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Wheat Market Outlook in Mid-June 2016

June 22, 2016


Summary

Since the USDA’s June 10th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) report, U.S. and World wheat market prices have fallen sharply – especially as the U.S. hard red winter wheat harvest has advanced.  For the “new crop” 2016/17 marketing year the USDA projected: 1) World wheat total supplies of 973.8 mmt and total use of 716.0 mmt – both at record high levels, 2) that at least marginally weaker trade continues in World wheat exports with 165.7 mmt in the “new” marketing year – down from 168.3 mmt last year, but up from 164.1 mmt two years ago, 3) World wheat ending stocks at a record high 257.8 mmt compared to 243.0 mmt last year, and 216.5 mmt two years ago, and 4) World wheat percent ending stocks-to-use of 36.0% - up from 34.3% last year and from 30.7% two years ago – up to their highest level in 15 years (since MY 2001/02).  For a perspective on how historically large World wheat stocks and percent stocks-to-use are, the 34-year low in World wheat ending stocks of 128.7 mmt and at least a 57-year low in percent ending stocks-to-use of 20.9% S/U both occurred in MY 2007/08, the last major World wheat “short crop” marketing year.  The “large crop-over supply” situation that exists in World and U.S. wheat markets continues to have a strong prevailing negative influence on World wheat prices. 

It is likely that significant World wheat production problems and/or trade disruptions would need to occur in coming weeks and months in order to have wheat prices recover significantly in spring-summer 2016.  Ongoing strength in the U.S. dollar exchange rate – although it has been weakening recently – also is a serious negative factor that is limiting U.S. wheat exports, resulting in higher U.S. wheat ending stocks and % ending stocks-to-use, and is consequently causing U.S. wheat prices to fall sharply. 

USDA U.S. Wheat S/D Forecast for “Old Crop” MY 2015/16: The USDA made minor changes in its supply-demand and price projections for U.S. wheat in the “old crop” 2015/16 marketing year – with 2.052 billion bushels (bb) production, 2.921 bb total supplies (down 3 mb on reduced imports), 960 million bushels (mb) of food use, 775 mb of exports (down 5 mb), 140 mb of feed use, 1.941 bb of total use (down 5 mb), 980 mb ending stocks (up 2 mb), and 50.49% ending-stocks-to-use (up from 50.24% in May to the highest level since 48.6% in MY 2009/10).  The USDA forecast of “old crop” MY 2015/16 U.S. average wheat prices to be $4.90 /bu – the lowest U.S. wheat marketing year average price since $4.87 /bu in MY 2009/10 when U.S. wheat ending stocks-to-use was 48.58%.

USDA U.S. Wheat S/D Forecast for “New Crop” MY 2016/17:  The USDA projected 2016 U.S. wheat plantings of 49.559 million acres (ma) – down 5.085 ma from 2015.  The USDA also implicitly forecast 2016 harvested acres of 42.737 ma which would be down 4.357 ma (-9.25%) vs 2015.  Based on projected 2016 U.S. wheat yields of 48.6 bu/ac (up from 43.6 bu/ac in 2015), 2016 U.S. wheat production is projected to be 2.077 bb (vs 2.052 bb in 2015), with total supplies of 3.182 bb (up from 2.921 bb in “old crop” MY 2015/16), and total use of 2.132 bb (up from 1.941 bb in “old crop” MY 2015/16).  Given these numbers, the USDA projected “new crop” MY 2016/17 ending stocks of 1.050 bb (vs 980 mb a year ago), with percent ending stocks-to-use of 49.25% S/U (vs 50.49% last year).  U.S. wheat average prices are projected to be in the range of $3.60 to $4.40 (midpoint = $4.00 /bu) – down from $4.90 /bu in “old crop” MY 2015/16.   It is assumed by Kansas State University that these USDA projections for “new crop” MY 2016/17 have a 35% probability of occurring.

KSU U.S. Wheat S/D Forecasts for “New Crop” MY 2016/17:  Three alternative KSU-Scenarios for U.S. wheat supply-demand and prices are presented for “new crop” MY 2016/17, with each assuming the same 2016 planted acreage as USDA.  However, based on historical U.S. percent harvested-to-planted acreage relationships, these KSU projections assumed 1.000 million less acres harvested than the implicit USDA estimate.  These KSU projections also assume at least a moderation in the high value of the U.S. dollar, and some improvement in U.S. wheat exports as a result.  A) KSU “Trend Yield – Moderate $USD” Scenario (30% probability) assumes for “new crop” MY 2016/17: 49.559 ma planted, 41.737 ma harvested, 46.0 bu/ac yield, 1.920 bb production, 3.025 bb total supplies, 850 mb exports, 2.079 bb total use, 946 mb ending stocks, 45.50% S/U, & $4.40 /bu U.S. wheat average price;  B) KSU “Trend Yield – Foreign Crop Problems – Moderate $USD” Scenario (15% probability) assumes: 49.559 ma planted, 41.737 ma harvested, 46.0 bu/ac yield, 1.920 bb production, 3.025 bb total supplies, 1.100 bb exports, 2.329 bb total use, 696 mb ending stocks, 29.88% S/U, & $5.50 /bu U.S. wheat average price;  and C) KSU “Trend Yield – Fall 2017 Crop Problems – Moderate $USD” (20% prob.) assumes for “new crop” MY 2016/17: 49.559 ma planted, 41.737 ma harvested, 46.0 bu/ac yield, 1.920 bb production, 3.025 bb total supplies, 1,000 mb exports, 2.229 bb total use, 796 mb ending stocks, 35.71% S/U, & $5.10 /bu U.S. wheat average price.


I. U.S. Wheat Market Situation & Outlook

I-A. June 10th USDA Crop Production & WASDE Reports

On June 10th the USDA National Agricultural Statistics Service (NASS) released its June 2016 Crop Production report – containing U.S. winter wheat harvested acreage, yield and production forecasts for 2016 – with information specific to the 2016 U.S. hard red winter (HRW) wheat, soft red winter (SRW) wheat, and white winter (WW) wheat crops.  

The NASS 2016 U.S. winter wheat production forecast was derived by USDA using a combination of a) an objective yield survey, and b) a farmer operator survey – both conducted during the May 25 – June 7 period. 

The objective yield survey was conducted in 10 states that accounted for 68% of 2015 U.S. winter wheat production.  Farm operators were interviewed to update previously reported acreage data, and to seek permission to randomly locate sample plots in selected winter wheat fields. Projected biological yields were calculated from these farmer plots – assessing number of wheat stalks, heads in late boot stage, and the number of emerged heads to develop a count of the number of heads that would be harvested. These same plots had been originally surveyed in late April – early May to monitor wheat development and update the USDA’s yield projections on a plot-by-plot basis, and will be revisited again on a monthly basis through and after harvest – to eventually obtain estimates of 2016 wheat harvest losses.

The farm operator survey included a sample of approximately 4,500 wheat producers representing all major U.S. wheat producing areas.  Producers were contacted by a combination of mail correspondence, internet and personal interviews, and were asked about likely wheat yields on their farms in 2016.

On June 10th the USDA World Agricultural Outlook Board (WAOB) also released its June 2016 World Agricultural Supply and Demand Estimates (WASDE) report – containing U.S. and World wheat supply-demand and price projections for the 2014/15, “old crop” 2015/16, and “new crop” 2016/17 marketing years.  The “old crop” 2015/16 marketing year for U.S. wheat began on 6/1/2015 and lasted through 5/31/2016, with “new crop” MY 2016/17 beginning 6/1/2016 and continuing through 5/31/2017. 

However, more current farmer survey-based information on 2016 planted and harvested acreage for U.S. wheat and other major and minor crops will be made available by USDA NASS in its’ June 30th 2016 Acreage report.  The findings of the USDA 2016 Acreage report will provide information from surveys of nearly 70,000 U.S. farm operators that were conducted the first two weeks in June 2016, supplemented with historical planted-to-harvested acreage relationships and the historic accuracy of past USDA Acreage report projections. 

I-B. CME Kansas Hard Red Winter Wheat JULY & DECEMBER 2016 Futures

Since a low of $4.52 ¾ on April 11, 2016, JULY 2016 Chicago Mercantile Exchange (CME) Kansas hard red winter wheat futures prices traded up to a high of $5.09 ¼ on April 21st.  Then after falling to lows of $4.41 ¼ on May 11th and 12th, JULY 2016 CME KS HRW Wheat futures traded higher again to $4.95 ½ on June 8th before moving lower again to a low of $4.77 ½ on June 21st before closing at $4.78 on that same day (Figure 1).  

Similarly, since a low of $4.88 on April 11, 2016, DECEMBER 2016 CME Kansas hard red winter wheat futures prices traded up to a high of $5.45 on April 21st.  Then after falling to a low of $4.83 ½ on May 11th, DECEMBER 2016 CME KS HRW Wheat futures traded sideways then higher again to $5.35 ½ on June 8th before moving lower again to to a high of $4.34 ½ on June 21st before closing at $4.35 on that same day (Figure 1). 

Figure 1. JULY 2016 & DECEMBER 2016 CME Kansas Wheat Futures Price Charts

 

 

I-C. Kansas Wheat Seasonal Average Cash Price Trends

Seasonal average price index trends for Kansas wheat over the last 15 years indicate definite seasonal impacts on wheat prices.  Meanwhile, the U.S. average cash price of wheat in the “old crop” 2015/16 marketing year has generally moved sideways-to-lower (Figure 2a).  “Old crop” MY 2015/16 for U.S. wheat began on June 1, 2015 and concluded May 31, 2016.  Prices declined from June 2015 through September, moved sideways with some variation from October through January 2016, and then trended mostly lower from February through May 2016. 

Since MY 1999/2000 Kansas hard red winter wheat prices have typically been weakest during the harvest month of July, with an average seasonal price index of 96.9% of the unweighted average marketing year average Kansas wheat cash price for the June through May marketing year.  However, Kansas cash wheat prices have then trended higher on average after harvest through September-October, and have then trended sideways from November through January, with moderate seasonal strength in February-March – followed by a sideways-to-lower trend in during April and May. 

According to historic price patterns, most of the post-harvest increase in Kansas wheat prices is usually realized from July through October, with movement being mostly sideways through the remainder of the marketing year.  The most variability around these monthly indices have occurred during June-July and the period when the Kansas hard red winter wheat crop breaks winter dormancy (i.e., February-March), with accompanying production uncertainty in late spring (i.e., May).   

Projected “New Crop” MY 2016/17 Wheat Price Pattern

The projected U.S. average cash price for U.S. hard red winter wheat in the “new crop” 2016/17 marketing year exhibits a pronounced price low in August 2016 with monthly prices climbing steadily from September through April 2017 – with a marginally decline in May 2017 (Figure 2b).  “New crop” MY 2016/17 for U.S. wheat began on June 1, 2016 and will conclude on May 31, 2017.  If this price pattern were to become reality, it would signal the likelihood of returns to storage for Kansas wheat following the summer 2016 harvest.  

Figure 2a. Kansas Wheat Seasonal Price Index – Last 15 Marketing Years (MY 1999/00 – MY 2014/15) plus “Old Crop” MY 2015/16 (Source: KSU www.AgManager.info & USDA)

 

 

Figure 2b. Kansas Wheat Seasonal Price Index – Last 15 Marketing Years (MY 1999/00 – MY 2014/15) plus “New Crop” MY 2016/17 (Source: KSU www.AgManager.info & USDA)

 

 

 

I-D. U.S. Trade Weighted Dollar Index

Increases in the value of the U.S. dollar relative to the currencies of U.S. trading partner countries began in earnest in August 2014 when the dollar index was valued at 77.2692 on August 15th.  This upward trend continued through January 2016 with the index climbing to a high of 95.8011 on January 20th - up 24.0% from mid-August 2014 (Figure 3).  Since then the index has declined, falling to a low of 87.7060 on May 2, 2016, before trending moderately higher again. On June 10, 2016 the U.S. Dollar index was calculated to be 89.1975 – down 6.9% from the January 20th high of 95.8011 but still up 15.4% from 77.2692 in mid-August 2014. 

The upward trend in the value of the U.S. trade weighted dollar index since mid-2014 has been a significant negative factor in U.S. wheat and other U.S. grain export markets.  A higher U.S. dollar exchange rate relative to other major currencies generally makes it more expensive for foreign buyers of U.S. grains to exchange their country’s currencies for U.S. dollars – which they would then in turn use to purchase U.S. grain exports (i.e., which are denominated or “priced” in U.S. dollars in U.S. grain markets).  Although this is not the only factor negatively impacting U.S. grain exports, it is a very important one – working against U.S. wheat being an affordable, competitive alternative export seller in World grain trade. 

Expected U.S. Dollar Trend for Mid 2016 – 2017

Expectations for the direction of the U.S. dollar for the remainder of 2016 and into 2017 are uncertain.  However, there is a prevalent market sentiment that the U.S. Federal Reserve will pursue less of a “hard dollar” policy (that resulted in a rising value of the U.S. dollar relative to other currencies) as financial markets were anticipating from mid-2014 through early 2016, and more of a “moderate” or “soft dollar” policy (resulting in unchanging or lower U.S. dollar values relative to foreign currencies).  Reasons for such a policy course by the U.S. Fed may be their desire not to limit already weak growth in the U.S. economy with higher interest rates, and also with the absence to date of significant inflation in the U.S. economy – which higher interest rates would combat.   Such a “moderation” of the U.S. dollar would have a positive impact on U.S. wheat exports and prices in “new crop” MY 2016/17.

Figure 3. Daily U.S. Trade Weighted Dollar Index – Major Currencies (DTWEXM)                     
(Source: St. Louis Federal Reserve Bank, FRED)

 

 

I-E. U.S. Wheat Production Acreage, Yield & Production

U.S. Wheat Planted Acreage

United States wheat acreage figures in the May 10th and June 10th USDA Crop Production and WASDE reports followed exactly from the March 31st NASS 2016 Prospective Plantings report.  The USDA forecast that 2016 U.S. total wheat planted acres would be 49.559 million acres (ma), down 5.085 ma (-9.3%) from 54.644 ma in 2015, down 12.8% from 56.841 ma in 2014, and down 11.9% from 56.236 ma in 2013 (Table 1 and Figures 4 and 5). The KSU projection for 2016 U.S. wheat planted acres would be the same as the USDA.

U.S. Winter Wheat Planted Acres: In its May 10th and June 10th NASS Crop Production reports the USDA projected 2016 U.S. winter wheat seedings to be 36.216 ma (Table 1 and Figures 4 and 5).  Winter wheat seedings of 36.216 ma in 2015 for harvest in 2016 are down 3.301 ma (-8.2%) from 39.461 ma in 2015, down 6.193 ma (-14.7%) from 42.409 ma in 2014, and down 7.014 ma from 43.230 ma (-16.2%) in 2013.   

Of this total amount of 2016 U.S. Winter Wheat planted acres, Hard Red Winter wheat planted acres are projected to be 26.20 ma, down from 28.98 ma in 2015 and 30.50 ma in 2014.  Soft Red Winter wheat planted acres are projected to be 6.60 ma, down from 7.09 ma in 2015 and 8.48 ma in 2014.  White Winter wheat planted acres are projected to be 3.37 ma, down from 3.40 ma in 2015 and 3.43 ma in 2014.

 U.S. “Other Spring Wheat” Planted Acres: The USDA forecast 2016 “other spring wheat” planted area to be 11.348 ma, down 1.899 ma (-14.3%) from 13.247 ma in 2015, down from 13.025 ma in 2014, and from 11.606 ma in 2013 (Table 1 and Figures 4 and 5).  Of these acres, 10.70 ma were projected to be seeded to Hard Red Spring Wheat in 2016, down from 12.51 ma in 2015, and 12.25 ma in 2013. 

U.S. Durum Wheat Planted Acres: The USDA forecast 2016 durum wheat planted area to be 1.995 ma, up 59,000 acres (+3.0%) from 1.936 ma in 2015, and up from 1.407 ma in 2014, and 1.400 ma in 2013 (Table 1 and Figures 4 and 5).   

Figure 4. U.S. Wheat Planted Acreage – All Winter, Other Spring & Durum Classes (1981-2016) as of the March 31, 2016 USDA NASS Prospective Plantings & the June 10th NASS Crop Production Reports

 

 

U.S. Wheat Harvested Acreage

In both its June 10th WASDE report the USDA projected implicitly that 2016 U.S. All Wheat Harvested Acreage would be 42,736,625 acres 42.737 ma – down from 42.784 ma in the May WASDE report (Table 1 and Figure 5).  This implicit USDA projection of 42.737 ma for 2016 U.S. wheat harvested acres is down 4.356 ma (down 9.25%) from 47.094 ma in 2015, and down 7.9% from 46.385 ma in 2014, and down 5.7% from 45.332 ma in 2013.

This projected USDA U.S. wheat harvested acreage figure is calculated by dividing the USDA’s projection of 2016 U.S. wheat production (2.077 billion bushels or ‘bb’) by its forecast 2016 U.S. wheat yield (48.6 bushels per acre or ‘bu/ac’).  It also assumes that 2016 U.S. wheat harvested acres are 86.24% of planted acres – up from the U.S. 2000-2015 average of 84.22%.    

The KSU June 2016 forecast of 2016 U.S. wheat harvested acres is 41.737 ma, using a 2000-2015 average harvested-to-planted acres percentage of 84.22% on the USDA’s forecast of 49.559 ma planted – down 1.000 ma acres (-2.3%) from the implicit USDA 2016 projection of 42.737 ma (Table 1). 

U.S. Winter Wheat Harvested Acres: In its June 10th NASS Crop Production report the USDA projected 2016 U.S. winter wheat harvested acres to be 29.831 ma – down 2.426 ma (-7.5%) from 32.257 ma in 2015, down 2.468 ma (-7.6%) from 32.299 ma in 2014, down 2.819 ma (-8.6%) from 32.650 ma in 2013, and down 4.778 ma (-13.8%)  from 34.609 ma in 2012 (Table 1 and Figures 4 and 5).  

   Figure 5. U.S. All Wheat Planted & Harvested Acreage (1973-2016) as of the June 10, 2016 WASDE report

 

 

U.S. Wheat Yields & Production

U.S. Wheat Yields: In its June 10th WASDE report the USDA projected 2016 U.S. wheat yields to be 48.6 bu/ac – up 1.9 bu from the May WASDE report.  The USDA forecast U.S. wheat yield of 48.6 bu/ac in 2016 is up from 43.6 bu/ac in 2015, and 43.7 bu/ac in 2014, greater than the present record high of 47.1 bu/ac in 2013, and the 2nd highest yield on record of 46.2 bu/ac in 2012 (Table 1 and Figure 6).  This USDA forecast scenario is given a 35% probability of occurring by KSU estimates.  

Three KSU “Trend Yield” Scenarios (i.e., the KSU “Trend Yield – Moderate $USD” Scenario – 30% probability, the KSU “Trend Yield – Foreign Crop Problems – Moderate $USD” Scenario – 15% probability, and the KSU “Trend Yield – Fall 2017 Crop Problems – Moderate $USD” Scenario – 20% probability) with a combined estimate of 65% probability of occurring assume that 2016 U.S. average wheat yields will be 46.0 bu/ac.  This projection is a trend-line forecast for year 2016 based on all yields over the 1973-2015 time period.  For this KSU forecast of 2016 U.S. wheat yields to be true, lower yields will need to occur for spring wheat in the northern states and for soft red winter wheat in the eastern Corn Belt – both being a distinct possibility given the “high temperature” July-August 2016 weather forecasts for the United States.     

U.S. Wheat Production: The USDA forecast in its June 10th WASDE report – based on forecast 2016 planted acreage (49.559 ma), implicit harvested acreage (42.737 ma), and yield (48.6 bu/ac) – that 2016 U.S. wheat production to be 2.007 billion bushels (bb) (Table 1 and Figure 7).  This USDA forecast scenario of 2.077 bb is given a 35% probability of occurring by KSU estimates, and is up from 2.052 bb in 2015, and 2.026 bb in 2014, and within the 2004-2013 range of 1.808-2.512 bb (average = 2.128 bb, median = 2.135 bb). 

By KSU projection estimates, there is a combined 65% likelihood of 2016 U.S. wheat production of U.S. wheat of approximately 1.920 bb based on KSU acreage assumptions (i.e., 41.737 bb harvested acres and 46.0 bu/ac trend line yields) (Table 1). 

U.S. Winter Wheat Production: In its June 10th NASS Crop Production report the USDA projected 2016 U.S. winter wheat production to be 1.507 bb – up 136.9 million bushels (mb) (+10.0%) from 1.370 bb in 2015, and up from 1.377 bb in 2014, down from 1.543 bb in 2013, and down from 1.631 bb in 2012.  

In this report, 2016 U.S. Hard Red Winter wheat production is forecast to be 938 mb in 2016, up 13.4% from 827 mb in 2015 and up 26.9% from 739 mb in 2014.  Soft Red Winter wheat production is forecast to be 355 mb in 2016, down marginally from 359 mb in 2015 and down 21.9% from 455 mb in 2014.  White Winter wheat production is projected to be 214 mb in 2016, down from 219 mb in 2015 and 224 mb in 2014.

Figure 6. U.S. All Wheat Yield (1973-2015) and USDA 2016 Projection as of June 10, 2016 WASDE, with KSU Long-Term Trend Estimate for 2016

 


Table 1. U.S. Wheat Supply-Demand Balance Sheet: MY 2010/11 – “New Crop” MY 2016/17 as of June 10, 2016 WASDE Report, and KSU projections for “New Crop” MY 2016/17.

Item

2010/11

2011/12

2012/13

2013/14

2014/15

 

2015/16

USDA

2016/17

KSU

Trend-line U.S. Wheat Yields,

Moderate USD$ 2016/17

KSU

Foreign Crop Problems & Higher U.S. Wheat Exports

Moderate USD$ 2016/17

KSU

2016/17 U.S. Crop Problems & Higher U.S. Wheat Exports

Moderate USD$

2016/17

% Probability of Occurring

 

 

 

 

 

 

35%

30%

15%

20%

Planted Area (million acres)

52.620

54.277

55.294

56.236

56.841

54.644

49.559

49.559

49.559

49.559

Harvested Area (million acres)

46.883

45.687

48.758

45.332

46.385

47.094

42.737

41.737

41.737

41.737

% Harvested/Planted Area

89.10%

84.17%

88.18%

80.61%

81.60%

86.18%

86.24%

84.22%

84.22%

84.22%

Yield / harvested acre (bu/ac)

46.1

43.6

46.2

47.1

43.7

43.6

48.6

46.0

46.0

46.0

 

Million Bushels

Beginning Stocks

976

863

743

718

590

752

980

980

980

980

Production

2,163

1,993

2,252

2,135

2,026

2,052

2,077

1,920

1,920

1,920

Imports

97

113

124

173

149

117

125

125

125

125

Total Supply

3,236

2,969

3,119

3,026

2,766

2,921

3,182

3,025

3,025

3,025

 

 

Food Use

926

941

951

955

958

960

963

963

963

963

Seed Use

71

76

73

77

79

66

69

66

66

66

Exports

1,291

1,051

1,012

1,176

854

775

900

850

1,100

1,000

Feed & Residual Use

85

159

365

228

122

140

200

200

200

150

Total Use

2,373

2,227

2,401

2,436

2,014

1,941

2,132

2,079

2,329

2,229

 

 

Ending Stocks

863

743

718

590

752

980

1,050

946

696

796

% Ending Stocks-to-Use

36.37%

33.35%

29.90%

24.24%

37.36%

50.49%

49.25%

45.50%

29.88%

35.71%

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

$5.70

$7.24

 

$7.77

 

$6.87

$5.99

$4.90

$3.60-$4.40 ($4.00)

$4.40

$5.50

$5.10


I-F. U.S. Wheat Total Supplies

Total supplies of U.S. wheat for “new crop” MY 2016/17 are projected by the USDA to be 3.182 bb – up 76 mb from the May WASDE report, and up from 2.921 bb for “old crop” MY 2015/16 (down 3 mb).  The USDA projection of 3.182 bb in total supplies for “new crop” MY 2016/17 results from beginning stocks of 980 mb (up 2 mb), projected 2016 production of 2.077 bb (up 79 mb), and projected imports of 125 mb (down 5 mb) (Table 1 and Figure 7).  This USDA forecast scenario of 3.182 bb in U.S. wheat supplies is given a 35% probability of occurring by KSU estimates.

By KSU projections estimates, there is a combined 65% likelihood of U.S. wheat total supplies in “new crop” MY 2016/17 of 3.025 bb, down from the USDA’s forecast of 3.182 bb (Table 1). 

Figure 7. U.S. Wheat Total Supplies for MY 2004/05 – “New Crop” MY 2016/17 as of June 10, 2016 USDA WASDE Report

 

 

The USDA’s forecast U.S. wheat beginning stocks of 980 mb in “new crop” MY 2016/17 (up 2 mb from the May WASDE) are up from 752 mb in “old crop” MY 2015/16, 590 mb in MY 2014/15, and from 718 mb in MY 2013/14.  Projected U.S. wheat imports of 125 mb for “new crop” MY 2016/17 (down 5 mb from the May WASDE) are up from 117 mb in “old crop” MY 2015/16 (down 3 mb from the May WASDE), but down from 149 mb in MY 2014/15 (the 2nd highest on record), and the record high of 173 mb in MY 2013/14. 

Canada Wheat Production Trends: Nearly all of U.S. wheat imports come from Canada because of favorable geographic location and associated grain transportation logistic advantages.  Large Canadian wheat supplies over the last several years have been a major factor in this increase in U.S. wheat imports.  Canada produced a record large wheat crop of 37.530 million metric tons (mmt) (or 1.379 bb in 60 lb/bu units) in MY 2013/14, followed by a crop of 29.420 mmt (1.081 bb) in MY 2014/15, with an estimate of 27.600 mmt (1.014 bb) in “old crop” MY 2015/16, and a projection of 28.500 mmt (1.047 bb) in “new crop” MY 2016/17.  The largest Canadian wheat crops since 1960 that were over 30.0 mmt happened in 1986 (31.4 mmt or 1.152 bb), 1990 (32.1 mmt or 1.179 bb), 1991 (31.9 mmt or 1.174 bb), and in 2013 (37.530 mmt or 1.379 bb).   For “new crop” MY 2016/17 the USDA forecasts that Canada will produce 28.500 mmt (1.047 bb).

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

U.S. Wheat Food Use

The USDA forecast U.S. wheat food use of 963 mb in “new crop” MY 2016/17, following a consistent upward trend over time due to a) steady growth in the U.S. population, and b) associated regular increases in domestic demand for processed wheat products.  This projected amount of 963 mb in food use in “new crop” MY 2016/17 is up from 960 mb for “old crop” MY 2015/16, 958 mb in MY 2014/15, 955 mb in MY 2013/14, and 951 mb in MY 2012/13 (Table 1 and Figure 8).  The KSU forecast of U.S. wheat food use for “new crop” MY 2016/17 is the same as that of the USDA, i.e., 963 mb.

Figure 8. Trends in U.S. Wheat Use & Ending Stocks: MY 2004/05 – “New Crop” MY 2016/17           
as of the June 10, 2016 USDA WASDE report

 

 

U.S. Wheat Seed Use

The USDA forecast seed use of 69 mb in “new crop” MY 2016/17, up from 66 mb in “old crop” MY 2015/16, but down from 79 mb in MY 2014/15, 77 mb in MY 2013/14, and 73 mb in MY 2012/13 (Table 1 and Figure 8).  The KSU forecast of seed use in “new crop” MY 2016/17 is lower than the USDA at 66 mb.

U.S. Wheat Exports

The USDA projected that U.S. wheat exports will be 900 mb in “new crop” MY 2016/17 – up 25 mb from the May WASDE (Table 1).  A total of 900 mb of U.S. wheat exports in “new crop” MY 2016/17 would be up from 775 mb in “old crop” MY 2015/16 (down 5 mb from the May WASDE), and is up from 854 mb in MY 2014/15, but less than the range of 1.051 – 1.291 bb over the MY 2010/11 – MY 2013/14 period.  Total U.S. wheat exports of 775 mb in “old crop” MY 2015/16 is the lowest amount in 45 years, i.e., since 610 mb in MY 1971/72 prior to the “Russian Grain Deal” period of MY 1973/74 (Table 1 and Figure 8).  This USDA forecast scenario of 900 mb in U.S. wheat exports in “new crop” MY 2016/17 is given a 35% probability of occurring by KSU estimates.  

For the KSU “Trend Yield – Moderate $USD” Scenario – 30% probability – U.S. wheat exports for “new crop” MY 2016/17 are projected to be 850 mb compared to the 900 mb forecast by the USDA (Table 1).  For the KSU “Trend Yield – Foreign Crop Problems – Moderate $USD” Scenario – 15% probability – U.S. wheat exports would increase with fewer exportable, competitive foreign U.S. wheat supplies, totaling 1,100 mb (or 1.100 bb).   For the KSU “Trend Yield – Fall 2017 Crop Problems – Moderate $USD” Scenario – 20% probability – U.S. wheat exports are projected to be 1,000 mb (1.000 bb), based on concerns by foreign importers of dry weather conditions in the U.S. which could cause deteriorating winter wheat establishment conditions in fall 2016 and winter wheat development problems in the spring of 2017 – both of which would be expected to bring about at least a moderate increase in U.S. wheat exports in the later 2/3 of “new crop” MY 2016/17.  

Also, based on recent announcements and actions by the U.S. Federal Reserve Bank, it seems likely that the value of the U.S. dollar relative to other major World currencies may be expected to be either unchanged or lower during the remainder of “new crop” MY 2016/17.  Such a trend in the relative value of the U.S. dollar would be at least neutral if not directly supportive of U.S. wheat exports and prices. 

Cumulative U.S. wheat export shipments through June 9th – the 2nd week of the “new crop” 2016/17 marketing year for U.S. wheat which began on June 1, 2016 – have totaled 17.4 mb, which is 1.9% of the USDA’s projected “new crop” MY 2016/17 exports of 900 mb, with 3.85% (2 of 52 weeks) of the marketing year completed.  United States’ wheat export shipments will need to average 17.6 mb per week through the remainder of the “new crop” 2016/17 marketing year to attain the USDA’s June 10th WASDE projection of 900 mb.  Total wheat export shipments by the U.S. of 4.6 mb and 12.9 mb during the weeks ending June 2nd and June 9th, respectively, are behind the pace (17.6 mb/week) needed to meet USDA forecast of 900 mb in the “new crop” 2016/17 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 222.4 mb in U.S. wheat for “new crop” MY 2016/17 (i.e., that had not yet been shipped as of June 9th), total U.S. wheat shipped plus outstanding shipments added up to 239.8 mb (i.e., 17.4 mb shipped plus 222.4 mb forward sales).  This amounts to 26.6% of the USDA’s projection of 900 mb for “new crop” MY 2016/17 with 3.85% of the marketing year having already occurred (i.e., 2 of 52 weeks) – presenting a more positive perspective on potential U.S. wheat export sales and the likelihood of U.S. wheat exports reaching the 900 mb target set by the USDA in the June 10th WASDE report. 

The primary factors that have caused lower U.S. wheat exports in MY 2014/15 and “old crop” MY 2015/16 are a) the sharp increase in the value of the U.S. dollar that occurred in 2014, 2015, and early 2016 relative to other World currencies – in particular those of other major World wheat exporters, and b) prospects for fully adequate supplies of both the U.S. and competitive foreign wheat stockpiles for export trade purposes. 

There are several factors that could eventually change the existing “low export demand for wheat” situation for the United States.  These include 1) the uncertain impact on World wheat trade in the future from ongoing geopolitical conflicts – such as those between Russian and Ukraine and also in the broader Middle East, and 2) the potential for dry or adverse weather conditions in other major World wheat production areas due to the “El Nino transition to a La Nina” weather pattern likely to occur in the spring and/or summer of 2016.  However, until tangible evidence of such potential damage to U.S. and/or foreign wheat production prospects, and/or other market events should occur in the last half of 2016 and the first half of 2017, such weather uncertainties are being treated mostly as non-factors in World wheat export and wheat futures markets.

U.S. Wheat Feed & Residual Use

In the June 10th WASDE report the USDA projected that U.S. feed and residual use for “new crop” MY 2016/17 would be 200 mb – up 30 mb from the May WASDE, and up from 140 mb in “old crop” MY 2015/16 and 122 mb in MY 2014/15 – but still down from 228 mb in MY 2013/14, and from the recent high of 365 mb in MY 2012/13 (Table 1 and Figure 8).  Projections by KSU of “new crop” MY 2016/17 U.S. wheat feed use range from 200 mb to 150 mb, compared to the USDA’s projection of 200 mb (Table 1).

Domestic U.S. wheat feeding had trended lower in “old crop” MY 2014/15 from the previous year, and remained lower in “old crop” MY 2015/16 due to the availability in domestic markets of sizable 2013, 2014, and 2015 U.S. corn and grain sorghum crops and supplies at low prices.  However, in early-mid June 2015 the price of wheat at local markets near livestock feeding centers in western Kansas had fallen below the price of corn.  For example, in Dodge City in southwest Kansas on June 21st the USDA Agricultural Marketing Service (AMS) reported cash wheat prices to be $3.45 /bu, while corn prices were reported to be $3.66 /bu – a ratio of $3.45 / $3.66 = 0.9426 or 94.26%.  In these western Kansas locations – especially in proximity to livestock feeding operations – there would seem to be an opportunity to feed lower priced wheat in feed rations and perhaps free-up storage space for looming 2016 fall crop harvests at local grain elevators.

However, in the more wheat export and wheat milling-focused central parts of Kansas, wheat prices were still at or above corn prices – providing little incentive to feed wheat in livestock rations.  For instance, in Hutchinson in South Central Kansas on June 21st, the USDA AMS reported cash wheat prices to be in the range of $3.54-$3.80 /bu (mid-point = $3.67), while corn prices were reported to be in the range of $3.40-$3.51 ¼ /bu (mid-point = $3.46) – a ratio of $3.67 / $3.46 = 1.0607 or 106.07%.   This situation has led to large competitive U.S. feedgrain supplies for domestic livestock feeding at lower market prices since MY 2012/13. 

Total U.S. Wheat Use

Total use of U.S. wheat for “new crop” MY 2016/17 is projected by the USDA to be 2.132 bb (up 55 mb from the May WASDE).  This projection of 2.132 bb in total use of U.S. wheat in “new crop” MY 2016/17 is up from 1.941 bb in “old crop” MY 2015/16 (lowered 5 mb in the May WASDE report), and 2.014 bb in MY 2014/15, but down from 2.436 bb in MY 2013/14.  This USDA forecast scenario of 2.132 bb in U.S. wheat use during “new crop” MY 2016/17 is given a 35% probability of occurring by KSU estimates.  Projected total use of wheat in “old crop” MY 2015/16 of 1.946 bb is the smallest amount of U.S. wheat total usage in the last 14 marketing years, i.e., since 1.969 bb in MY 2002/03 (Table 1 and Figure 8). 

For the KSU “Trend Yield – Moderate $USD” Scenario – 30% probability – U.S. wheat total use for “new crop” MY 2016/17 is projected to be 2.079 bb compared to the 2.132 bb forecast by the USDA (Table 1).  For the KSU “Trend Yield – Foreign Crop Problems – Moderate $USD” Scenario – 15% probability – U.S. wheat total use would increase with increased U.S. wheat exports to 2.329 bb.   For the KSU “Trend Yield – Fall 2017 Crop Problems – Moderate $USD” Scenario – 20% probability – U.S. wheat total use would be moderately higher as U.S. wheat exports increased due to development problems with the 2017 U.S. wheat crops, increasing to 2.229 bb.    

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

U.S. Wheat Ending Stocks

In its June 10th WASDE report, the USDA projected that U.S. wheat ending stocks for “new crop” MY 2016/17 would be 1.050 bb – up 21 mb from May and this highest in 29 years since 1.261 bb in MY 1987/88 (Table 1 and Figure 8).  Wheat ending stocks in the U.S. of 1.051 bb in “new crop” MY 2016/17 would be up from 980 mb in “old crop” MY 2015/16 (up 2 mb from May), 752 mb in MY 2014/15, and 590 mb in MY 2013/14.  This USDA forecast scenario of 1.051 bb in U.S. wheat ending stocks in “new crop” MY 2016/17 is given a 35% probability of occurring by KSU estimates.  Ending stocks of U.S. wheat in “new crop” MY 2016/17 of 1.050 bb are 343% of ending stocks of 306 mb in MY 2007/08 – the historic “tight stocks” marketing year since the early 1970s. 

For the KSU “Trend Yield – Moderate $USD” Scenario – 30% probability – U.S. wheat ending stocks for “new crop” MY 2016/17 are projected to be 946 mb compared to the 1.050 bb forecast by the USDA (Table 1).  For the KSU “Trend Yield – Foreign Crop Problems – Moderate $USD” Scenario – 15% probability – U.S. wheat ending stocks would decrease with increased U.S. wheat exports and total use down to 696 mb.   For the KSU “Trend Yield – Fall 2017 Crop Problems – Moderate $USD” Scenario – 20% probability – U.S. wheat ending stocks are forecast to be 796 mb – following from moderately higher as U.S. wheat exports and total use in response to market concerns about development problems with the 2017 U.S. wheat crop.   

U.S. Wheat Ending Stocks-to-Use 

In its June 10th WASDE report, the USDA projected percent (%) ending stocks-to-use for U.S. wheat of 49.25% in “new crop” MY 2016/17 – down from 50.49% in “old crop” MY 2015/16, but up from 37.36% in MY 2014/15, and 24.24% in MY 2013/14 (Table 1 and Figures 8 and 9).  This USDA forecast scenario of 49.25% in U.S. wheat percent ending stocks-to-use in “new crop” MY 2016/17 is given a 35% probability of occurring by KSU estimates. Forecast U.S. wheat ending stocks-to-use of 49.25% in “new crop” MY 2016/17 and 50.49% in “old crop” MY 2015/16 are the highest since 48.58% in MY 2009/10, and the largest since the 32-year highs during the “U.S. farm financial crisis years” of 97.2% in MY 1985/86 and 82.9% MY 1986/87.  

For the KSU “Trend Yield – Moderate $USD” Scenario – 30% probability – U.S. wheat percent ending stocks-to-use for “new crop” MY 2016/17 are projected to be 45.50% compared to the 49.25% forecast by the USDA (Table 1).  For the KSU “Trend Yield – Foreign Crop Problems – Moderate $USD” Scenario – 15% probability – U.S. wheat percent ending stocks-to-use would decrease with increased U.S. wheat exports and total use, and lower ending stocks down to 29.88%.   For the KSU “Trend Yield – Fall 2017 Crop Problems – Moderate $USD” Scenario – 20% probability – U.S. wheat percent ending stocks-to-use are forecast to be 35.71% – following from moderately higher as U.S. wheat exports and total use, and moderately lower ending stocks in response to market concerns about development problems with the 2017 U.S. wheat crop.   

U.S. Wheat Marketing Year Average Prices 

In its June 10th WASDE report, the USDA projected U.S. average wheat prices for “new crop” MY 2016/17 in the range of $3.60-$4.40 (midpoint = $4.00 per bushel) – down $0.10 on each end of the price range from the May WASDE, and down from $4.90 per bushel in “old crop” MY 2015/16, $5.99 in MY 2014/15, $6.87 in MY 2013/14, and the record high of $7.24 in MY 2012/13 (Table 1 and Figures 9 and 10). 

For the KSU “Trend Yield – Moderate $USD” Scenario – 30% probability – U.S. wheat season average prices for “new crop” MY 2016/17 are projected to be $4.40 /bu compared to the midpoint $4.00 forecast by the USDA (Table 1).  For the KSU “Trend Yield – Foreign Crop Problems – Moderate $USD” Scenario – 15% probability – U.S. wheat season average prices would increase in response to lower percent ending stocks-to-use up to $5.50 /bu.   For the KSU “Trend Yield – Fall 2017 Crop Problems – Moderate $USD” Scenario – 20% probability – U.S. wheat season average prices are forecast to be $5.10 /bu – following from moderately lower percent ending stocks-to-use occurring in response to market concerns about development problems with the 2017 U.S. wheat crop.   

These KSU supply-demand and price forecasts assume a moderation in the value of the U.S. dollar in “new” crop MY 2016/17, providing some support for U.S. wheat exports and prices.

Figure 9. U.S. Wheat Ending Stocks vs U.S. Cash Prices: MY 2004/05 thru “New Crop” MY 2016/17  as of June 10, 2016 WASDE report & KSU forecasts for “New Crop” MY 2016/17


 

Figure 10. U.S. Wheat Price vs U.S. % Stocks-to-Use: MY 1973/74 through “New Crop” MY 2016/17 as of the June 10, 2016 WASDE report

 

 

 

II. World Wheat Supply-Demand Trends

The USDA forecast that World wheat production of 730.8 mmt in “new crop” MY 2016/17 will be down 0.5% from 734.2 mmt in the “old crop” 2015/16 marketing year that ended on May 31, 2016, and up 0.5% to 726.9 mmt two years ago in MY 2014/15 (Figure 11).    World wheat total supplies in “new crop” MY 2016/17 are forecast to be 973.8 mmt, up 23.05 mmt (up 2.4%) from 950.8 mmt in “old crop” MY 2015/16, and up 52.7 mmt (up 5.7%) from 921.1 mmt in MY 2014/15.  Given these increases in World wheat supplies, World wheat total use in “new crop” MY 2016/17 is projected to increase 1.2% from “old crop” MY 2015/16, and to be up 1.6% from MY 2014/15.  World wheat ending stocks in “new crop” MY 2016/17 are projected to increase by 6.0% from a year earlier in “old crop” MY 2015/16, and by 16.9% from two years ago in MY 2014/15.  

The direction of U.S. and World wheat markets in June 2016, i.e., the beginning of “new crop” MY 2016/17, will depend primarily on market expectations of how total World wheat supplies balance with total demand, as well as on volatile World and U.S. financial and currency markets.  Wheat producing areas of the World from which periodic annual variations in wheat production historically have periodically caused significant 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 producing regions in the European Union, f) Argentina, g) India, and h) China.  Whether World wheat markets improve from old levels or not in the near or longer term will likely depend on whether production and/or export availability problems are avoided in any one or a combination of these major wheat producing and exporting areas for the remainder of 2016-2017.   

From the perspective of the United States, at this time the opportunity for sharp improvements in U.S. wheat export demand for “new crop” MY 2016/17 appear to depend on the persistence of the high value of the U.S. dollar (although it has trended lower in recent months) and its negative impact on U.S. wheat export sales as the U.S. competes in World wheat export markets with other major wheat exporters.  That said, it is also possible that geopolitical conflicts in the Middle East and/or the Black Sea region could escalate to the point of causing disruptions and extreme price volatility in World energy and grain markets.  These large geopolitical events are near impossible to forecast accurately, but could have a major impact on World wheat and other grain markets in coming months.  Such “systematic market risks” are not being accounted for to any appreciable degree in World wheat markets at this time.

Figure 11. World Wheat Usage & Ending Stocks: MY 2007/08 through “New Crop” MY 2016/17                     
as of June 10, 2016 USDA WASDE Report

 

 

II-A. World Wheat Production

Projected World wheat production of 730.8 mmt in “new crop” MY 2016/17 are less than the record high of 734.2 mmt in “old crop” MY 2015/16, and would be larger than the 2nd highest year on record of 726.9 mmt for MY 2014/15.  This total for “new crop” MY 2016/17 of 730.8 mmt is also up from 714.9 mmt in MY 2013/14, is larger than the “short” 658.3 mmt World wheat crop in MY 2012/13, and above the range of 612.6-696.9 mmt during the previous MY 2007/09-MY 2011/12 period (Table 2 and Figure 11).  Foreign (non-U.S.) wheat production is projected to be 674.3 mmt in “new crop” MY 2016/17, down 0.6% from 678.4 mmt in “old crop” MY 2015/16, and up 0.4% from 671.8 mmt in MY 2014/15. 

II-B. World Wheat Exports

Global wheat exports in “new crop” MY 2016/17 are projected to be a 165.6 mmt, down 1.6% from 168.3 mmt in “old crop” MY 2015/16, and also up 0.9% from 164.1 mmt in MY 2014/15 (Table 3).  Foreign (non-U.S.) wheat exports are projected to be 141.1 mmt in “new crop” MY 2016/17, down 4.1% from 147.2 mmt in “old crop” MY 2015/16, and down 0.1% from 140.9 mmt in MY 2014/15. 

II-C. World Wheat Imports

Global wheat imports in “new crop” MY 2016/17 are projected to be 162.0 mmt, down 2.4% from 165.9 mmt in “old crop” MY 2015/16, and up 2.0% from 158.8 mmt in MY 2014/15 (Table 4).   Foreign (non-U.S.) wheat imports are projected to be 158.6 mmt in “new crop” MY 2016/17, down 2.5% from 162.8 mmt in “old crop” MY 2015/16, and up 2.5% from 154.8 mmt in MY 2014/15. 

II-D. World Wheat Domestic Feed Use

Global wheat domestic feed use in “new crop” MY 2016/17 is projected to be 133.5 mmt, down 0.5% from 134.1 mmt in “old crop” MY 2015/16, and up 2.0% from 130.8 mmt in MY 2014/15 (Table 5).   Foreign (non-U.S.) wheat domestic feed use is projected to be 128.0 mmt in “new crop” MY 2016/17, down 1.7% from 130.3 mmt in “old crop” MY 2015/16, and up 0.4% from 127.5 mmt in MY 2014/15. 

II-E. World Wheat Food, Seed & Industrial (FSI) Use

Global wheat food, seed and industrial (FSI) use in “new crop” MY 2016/17 is projected to be a 582.5 mmt, up 1.5% from 573.8 mmt in “old crop” MY 2015/16, and up 1.5% from 573.8 mmt in MY 2014/15 (Table 6).  Foreign (non-U.S.) wheat FSI use is projected to be 554.4 mmt in “new crop” MY 2016/17, up 1.6% from 545.75 mmt in “old crop” MY 2015/16, and up 1.6% from 545.55 mmt in MY 2013/14. 

II-F. World Wheat Total Use

Projected World wheat total use of 716.0 mmt in “new crop” MY 2016/17 is the highest amount on record, being up 1.2% from the previous record high of 707.8 mmt in “old crop” MY 2015/16, up 1.6% from 704.6 mmt in MY 2014/15, and up from the range of 614.5-690.3 mmt during the MY 2007/08-MY 2013/14 period (Table 7 and Figure 11).  Foreign (non-U.S.) wheat total use is projected to be 682.5 mmt in “new crop” MY 2016/17, up 1.0% from 676.0 mmt in “old crop” MY 2015/16, and up 1.4% from 673.0 mmt in MY 2014/15. 

II-G. World Wheat Ending Stocks

Projected World wheat ending stocks of 257.8 mmt for “new crop” MY 2016/17 are up 6.1% from 243.0 mmt in “old crop” MY 2015/16, and up 19.1% from 216.5 mmt in MY 2014/15, and is comparable to the range of 128.7-203.2 mmt over the MY 2007/08 through 2013/14 period (Table 8 and Figure 11).  The 38-year low in World wheat ending stocks occurred when supply-demand balances fell to 128.7 mmt in MY 2007/08.  Foreign (non-U.S.) wheat ending stocks are projected at 229.3 mmt in “new crop” MY 2016/17, up 6.0% from 216.3 mmt in “old crop” MY 2015/16, and up 16.9% from 196.1 mmt in MY 2014/15. 

II-H. World Wheat Ending Stocks-to-Use

Projected World wheat ending stocks-to-use of 36.0% for “new crop” MY 2016/17 are up from 34.3% in “old crop” MY 2015/16, and from 30.7% in MY 2014/15 (Table 9 and Figure 12).  After falling to a 39-year low in World wheat % ending stocks-to-use in MY 2007/08 (20.9% S/U), World wheat % S/U was 26.6% in MY 2008/09, 31.3% in MY 2009/10, 30.4% in MY 2010/11, 28.7% in MY 2011/12, 25.8% in MY 2012/13, 28.1% in MY 2013/14, 30.3% in MY 2014/15, 34.3% in “old crop” MY 2015/16, and are now projected to be 36.0% in “new crop” MY 2016/17.   Foreign (non-U.S.) wheat ending stocks-to-use are projected at 27.8% in “new crop” MY 2016/17, up from 26.3% in “old crop” MY 2015/16, and up from 24.1% in MY 2014/15. 

II-I. World Wheat Ending Stocks-to-Use vs U.S. Wheat Prices

Similar to the relationship between U.S. wheat ending stocks-to-use and U.S. average wheat prices (see Figure 10), a negatively correlated market relationship has existed between U.S. wheat season average cash prices and World wheat % ending stocks-to-use – with what may prove to have been an upward structural adjustment or “jump” during the MY 2011/12  ̶  MY 2012/13 time period (Figure 12).  Larger World wheat supply-demand balances are typically associated with lower World and U.S. wheat prices, while smaller supply-demand balances are usually associated with higher World and U.S. wheat prices – all else being equal. 

As in Figure 10 earlier, U.S. wheat prices in Figure 12 are reported on a nominal basis (i.e., not adjusted for inflation).   While the minimum U.S. wheat percent stocks-to-use since MY 1973/74 was 13.2% in the tight stocks year of MY 2007/08, the historic minimum in World wheat percent stocks-to-use occurred in that same marketing year at 20.9%.  World stocks-to-use have not fallen below 25.8% in MY 2012/13 since the MY 2007/08 low of 20.9%.

Figure 12. U.S. Wheat Price vs % World Stocks-to-Use: MY 1973/74 through “New Crop” MY 2016/17, as of the June 10, 2016 USDA WASDE Report            

 

During the four most recent marketing years, rising World wheat percent ending stocks-to-use levels have been associated with declining U.S. wheat prices.  Since MY 2013/14 as World % ending stocks-to-use increased from 28.1% to 30.3% to 34.3% to 36.0% (up 28.1%, i.e., 0.360 / 0.281), U.S. wheat prices have fallen from $6.87 /bu to $5.99, to $4.90, and now to a projected level of $4.00 /bu (down 41.8%) before considering inflation adjustments.

Table 2. World Wheat Production Projections for “New Crop” MY 2016/17, “Old Crop” MY 2015/16, and MY 2014/15

World Wheat Production                                                 by Major Country / Region

Wheat Production: New crop 2016/17    June 2016

Wheat Production: May 2016 New crop 2016/17                   (1 month ago)

New crop 2016/17 Production:               June Less May 2016                    

New crop 2016/17 Production:                Percent (%)         June of May 2016

June Wheat Production: 2015/16          

May  Wheat Production: 2015/16

June Less May  Wheat  Production             for 2015/16

New crop 2016/17 Production             Less 2015/16

% New crop 2016/17 Production of                         2015/16

Wheat Production: 2014/15                           (2 years ago)

New crop 2016/17 Production             Less 2014/15

% New crop 2016/17 Production       of 2014/15

 

mmt

mmt

mmt

Percent (%)

mmt

mmt

mmt

mmt

Percent (%)

mmt

mmt

Percent (%)

World

730.83

726.99

3.84

100.5%

734.24

734.05

0.19

(3.41)

99.5%

726.94

3.89

100.5%

United States

56.53

54.37

2.16

104.0%

55.84

55.84

0.00

0.69

101.2%

55.15

1.38

102.5%

Total Foreign

674.30

672.63

1.67

100.2%

678.40

678.21

0.19

(4.10)

99.4%

671.80

2.50

100.4%

Major Exporters

225.50

224.50

1.00

100.4%

223.41

223.41

0.00

2.09

100.9%

223.32

2.18

101.0%

Argentina

14.50

14.50

0.00

100.0%

11.30

11.30

0.00

3.20

128.3%

14.00

0.50

103.6%

Australia

25.00

25.00

0.00

100.0%

24.50

24.50

0.00

0.50

102.0%

23.08

1.92

108.3%

Canada

28.50

28.50

0.00

100.0%

27.60

27.60

0.00

0.90

103.3%

29.42

(0.92)

96.9%

European Union

157.50

156.50

1.00

100.6%

160.01

160.01

0.00

(2.51)

98.4%

156.83

0.67

100.4%

Major Importers

199.51

199.84

(0.33)

99.8%

204.31

204.32

(0.01)

(4.80)

97.7%

197.40

2.11

101.1%

Brazil

5.30

5.50

(0.20)

96.4%

5.54

5.54

0.00

(0.24)

95.7%

6.00

(0.70)

88.3%

China

130.00

130.00

0.00

100.0%

130.19

130.19

0.00

(0.19)

99.9%

126.21

3.79

103.0%

Selected Middle East

19.41

19.41

0.00

100.0%

18.82

18.82

0.00

0.59

103.1%

17.66

1.75

109.9%

North Africa

14.70

14.70

0.00

100.0%

19.91

19.91

0.00

(5.21)

73.8%

17.01

(2.31)

86.4%

Pakistan

25.30

25.30

0.00

100.0%

25.10

25.10

0.00

0.20

100.8%

25.98

(0.68)

97.4%

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

88.00

88.00

0.00

100.0%

86.53

86.53

0.00

1.47

101.7%

95.85

(7.85)

91.8%

Former Soviet Union - 12 Countries

116.83

115.83

1.00

100.9%

117.60

117.60

0.00

(0.77)

99.3%

112.74

4.09

103.6%

Russia

64.00

63.00

1.00

101.6%

61.04

61.04

0.00

2.96

104.8%

59.08

4.92

108.3%

Kazakhstan

13.00

13.00

0.00

100.0%

13.75

13.75

0.00

(0.75)

94.5%

13.00

0.00

100.0%

Ukraine

24.00

24.00

0.00

100.0%

27.27

27.27

0.00

-3.27

88.0%

24.75

-0.75

97.0%

Other FSU 12 Countries

15.83

15.83

0.00

100.0%

15.54

15.54

0.00

0.29

101.9%

15.91

-0.08

99.5%

Table 3. World Wheat Export Projections for “New Crop” MY 2016/17, “Old Crop” MY 2015/16, and MY 2014/15

World Wheat Exports                                                 by Major Country / Region

Wheat Exports: New crop 2016/17     June 2016

Wheat Exports: June  2014 New crop 2016/17                   (1 month ago)

New crop 2016/17 Exports:               June Less May 2016                    

New crop 2016/17 Exports:                Percent (%)         June of May 2016

June Wheat Exports: 2015/16          

May  Wheat Exports: 2015/16

June Less May Wheat  Exports for 2015/16

New crop 2016/17 Exports Less 2015/16

% New crop 2016/17 Exports of 2015/16

Wheat Exports: 2014/15                           (2 years ago)

New crop 2016/17 Exports Less 2014/15

% New crop 2016/17 Exports       of 2014/15

 

mmt

mmt

mmt

Percent (%)

mmt

mmt

mmt

mmt

Percent (%)

mmt

mmt

Percent (%)

World

165.59

163.92

1.67

101.0%

168.28

166.87

1.41

(2.69)

98.4%

164.14

1.45

100.9%

United States

24.49

23.81

0.68

102.9%

21.09

21.23

(0.14)

3.40

116.1%

23.25

1.24

105.3%

Total Foreign

141.10

140.10

1.00

100.7%

147.19

145.64

1.55

(6.09)

95.9%

140.90

0.20

100.1%

Major Exporters

81.00

80.50

0.50

100.6%

81.00

80.00

1.00

0.00

100.0%

81.47

(0.47)

99.4%

Argentina

8.50

8.50

0.00

100.0%

9.00

8.50

0.50

(0.50)

94.4%

5.30

3.20

160.4%

Australia

17.00

17.00

0.00

100.0%

16.50

16.50

0.00

0.50

103.0%

16.59

0.41

102.5%

Canada

20.00

20.00

0.00

100.0%

22.50

22.50

0.00

(2.50)

88.9%

24.16

(4.16)

82.8%

European Union

35.50

35.00

0.50

101.4%

33.00

32.50

0.50

2.50

107.6%

35.42

0.08

100.2%

Major Importers

6.48

6.48

0.00

100.0%

6.57

6.62

(0.05)

(0.09)

98.6%

7.64

(1.16)

84.8%

Brazil

1.00

1.00

0.00

100.0%

1.20

1.30

(0.10)

(0.20)

83.3%

1.69

(0.69)

59.2%

China

1.00

1.00

0.00

100.0%

1.00

1.00

0.00

0.00

100.0%

0.80

0.20

125.0%

Selected Middle East

0.54

0.54

0.00

100.0%

0.54

0.54

0.00

0.00

100.0%

1.52

(0.98)

35.5%

North Africa

0.84

0.84

0.00

100.0%

0.70

0.85

(0.15)

0.14

120.0%

0.61

0.23

137.7%

Pakistan

0.70

0.70

0.00

100.0%

0.60

0.60

0.00

0.10

116.7%

0.70

0.00

100.0%

Southeast Asia

0.93

0.93

0.00

100.0%

0.96

0.96

0.00

(0.03)

96.9%

0.95

(0.02)

97.9%

India

0.40

0.40

0.00

100.0%

1.06

1.00

0.06

(0.66)

37.7%

3.41

(3.01)

11.7%

Former Soviet Union - 12 Countries

44.13

46.63

(2.50)

94.6%

48.68

48.33

0.35

(4.55)

90.7%

40.22

3.91

109.7%

Russia

25.00

24.50

0.50

102.0%

24.50

24.50

0.00

0.50

102.0%

22.80

2.20

109.6%

Kazakhstan

7.00

7.00

0.00

100.0%

7.50

7.50

0.00

(0.50)

93.3%

5.54

1.46

126.4%

Ukraine

11.50

11.50

0.00

100.0%

15.80

15.50

0.30

(4.30)

72.8%

11.27

0.23

102.0%

Other FSU 12 Countries

0.63

3.63

-3.00

17.4%

0.86

0.86

0.00

-0.23

73.3%

0.61

0.02

103.3%

Table 4. World Wheat Import Projections for “New Crop” MY 2016/17, “Old Crop” MY 2015/16, and MY 2014/15

World Wheat Imports                                                 by Major Country / Region

Wheat Imports: New crop 2016/17     June 2016

Wheat Imports: May  2014 New crop 2016/17                   (1 month ago)

New crop 2016/17 Imports:               June Less May 2016                    

New crop 2016/17 Imports:                Percent (%)         June of May 2016

June Wheat Imports: 2015/16          

May  Wheat Imports: 2015/16

June Less May Wheat  Imports for 2015/16

New crop 2016/17 Imports Less 2015/16

% New crop 2016/17 Imports of 2015/16

Wheat Imports: 2014/15                           (2 years ago)

New crop 2016/17 Imports             Less 2014/15

% New crop 2016/17 Imports       of 2014/15

 

mmt

mmt

mmt

Percent (%)

mmt

mmt

mmt

mmt

Percent (%)

mmt

mmt

Percent (%)

World

162.02

160.16

1.86

101.2%

165.94

164.50

1.44

(3.92)

97.6%

158.84

3.18

102.0%

United States

3.40

3.54

(0.14)

96.0%

3.18

3.27

(0.09)

0.22

106.9%

4.07

(0.67)

83.5%

Total Foreign

158.62

156.62

2.00

101.3%

162.76

161.23

1.53

(4.14)

97.5%

154.77

3.85

102.5%

Major Exporters

6.14

6.14

0.00

100.0%

7.34

7.14

0.20

(1.20)

83.7%

6.66

(0.52)

92.2%

Argentina

0.01

0.01

0.00

100.0%

0.01

0.01

0.00

0.00

100.0%

0.04

(0.03)

25.0%

Australia

0.15

0.15

0.00

100.0%

0.15

0.15

0.00

0.00

100.0%

0.16

(0.01)

93.8%

Canada

0.49

0.49

0.00

100.0%

0.49

0.49

0.00

0.00

100.0%

0.49

0.00

100.0%

European Union

5.50

5.50

0.00

100.0%

6.70

6.50

0.20

(1.20)

82.1%

5.98

(0.48)

92.0%

Major Importers

85.93

85.08

0.85

101.0%

88.47

87.22

1.25

(2.54)

97.1%

84.75

1.18

101.4%

Brazil

6.00

5.80

0.20

103.4%

6.00

6.00

0.00

0.00

100.0%

5.37

0.63

111.7%

China

3.20

3.20

0.00

100.0%

3.00

3.00

0.00

0.20

106.7%

1.93

1.27

165.8%

Selected Middle East

16.88

16.83

0.05

100.3%

19.02

18.97