected Middle Eastern countries (27.0%), Australia (26.6%), Ukraine (23.8%), Kazakhstan (20.2%), Canada (20.1%), Argentina (19.4%), Southeast Asia (19.2%), India (16.7%), Russia (16.3%), the European Union (10.5%), Brazil (10.3%), 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 negative 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 25.6% in MY 2012/13.

Table 1. U.S. Wheat Supply-Demand Balance Sheet: MY 2008/09 – “Next Crop” MY 2015/16
(February 10th USDA WASDE & adjusted Agricultural Baseline forecasts, & KSU 2014/15-2015/16 Projections)

Item

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

2014/15

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

54.830

54.830

Harvested Area (million acres)

56.036

49.841

46.883

45.687

48.758

45.332

46.381

46.105

46.105

% Harvested/Planted Area

88.1%

84.5%

89.1%

84.2%

88.2%

80.6%

81.6%

84.1%

84.1%

Yield / harvested acre (bu/ac)

44.8

44.3

46.1

43.6

46.2

47.1

43.7

**45.9

**43.5

 

Million Bushels

Beginning Stocks

306

657

976

862

743

718

590

692

692

Production

2,512

2,209

2,163

1,993

2,252

2,135

2,026

2,116

2,006

Imports

127

119

97

112

123

169

160

150

160

Total Supply

2,945

2,984

3,236

2,968

3,118

3,021

2,776

2,958

2,858

 

 

Food Use

927

919

926

941

945

952

960

970

965

Seed Use

78

68

71

76

73

77

74

75

74

Exports

1,015

879

1,291

1,051

1,012

1,176

900

**1,050

**1,025

Feed & Residual Use

268

150

85

162

370

226

150

165

160

Total Use

2,288

2,008

2,373

2,226

2,400

2,431

2,084

2,260

2,224

 

 

Ending Stocks

657

976

863

743

718

590

692

698

634

% Ending Stocks-to-Use

28.72%

48.61%

36.37%

33.38%

29.92%

24.27%

33.20%

30.88%

28.51%

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

$6.78

$4.87

$5.70

$7.24

 

$7.77

 

$6.87

$5.85-$6.15 ($6.00)

$5.70-$6.70

($6.20)

$5.95-$6.95

($6.45)


 

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

Text Box: U.S. Winter Wheat acreage in 2015 projected to be ò 5% vs 2014
KSU Estimate of All U.S. Wheat Acres in 2015 = 54.830 mln ac. (ò1.99 ma or 3.5%)

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 (February 10, 2015)

Text Box: USDA 2014 Yield = 43.7 bu/ac
KSU 2015 trend: 45.9 bu/ac 
10 year Minimum = 38.6 bu/ac
10 year Maximum = 47.1 bu/ac
 

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


 

Figure 7. Trends in U.S. Wheat Use & Ending Stocks: MY 2004/05 - 2014/15 Plus KSU 2015/16 Projections
(February 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
(February 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 KSU “Next Crop” MY 2015/16 Projections           

Text Box: 2011/12
Text Box: KSU “Next Crop” MY 2015/16
30.9% S/U, $6.20 /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                     
(February 10, 2015 USDA WASDE Report)

Text Box: Wheat Trade
133-166 mmt since MY 2008/09
 
160.1 mmt in MY 2014/15
Text Box: Wheat Usage
ñ12.2 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
197.8 mmt in “current crop” MY 2014/15
 
Up 68.2 mmt (+53%) 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     February 2015

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

New Crop 2014/15 Production:               February Less January 2015                    

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

February Wheat Production: Last Year’s 2013/14          

January  Wheat Production: Last Year’s 2013/14

February Less January  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

725.03

723.38

1.65

100.2%

716.14

715.36

0.78

8.89

101.2%

658.54

66.49

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

669.91

668.26

1.65

100.2%

658.03

657.25

0.78

11.88

101.8%

597.24

72.67

112.2%

Major Exporters

221.49

220.81

0.68

100.3%

218.55

218.55

0.00

2.94

101.3%

193.31

28.18

114.6%

Argentina

12.50

12.00

0.50

104.2%

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%

27.01

27.01

0.00

(3.01)

88.9%

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

155.51

0.18

100.1%

143.51

143.51

0.00

12.18

108.5%

133.95

21.74

116.2%

Major Importers

196.14

196.14

0.00

100.0%

194.06

194.06

0.00

2.08

101.1%

187.29

8.85

104.7%

Brazil

6.30

6.30

0.00

100.0%

5.30

5.30

0.00

1.00

118.9%

4.38

1.92

143.8%

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

17.53

17.53

0.00

100.0%

18.92

18.92

0.00

(1.39)

92.7%

17.18

0.35

102.0%

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

95.91

95.91

0.00

100.0%

93.51

93.51

0.00

2.40

102.6%

94.88

1.03

101.1%

Former Soviet Union - 12 Countries

112.35

111.60

0.75

100.7%

103.87

103.87

0.00

8.48

108.2%

77.80

34.55

144.4%

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

12.50

0.50

104.0%

13.94

13.94

0.00

(0.94)

93.3%

9.84

3.16

132.1%

Ukraine

24.75

24.50

0.25

101.0%

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     February 2015

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

Current Crop 2014/15 Exports:               February Less January  2014                    

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

February Wheat Exports: Last Year’s 2013/14          

January  Wheat Exports: Last Year’s 2013/14

February Less January  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

160.11

159.19

0.92

100.6%

165.81

165.83

(0.02)

(5.70)

96.6%

137.36

22.75

116.6%

United States

24.49

25.17

(0.68)

97.3%

32.01

32.01

0.00

(7.52)

76.5%

27.54

(3.05)

88.9%

Total Foreign

135.62

134.02

1.60

101.2%

133.79

133.82

(0.03)

1.83

101.4%

109.82

25.80

123.5%

Major Exporters

77.50

76.50

1.00

101.3%

75.98

75.98

0.00

1.52

102.0%

63.85

13.65

121.4%

Argentina

6.50

6.00

0.50

108.3%

2.20

2.20

0.00

4.30

295.5%

3.55

2.95

183.1%

Australia

17.00

17.50

(0.50)

97.1%

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

31.00

30.00

1.00

103.3%

31.93

31.93

0.00

(0.93)

97.1%

22.68

8.32

136.7%

Major Importers

7.92

7.42

0.50

106.7%

5.26

5.28

(0.02)

2.66

150.6%

6.47

1.45

122.4%

Brazil

1.50

1.00

0.50

150.0%

0.08

0.10

(0.02)

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

0.84

0.84

0.00

100.0%

0.88

0.88

0.00

(0.04)

95.5%

0.77

0.07

109.1%

India

3.50

3.50

0.00

100.0%

5.90

5.90

0.00

(2.40)

59.3%

6.82

(3.32)

51.3%

Former Soviet Union - 12 Countries

37.74

37.74

0.00

100.0%

37.10

37.10

0.00

0.64

101.7%

25.38

12.36

148.7%

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     February 2015

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

Current Crop 2014/15 Imports:               February Less January  2014                    

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

February Wheat Imports: Last Year’s 2013/14          

January  Wheat Imports: Last Year’s 2013/14

February Less January  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

Percent (%)

mmt

mmt

Percent (%)

World

157.35

156.89

0.46

100.3%

156.65

156.74

(0.09)

0.70

100.4%

144.22

13.13

109.1%

United States

4.35

4.90

(0.55)

88.8%

4.59

4.59

0.00

(0.24)

94.8%

3.34

1.01

130.2%

Total Foreign

153.00

151.99

1.01

100.7%

152.06

152.16

(0.10)

0.94

100.6%

140.88

12.12

108.6%

Major Exporters

6.17

6.14

0.03

100.5%

4.60

4.60

0.00

1.57

134.1%

5.91

0.26

104.4%

Argentina

0.04

0.01

0.03

400.0%

0.02

0.02

0.00

0.02

200.0%

0.00

0.04

#DIV/0!

Australia

0.15

0.15

0.00

100.0%

0.15

0.15

0.00

0.00

100.0%

0.14

0.01

107.1%

Canada

0.48

0.48

0.00

100.0%

0.45

0.45

0.00

0.03

106.7%

0.48

0.00

100.0%

European Union

5.50

5.50

0.00

100.0%

3.98

3.98

0.00

1.52

138.2%

5.28

0.22

104.2%

Major Importers

84.38

83.63

0.75

100.9%

87.32

87.32

0.00

(2.94)

96.6%

79.47

4.91

106.2%

Brazil

6.70

7.00

(0.30)

95.7%

7.07

7.07

0.00

(0.37)

94.8%

7.36

(0.66)

91.0%

China

1.50

1.50

0.00

100.0%

6.77

6.77

0.00

(5.27)

22.2%

2.96

(1.46)

50.7%

Selected Middle East

23.28

23.08

0.20

100.9%

20.69

20.69

0.00

2.59

112.5%

20.86

2.42

111.6%

North Africa

24.35

23.75

0.60

102.5%

25.24

25.24

0.00

(0.89)

96.5%

22.06

2.29

110.4%

Pakistan

0.75

0.70

0.05

107.1%

0.39

0.39

0.00

0.36

192.3%

0.05

0.70

1500.0%

Southeast Asia

17.20

17.00

0.20

101.2%

16.40

16.40

0.00

0.80

104.9%

15.76

1.44

109.1%

India

0.05

0.05

0.00

100.0%

0.03

0.03

0.00

0.02

166.7%

0.02

0.03

250.0%

Former Soviet Union - 12 Countries

7.64

7.29

0.35

104.8%

7.39

7.39

0.00

0.25

103.4%

7.23

0.41

105.7%

Russia

0.35

0.20

0.15

175.0%

0.80

0.80

0.00

(0.45)

43.8%

1.17

(0.82)

29.9%

Kazakhstan

0.40

0.20

0.20

200.0%

0.01

0.01

0.00

0.39

4000.0%

0.01

0.39

4000.0%

Ukraine

0.05

0.05

0.00

100.0%

0.07

0.07

0.00

(0.02)

71.4%

0.05

0.00

100.0%

 

Table 5. World Wheat Feed Use Projections for “Current Crop” MY 2014/15, MY 2013/14, and MY 2012/13

World Wheat Feed Use                                                 by Major Country / Region

Wheat Feed Use: Current Crop 2014/15     February 2015

Wheat Feed Use: January  2014 Current Crop 2014/15                   (1 month ago)

Current Crop 2014/15 Feed Use: February Less January  2014                    

Current Crop 2014/15 Feed Use: Percent (%)         February of January  2014

February Wheat Feed Use: Last Year’s 2013/14          

January  Wheat Feed Use: Last Year’s 2013/14

February Less January  Wheat  Feed Use for Last Year’s 2013/14

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

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

Wheat Feed Use: 2012/13                           (2 years ago)

Current Crop 2014/15 Feed Use             Less 2012/13

% Last Year’s 2014/15 Feed Use of 2012/13

 

mmt

mmt

mmt

Percent (%)

mmt

 

mmt

mmt

Percent (%)

mmt

mmt

Percent (%)

World

139.70

139.40

0.30

100.2%

130.52

130.30

0.22

9.18

107.0%

137.24

2.46

101.8%

United States

4.08

4.08

0.00

100.0%

6.14

6.14

0.00

(2.06)

66.4%

10.07

(5.99)

40.5%

Total Foreign

135.62

135.32

0.30

100.2%

124.38

124.16

0.22

11.24

109.0%

127.18

8.44

106.6%

Major Exporters

64.20

64.50

(0.30)

99.5%

56.63

56.49

0.14

7.57

113.4%

59.06

5.14

108.7%

Argentina

0.10

0.10

0.00

100.0%

0.10

0.10

0.00

0.00

100.0%

0.30

(0.20)

33.3%

Australia

3.60

3.40

0.20

105.9%

3.60

3.60

0.00

0.00

100.0%

3.40

0.20

105.9%

Canada

4.50

5.00

(0.50)

90.0%

4.93

4.79

0.14

(0.43)

91.3%

4.36

0.14

103.2%

European Union

56.00

56.00

0.00

100.0%

48.00

48.00

0.00

8.00

116.7%

51.00

5.00

109.8%

Major Importers

35.50

35.45

0.05

100.1%

32.40

32.40

0.00

3.10

109.6%

35.39

0.11

100.3%

Brazil

0.70

1.00

(0.30)

70.0%

0.60

0.60

0.00

0.10

116.7%

0.20

0.50

350.0%

China

23.00

23.00

0.00

100.0%