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Wheat Tour Finds Lower Yield Potential; Snow and Freeze Losses Still Uncertain

By Stephanie Bryant-Erdmann, USW Market Analyst

This week I joined the annual Wheat Quality Council (WQC) “Hard Red Wheat Tour” for an early survey of the new crop. Each year, participants gather in Manhattan, KS, and spend the next two and a half days in small team, randomly stopping at 14, 15 or more fields in a full day along the same routes followed for many years. The scout teams measure yield potential, determine an average for the route and estimate a cumulative average for the day when all the scouts come together in the evening.

Just a few hours before USW published this issue of “Wheat Letter,” the tour estimated a final average yield potential of 46.1 bushels per acre (bu/ac) or about 3.10 metric tons per hectare for the 2017/18 Kansas hard red winter (HRW) crop. This year the tour participants made 469 stops to scout fields. Combining seeded area with per-acre yield potential, the total production potential estimate was 282.0 million bushels (7.67 million MT). Last year’s total production estimate was 382.4 million bushels (10.4 MMT). Sampling this year was skewed toward central and eastern Kansas due to difficulties sampling in the west.

On the first day, the tour traveled from Manhattan along several routes covering most northern Kansas counties. The cumulative Day 1 average yield potential was 43.0 bu/ac, which is equivalent to about 2.89 MT per hectare, compared to 47.1 bu/ac (3.16 MT per hectare) in 2016. To reach that average, participants surveyed 222 fields recording a range from a low of 18 bu/ac to a high of 96 bu/ac. We saw moderate pressure from stripe rust, a fungal disease, as well as viral diseases wheat streak mosaic and barley yellow dwarf. Many farmers were having fungicide applied by air to protect against fungal diseases, but there is no input to check viral disease.

Participants also received a report on the Nebraska and Colorado wheat crops. Nebraska estimated an average 40.0 bu/ac (2.69 MT per hectare) for a total production estimate of 41.8 million bushels (1.14 MMT), down roughly 41 percent from last year’s tour estimate. Colorado estimated an average of 31.6 bu/ac (2.12 MT per hectare) with total production estimated at 69.5 million bushels.

On the second day, the tour traveled on routes that led from the city of Colby to Wichita, making 202 stops. The number of observations was down significantly this year due to the challenging field conditions found in the western third of the state where wet, heavy snow continued to blanket wheat fields. After digging the wheat out of the snow, scouts noted the combination of heavy snow and accompanying 50 to 60 mile per hour winds had laid substantial portions of the wheat down and in some instances had broken the wheat stems. Wheat that was knocked over by the heavy snow, then endured several days of cold temperatures.

Standing water in fields and flooded ditches made field evaluation difficult in the south central part of the state where lodging and some freeze damage was also noted. Wheat streak mosaic was prevalent on Day 2, and participants reported seeing barley yellow dwarf, leaf rust and stripe rust. This year the tour estimated Day 2 average yield at 46.9 bu/ac (3.15 MT per hectare), for a combined two-day average of 44.9 bu/ac (3.02 MT per hectare) across 427 stops. Last year, the Day 2 average was 49.3 bu/ac (3.31 MT per hectare) and the combined two-day average was 48.2 bu/ac (3.24 MT per hectare).

A word of caution to our overseas customers is prudent. The wind, snow and cold events this year are unprecedented. Participants in the tour did the best they could to evaluate the western Kansas crop, but Dr. Romulo Lollato, Assistant Professor, Wheat and Forages Production, Kansas State University told us the most accurate assessment of the storm and freeze will not be possible for 10 to 14 days after each event. “High Plains Journal” magazine is reporting from the Tour and provides more details on Day 2 activities here. Kansas Wheat published additional information here.

Participants also received a crop report from Oklahoma, where drought conditions severely impacted the southern half of the state which received one inch (2.5 cm) of rain between September and mid-February. The northern half of the state benefited from the recent rainfall. The estimated average yield in Oklahoma is 33.7 bu/ac (2.26 MT per hectare), for a total production estimate of 100 million bushels or about 2.72 MMT. If realized, that would be down 27 percent year over year. The crop development is well ahead of normal with farmers expecting to start harvest in the next three weeks.

The third and final day of the tour was shorter, with each car making 3 to 4 field stops on the way from Wichita back to Manhattan for the final report. The Day 3 estimated average yield was 58.3 bu/ac, (3.92 MT per hectare) across 49 stops.

View highlights and photos from the tour by searching #wheattour17 on Facebook and Twitter. The WQC also sponsors a spring wheat tour in the Northern Plains in July. For more information, visit the Council’s web site at https://www.wheatqualitycouncil.org.

 

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USW Reports and Resources Provide Valuable and Timely Information

USW is committed to helping customers get the wheat they want at the best value possible by providing critical information throughout the year. USW Marketing Specialist Stephanie Bryant-Erdmann leads this effort, working closely with a network of traders, extension specialists, market contacts, USDA staff and, of course, colleagues in USW’s overseas offices to analyze and update these resources regularly.

Between May and October, USW publishes a Harvest Report every Friday afternoon with updates and comments on harvest progress, crop conditions and current crop quality for HRW, SRW, HRS, SW and durum wheat. USW expects to publish a preliminary 2017/18 Harvest Report on May 5. Follow the progress of the 2017/18 crop at www.uswheat.org/harvest.

Every Friday, USW compiles information from market sources, including exporters of all U.S. wheat classes from various U.S. ports, to publish the Price Report. The prices represent the value of number two grade and the proteins indicated. The report includes FOB and futures prices by class, as well as ocean freight and currency exchange rates. View the Price Report at www.uswheat.org/prices.

Each Thursday, USW releases a Commercial Sales Report that documents sales-to-date for the current marketing year compared to the previous marketing year at the same date. The report sources data from the Weekly Export Sales report published by the USDA Foreign Agricultural Service. View this report at www.uswheat.org/commercialSales.

Once a month, USW updates a graphic summary of USDA’s World Agricultural Supply and Demand Estimates Report. The report summarizes factors affecting the global wheat market, historic information for all major wheat exporting countries and regions, and a by-class summary of U.S. wheat supply and demand. The data may be used without permission, but attribution to USW and USDA is appreciated. View this report at www.uswheat.org/supplyDemand.

In addition to USW’s market data reports, USW publishes this bimonthly newsletter, Wheat Letter. It features coverage on market analysis and crop updates, trade policy, export promotion activities and other general wheat industry news. Read the latest issue of Wheat Letter at www.uswheat.org/wheatLetter.

USW’s 15 overseas offices share these reports and resources with their market contacts and use them as key resources in their trade servicing activities. USW also publishes many of the reports in Spanish in “Trigonoticias,” distributed to Latin American wheat buyers and millers.

You may subscribe at www.uswheat.org/subscribe1 to have the Price Report, Harvest Report and Wheat Letter sent straight to your email.

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First Reports on HRW Damage from Late Season Snow and Freeze Events: “Just Terrible.”

By Steve Mercer, USW Vice President of Communications

Kansas Wheat CEO Justin Gilpin is not a fellow who is prone to hyperbole. So, when @jp_gilp “Tweets” to the world that “we lost the Western Kansas wheat crop,” people notice.

Blizzard conditions and up to 18 inches (45.8 cm) of heavy, wet snow came down hard on the rapidly maturing hard red winter (HRW) wheat crop in northwest Oklahoma, western Kansas, eastern Colorado and southwest Nebraska April 29 and 30. Much of that wheat looked very good before the storm. Its higher yield potential was a cautious hope for some farm profit this year, a hope now broken like the stems under the snow in so many fields.

This unusual event may have overshadowed separate freeze events April 22, 23 and 27 that affected a big portion of central Kansas as well as south central Nebraska and north central Oklahoma. Kansas Wheat said “the freezes may cause significant damage in many areas because the crop was in boot and early heading stages at the time.”

Local agronomists say it will take 10 to 14 days before the final effects of the unprecedented late-season freeze and snow events can be determined with any accuracy. The first estimate from the snow alone put loss potential at 50 million bushels or almost 1.4 million metric tons (MMT). That would be roughly equal to 5 percent of the 23.8 MMT 5-year average total U.S. HRW crop.

National Association of Wheat Growers (NAWG) President David Schemm, who farms near Sharon Springs in far western Kansas, captured what is probably on the minds of most Kansas farmers. In a Facebook Live video from one of his fields as he surveyed the damage, he said, “all we can say, thankfully, in these situations is that with crop insurance we can maybe keep our farm for another year.”

More tough blows to already strapped farmers are, as Justin Gilpin added in his striking Tweet, “Just terrible.” Perhaps some of the wheat — and all Central and Southern Plains wheat farmers — will recover from these stresses.

We can only hope.

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Wheat Quality Improvement Team Travels to Asia to Discuss Quality Control

By Steve Wirsching, USW Vice President and Director, West Coast Office

The USW Wheat Quality Improvement Team (WQIT) connects wheat breeders who develop new varieties with overseas customers to discuss which quality characteristics end users value the most. This is essential to the breeding process because for farmers about half of their wheat is exported and importers expect high value from those purchases.

The latest WQIT travelled to Bangkok, Thailand, and Taipei, Taiwan, where they met with quality control specialists April 3 to 12, 2017. The team included:

  • Mike Pumphrey, Washington State University;
  • Phil Bruckner, Montana State University;
  • Robert Talley, AgriPro/Syngenta;
  • Steven Wirsching, USW.

To learn more about the team members, click here.

In Bangkok, the breeders met with milling managers from Vietnam, Indonesia, Thailand and the Philippines who gathered at the UFM Baking and Cooking School to test selected U.S. wheat varieties against their own flours made from competitor wheats under the supervision of Roy Chung, USW Bakery Consultant. An annual event, this year the WQIT observed test results demonstrating that U.S. hard red spring (HRS) wheat quality is improving with longer farinograph stability times and better water absorption. This group also provided feedback on hard red winter (HRW) wheat used for Asian style noodles that require color stability. Many new HRW varieties under development in Montana have very low polyphenol oxidase (PPO) enzymatic levels that help noodles remain bright during processing. U.S. soft white (SW) wheat stands out as the best option for sponge cakes, cookies and crackers. Solvent retention capacity (SRC) values are used to distinguish U.S. wheat quality from other competitors that have similar protein values but vastly different starch and baking qualities.

In Taipei, the team met with the Taiwan Flour Millers Association (TFMA) to discuss wheat quality and supply reliability. Overall, the Taiwanese are satisfied with U.S. wheat quality, but there is always room for improvement, and the U.S. wheat industry is working to stay ahead of the competition. The WQIT also attended the Taipei International Bakery Show and met with several flour millers. Over the years, USW, in partnership with TFMA, has worked to develop this market, and the fruits of our joint efforts were in full display at this international event. The market is incredibly sophisticated with thousands of products that continue to drive wheat flour consumption higher, such that Taiwanese now consume more wheat than rice on a per capita basis. The team also met with China Grain Products Research and Development Institute (CGPRDI) staff who have trained thousands of bakers and other end users to create a wide range of products that keep consumers interested in wheat foods. Established in the 1960s with funding from USW and state wheat commissions, CGPRDI provides technical training for bakers and millers as well as wheat quality analysis.

The wheat breeders also discussed the benefits of hybrid wheat and other non-GMO plant breeding innovations. Talley, the Syngenta wheat breeder, is developing commercial hybrid wheat varieties that promise to increase drought tolerance, heat resistance and overall yield, which could bring benefits to the wheat industry within 5 to 7 years. Some of the millers asked if the new hybrid wheat would be considered a GMO. Talley explained that hybridization has been used for many crops, most notability corn, since the 1930s. Hybrid wheat will not be a GMO crop, but will benefit from the hybrid vigor of crossing two dissimilar high quality parent lines. Like all U.S. public and private breeding programs, Syngenta is committed to bringing high quality wheat to the market.

In today’s hyper-competitive market, overseas customers are not just looking for the lowest prices. More and more are seeking real value. USW is working with public and private breeders to develop high quality wheat varieties that perform not only in the flour mill, but also in the bakery or cookie/cracker line, delivering economic value to the end users and, in turn, to millers and farmers alike.

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Importer Ending Stocks Shrink to 6-Year Low

By Stephanie Bryant-Erdmann, USW Market Analyst

On April 11, USDA released its latest World Agricultural Supply and Demand Estimates (WASDE) report. With six weeks left in marketing year 2016/17, USDA expects wheat world ending stocks to reach a record high 252 million metric tons (MMT), up 4 percent year over year and 22 percent ahead of the 5-year average, if realized. The current marketing year factors in this report are well defined and the record large ending stocks are neither surprising nor new to those who follow the wheat industry. However, the position of those stocks has been quietly changing.

Historically, global wheat exporters — Argentina, Australia, Canada, the European Union (EU), Kazakhstan, Russia, Ukraine and the United States — have held roughly 30 percent of global ending stocks. China has historically held one third of global endings stocks and the mostly net importers that remain have held about 37 percent. The 5-year average breaks out with exporter stocks at 61 MMT, China holding roughly 70 MMT and the world’s importers carrying out about 75 MMT

However, USDA expects that ratio to shift at the end of 2016/17. Chinese ending stocks are expected to reach a record high 111 MMT, or 44 percent of global ending stocks. In global wheat exporting countries, ending stocks are also expected to grow slightly to 74.0 MMT, but the ratio will fall to about 29 percent of global ending stocks. Carryout stocks in the world’s wheat importing countries are expected to fall 16 percent year over year to 67.1 MMT. If realized, that would be 11 percent below the 5-year average and 27 percent of global ending stocks, down 10 percentage points from the 5-year average.

This decrease is due in large part to a shift in purchasing behavior. Four consecutive record production years have enticed many buyers to adopt a “just-in-time” approach to take advantage of the lower prices and reduce storage costs where possible. That is why ending stocks in the top 20 markets for U.S. wheat (excluding China) are expected to cover just over two months of consumption, 6 percent below the 5-year average.

Additionally, 28 countries (including the EU, the world’s largest wheat consumer and normally a top wheat exporter) expect to have one month or less of domestic consumption in carryout stocks at the end of 2016/17, compared to the 5-year average of 20 countries with one month or less of domestic consumption. There are also 23 countries for which USDA does not show ending stocks data. These countries import 6.09 MMT of wheat annually and, with limited storage capacity, tend to buy “just-in-time.”

With lower planted area and an expected return to trendline yields, world wheat production is poised to decrease in 2017/18. With importing country stocks drawn down to the lowest level since 2010/11, any supply shocks would increase price volatility in wheat futures markets. On paper, the world has ample wheat, but 44 percent of that supply resides in China, which rarely offers wheat or flour for export.

After four consecutive years of larger global production and lower global wheat prices, many customers have minimal stocks on hand to weather supply shocks, and as one wheat buyer noted, “wheat (export) prices take the stairs down and the elevator up.” Fortunately for our customers, the United States holds 12 percent of world wheat ending stocks, ensuring the U.S. wheat store is always open. What is still uncertain is whether the price of U.S. high-quality wheat will remain at the current low levels. As always, weather is the wildcard, both in its direct effects on world wheat production and the wheat price impacts of any production problems with other major grains, especially corn and soybeans.

Customers should be aware of changing conditions around the world, and can track USDA weekly wheat crop condition and planting progress reports, as well as the latest U.S. weather forecast on the weekly USW Price Report.

USW will begin weekly Harvest Reports in May. To subscribe to any of USW’s reports, click here.

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Wheat Quality Improvement Team to Hear Customer Preferences in Asia

By Steve Wirsching, USW Vice President and Director, West Coast Office

This week and next, USW is conducting a top-level Wheat Quality Improvement Team (WQIT) of U.S. wheat breeders taking face-to-face meetings with Asian milling and baking quality control managers to discuss end-use quality and functionality.

The breeders will hear first-hand what quality characteristics customers in overseas markets need so they can apply that knowledge in their work on new wheat varieties.

This team includes both public and private wheat breeders from the PNW focused on bringing the very best genetic technology to U.S. wheat farmers. Team members include:

  • Mike Pumphrey, Associate Professor and the Orville Vogel Endowed Chair of spring wheat breeding and genetics at Washington State University, Pullman, where he has worked since 2010. He was previously a research geneticist employed by the USDA’s Agricultural Research Service at Kansas State University, Manhattan. Dr. Pumphrey’s participation is sponsored by the Washington Grain Commission (WGC).
  • Phil L. Bruckner, a winter wheat breeder and Professor in the Plant Sciences & Plant Pathology Department at Montana State University, Bozeman. Dr. Bruckner obtained bachelors and master’s degrees at Montana State and a Ph.D. in 1985 from North Dakota State University, Fargo.
  • Robert Talley, Plant Scientist and Head of the Hybrid Wheat Development team at AgriPro/Syngenta. Talley earned a bachelor’s degree from Colorado State University, Ft. Collins, in Soil and Crop Sciences. Prior to his current position, he was with Busch Agricultural Resources where he worked on the International Barley Research and Germplasm Exchange. Talley’s participation is also sponsored by the WGC.

The team will have the chance to interact with customers that are participating in a USW wheat quality analysis program at the United Flour Mill (UFM) Baking and Cooking Center in Bangkok, Thailand, as another team of wheat breeders did two years ago. Each breeder will make a presentation on how they are contributing to continuous quality and yield improvement of U.S. SW and HRS wheat, and, in Talley’s case, the potential for hybrid wheat varieties now in development. The breeders end their trip early next week in similar meetings with millers and wheat food processors in Taiwan.

Following their activity, the WQIT members will consider how to incorporate what they hear from customers into their breeding programs and communicate their activity to U.S. wheat farmers through the Wheat Quality Council and public as well as private breeding programs.

USW will post photos and other information from the 2017 WQIT on its Facebook page at www.facebook.com/uswheat.

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U.S. Wheat Planted Area Falls to Record Low

By Stephanie Bryant-Erdmann, USW Market Analyst

Over the past decade, U.S. wheat planted area peaked in 2008/09 at 63.2 million acres (25.6 million hectares). Since then, U.S. wheat planted area has fallen 27 percent to a projected 46.1 million acres (18.7 million hectares) in 2017/18 according to the March 31 USDA Prospective Plantings report. If realized, it will be 16 percent below the 5-year average of 55.0 million acres (22.3 million hectares) — making it the lowest planted wheat area since 1919 when USDA records began.

This report actually increased winter wheat planted area by 360,000 acres (146,000 hectares) from USDA’s January 2017 estimate to 32.7 million acres (13.23 million hectares). However, the new estimate is still 9 percent down from 2016/17 planted area. The increase came from hard red winter (HRW) area, estimated at 23.8 million acres (9.63 million hectares), up 2 percent from the previous projection. Still, HRW planted area will be down 10 percent from 26.5 million acres (10.7 million hectares) planted for 2016/17.

Soft red winter (SRW) planted area decreased from the previous estimate to 5.53 million acres (2.24 million hectares). The biggest declines occurred in Midwest states where SRW faces strong competition for acres from corn and, particularly this year, from soybeans.

USDA expects white wheat acres — planted in both winter and spring — to reach 4.12 million acres (1.67 million hectares) for 2017/18, down slightly from 2016/17, but in line with the 5-year average. For the first time in three years, the Drought Monitor shows adequate soil moisture in the Pacific Northwest (PNW) following a rather wet winter.

Given the drop in planted area, crop conditions become crucial to any look out at potential production for 2017/18. For HRW, the April 6 Drought Monitor also shows that 45 percent of Kansas and 66 percent of Oklahoma were abnormally dry or experiencing moderate drought, even though the region received 1 to 4 inches (2.5 to 10 cm) of rain last week. Fifteen percent of Oklahoma remains in severe or extreme drought. In 2016, these states grew nearly half of the total U.S. HRW crop.

Last week’s beneficial moisture improved U.S. winter wheat condition in Kansas, Oklahoma and Texas, but the crop is still in worse condition than last year at this time. As of April 3, USDA rated the winter wheat crop at 51 percent good to excellent, compared to 59 percent on the same date in 2016. USDA rated 14 percent of the crop as poor or very poor, up from 7 percent last year.

The U.S. Northern Plains received abundant precipitation this winter, providing good soil moisture for HRS and durum planting. The past two years, farmers in North Dakota, Montana and Minnesota began HRS planting 7 to 14 days ahead of normal due to early springs. This year, planting dates will be closer to normal as farmers are now waiting for fields to dry out.

According to USDA, U.S. total spring-planted area will decline to an estimated 11.3 million acres (4.57 million hectares), 3 percent less than in 2016/17. The estimate includes 10.6 million acres (4.3 million hectares) of hard red spring (HRS), down 7 percent from 2016, if realized.

USDA expects U.S. durum planted area to total 2.00 million acres (809,000 hectares), down 17 percent from 2016/17. If realized, this would further constrict the global durum supply discussed in the March 23 Wheat Letter.

Continuing to drive the decline in U.S. wheat planted area is a net farmer return on wheat that dropped 18 percent between 2015/16 and 2016/17, while input costs declined only one percent in the same time period. USDA expects this trend to continue in 2017/18, with returns falling another 6 percent from already unprofitable 2016/17 levels.

There is a long way to go before the final count is in. However, with less planted area and an expected return to trend line yields, the International Grains Council (IGC) pegged 2017/18 U.S. wheat production at 50.2 MMT, down 20 percent from 2016/17.

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A Look at the Current Global Ocean Freight Market

By Jay O’Neil, Senior Agricultural Economist, IGP Institute

For dry-bulk vessel owners and their customers, the first quarter of calendar 2017 has revealed rather dramatic changes in freight rates and vessel values and points to additional volatility ahead.

From 2009 through 2015, owners made what I consider an unreasonable and uncontrolled expansion of the dry-bulk fleet. As global economic factors turned against them, owners saw the Baltic Panamax Dry-Bulk index sink to just 287 points by February 2016. Dry-bulk Panamax shipping rates from the U.S. Gulf to Asia hit a low of $22.50 per MT and rates from the Pacific Northwest (PNW) to Asia were $12.50 per MT. Some ships were hiring out simply for the cost of voyage fuel and every vessel owner was losing piles of money. Numerous bankruptcies resulted.

The severe financial hardships of this past period finally motivated the shipping industry to all but stop ordering new vessel builds and, in turn, the expansion of the fleet.

As a result, dry-bulk freight rates and vessel values have slowly but steadily risen from those dark depths. In the past 13 months, Panamax vessel daily hire rates are up from less than $2,000 per day to more than $10,000 per day. Dry-bulk Panamax shipping rates from the U.S. Gulf to Asia are now sitting at $37.00 per MT and rates from the PNW to Asia are close to $20.50 per MT.

At such levels, ship owners and operators can cover operating costs and make a small profit if they manage things right.

The big question now is: can vessel owners keep their hands in their pockets and not scratch the itch to invest in additional tonnage because they believe better times are ahead? If not, they will certainly end up back in dangerous financial waters. Global GDP is only growing at close to 2.5 to 2.7 percent, not enough to absorb further fleet expansion for some years to come.

On a separate note, I am hearing a lot of market talk about Mexico possibly looking to other origins to source their commodities. Russia just extended an offer to purchase Mexican beef in exchange for purchase of Russian wheat. International traders have recently requested quotes on Handymax vessel freight from Brazil and Argentina to Veracruz, Mexico. Those quotes came in at $22.00 per MT and 27.00 per MT respectfully verses freight from the U.S. Gulf to Veracruz at $15.00/MT.

Can Mexico purchase corn, sorghum, wheat and soybeans from other countries? The simple answer is yes, if its private importers can afford to pay more relative to imports from its U.S. neighbors.

And, we do not yet know what effects crop weather conditions and production prospects will have for the 2017/18 marketing year. So, as they say, hold on to your hats, it could be an interesting, and bumpy, ride through the balance of 2017.

Jay O’Neil can be contacted at [email protected].

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Global Durum Production Expected to Fall in 2017/18

By Stephanie Bryant-Erdmann, USW Market Analyst

Global durum prices remain under pressure from a large 2016/17 crop. Per International Grains Council (IGC) data, global durum production increased 3 percent year over year to 40.2 million metric tons (MMT), 9 percent above the 5-year average and the largest since 2009/10.

As reported in the USW Price Report, U.S. free-on-board (FOB) Great Lakes durum prices have slipped 4 percent since the beginning of marketing year 2016/17 to a range from $303 to $309 per metric ton (MT) on March 17. Over the same time, Canadian FOB St. Lawrence durum prices declined 10 percent year over year based on Agriculture and Agri-Food Canada (AAFC) data.

Despite lower prices, global durum trade is expected to decline 7 percent to 8.0 MMT in 2016/17. But while trade volumes are expected to decrease, consumption of durum is expected to increase 5 percent year over year to 38.7 MMT. Global human durum consumption remains steady at roughly 30 MMT. Seed and residual usage is projected to increase 10 percent in 2016/17 to 5.4 MMT, but the largest change is expected in global durum feeding. IGC anticipates durum feed usage to reach 3.2 MMT in 2016/17, up 68 percent year over year, if realized. Canadian animal feed usage is expected to double to 1.4 MMT in 2016/17 due to lower prices and lower quality supplies. Animal feed usage in the European Union (EU) is also expected to more than double in 2016/17 to 700,000 MT.

International Grains Council Feb. 23 2017 Grain Market Report

While there are eight major exporters of common wheat, there are just four major exporters of durum — Canada, the European Union (EU), Mexico and the United States — all of which are in the Northern Hemisphere and benefited from the wet spring and mild summer that boosted 2016/17 yields and supplies. These four exporters account for an average 95 percent of total global durum exports each year. Year over year, durum supply in the major exporting countries increased 19 percent to 49.3 MMT. IGC expects global durum ending stocks to total 10.7 MMT, 41 percent above the 5-year average.

Against this backdrop, farmers are making plans and, in some places, are beginning to sow durum in the Northern Hemisphere. Spring weather affects planting decisions, but early projections expect significantly lower durum planted area in 2017/18. Stratégie Grains expects reduced planted area and more normal yields will cut 2017/18 EU durum production by 9 percent year over year to 8.9 MMT. AAFC pegged Canadian durum production at 5.5 MMT, which would be down 29 percent year over year if realized. The reduction is based on an expected 20 percent decline in planted durum area and a projected 15 percent decrease in yield. Stratégie Grains forecasts 2017/18 Mexican durum production at 2.0 MMT, down an estimated 20 percent from 2016/17, if realized.

As discussed in the March 9 Wheat Letter, USDA pegged U.S. spring and durum planted area at 13.6 million acres (5.51 million hectares) at its annual Agricultural Outlook Forum and forecasted total U.S. wheat production to fall 20 percent year over year. USDA will release detailed acreage projections in the Prospective Plantings Report on March 31.

In the United States, durum farmers have a saying, “plant durum every year and sell every third year.” The soaring yields seen in marketing year 2016/17 put plenty of durum in storage, but provided little incentive to farmers to sell it. U.S. farmers see this as a time to wait for prices to rise, ensuring that regardless of final 2017/18 production volume, the U.S. store will remain open and able to supply the world market with high quality durum.

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USDA Expects U.S. Wheat Production to Fall 20 Percent Year-Over-Year

By Stephanie Bryant-Erdmann, USW Market Analyst

The USDA held its annual Agricultural Outlook Forum Feb. 23 to 24 where the 2017 Grain and Oilseeds outlook was presented. USDA currently estimates 2016/17 (June to May) wheat acreage at 46.0 million acres (18.6 million hectares), a nine percent decrease from last year.

USDA reported that winter wheat plantings are down 10 percent with the HRW crop having the largest decrease. HRW plantings fell by 12 percent to 23.3 million acres (9.43 million hectares). Soft red winter (SRW) plantings decreased by 300,000 acres (121,000 hectares) to 5.7 million acres (2.3 million hectares). USDA anticipates a 3 percent reduction in spring wheat plantings due to more favorable returns for other commodities. Currently, USDA’s spring wheat and durum acreage projection stands at 13.6 million acres (5.51 million hectares).

Due to the expected reductions in planted area and a return to trend line yields, production will decrease to a projected 50.0 MMT. If realized, that would be down 20 percent year-over-year. Based on trend yields, USDA expects the national average yield to fall to 47.1 bushels per acre (31.6 MT per hectare). USDA projects the wheat harvested-to-planted ratio will be 0.85, on par with 2016/17 and the 5-year average.

Though winter wheat planted area is at its lowest level in 108 years, growing conditions can greatly impact production levels as demonstrated in 2016/17. In February, winter wheat ratings declined in Illinois, Kansas, Montana, Nebraska, North Dakota and South Dakota, according to the monthly USDA Crop Progress report. The biggest change was noted in Montana, where USDA rated 5 percent of winter wheat in good to excellent condition compared to 70 percent in January. The percentage of Oklahoma wheat rated good to excellent increased to 43 percent, up from 33 percent in January. USDA reported 15 percent of Oklahoma wheat in poor or very poor condition, down from 17 percent in January, but significantly higher than the 1 percent poor or very poor on the same date last year. USDA resumes weekly crop progress reporting on April 3.

Large carryover stocks will partially offset the projected lower production, yet the forecast expects total U.S. supplies to decrease in 2017/18. USDA forecasts 2017/18 U.S. supplies at 84.3 MMT, down 9 percent from 2016/17, still 1 percent more than the 5-year average, if realized. Demand in the United States will decline in 2017/18, due to decreased feed usage. USDA anticipates a 2 percent decrease in domestic use, from 33.9 MMT to 33.1 MMT.

Smaller U.S. supplies and competition from other origins are expected to constrain U.S. wheat exports. USDA expects U.S. exports to decline slightly to 26.5 MMT, down 5 percent from the forecasted 2016/17 U.S. wheat export level of 27.9 MMT. U.S. ending stocks are forecast to decrease to 24.6 MMT, down 21 percent year-over-year but still 8 percent above the 5-year average.

To read more from the USDA Outlook Forum or to download presentations, please visit https://www.usda.gov/oce/forum/.

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