You are here: / / Wheat Letter Blog
thumbnail
, , ,

Freeze, Snow Effects Likely Cut into World’s High Quality Wheat Supply

It is still too early to project specific effects on wheat yields for marketing year 2017/18 from the late-season cold and snow event in Kansas and parts of Colorado, Texas and Nebraska. However, those close to the situation suggest the freeze and snow only add fuel to an already established trend.

“The big story with hard red winter wheat in general before the blizzard headlines was about the reduction in planted area,” said Kansas Wheat CEO Justin Gilpin. “Lower planted area, now combined with higher abandonment in this crop, encouraged USDA to project a drop in hard red winter wheat production by 344 million bushels (9.36 MMT).”

Gilpin said he expects the situation in HRW will help reduce the total U.S. wheat stocks-to-use ratio by perhaps 10 percent — but carryover stocks still support a relatively high ratio of 40 percent.

“However, it needs to be pointed out that this does not reflect the balance sheet for the high quality milling wheat that buyers here in the United States and around the world should watch closely,” said Gilpin. “The available stocks-to-use number for quality supplies is projected to be to be much tighter on a global basis.”

/by
thumbnail
,

Profiling U.S. Wheat Sustainability: Mark Linnebur, Hard White Wheat Farmer

By Elizabeth Westendorf, USW Policy Specialist

Mark Linnebur’s family and their community are always at the core of every decision made on their farm. The president of the Colorado Wheat Administrative Committee farms 25,000 acres of land in Colorado alongside five of his brothers and their families. He typically grows HRW or hard white (HW) wheat and corn in a wheat-corn-fallow rotation.

“Being a good steward of the land is what every farmer is trying to achieve,” said Linnebur. “We are not trying to mine the land for what we can get out of it in the near term, because we want to pass it on to our children.”

Linnebur is one of six U.S. wheat farmers featured in a USW series on wheat sustainability. There are six U.S. wheat classes, grown in distinct regions and local micro-climates. Aggregate measures of sustainability are important, but they fail to capture the nuances of a crop that is grown across many different climates, soil types and farm environments. These profiles show the differences in farming practices across the country and how those farming practices enhance the sustainability of U.S. agriculture.

The Linneburs switched to no-till farming twenty years ago to help protect their soil and better retain moisture, which is a scarce commodity in his region. In dry years, they now see 20 to 50 percent better yields than before the switch to no-till because they are conserving an average 25 to 30 percent of water resources every year.

“Sustainability is more than just environmental. The fact that we are raising our family on this farm is what keeps our love for the land in place. If we don’t love the land, we are not going to take care of it,” said Linnebur. “First and foremost, sustainability is economical and generational – which leads to environmental sustainability.”

That intergenerational focus has resulted in efforts to innovate and better protect the resources on his land. For example, Linnebur uses “bio-solids” from the nearby metropolitan area to fertilize about half of his land every year and sees better soil quality as a result, which helps increase protein levels of his wheat crops.

“It can be challenging trying to convince the wider population that we are taking care of the ground, because for us, it’s about passing it on to the next generation,” said Linnebur. “We’re building the soil, that’s our real goal.”

U.S. wheat farmers deal with unique challenges and growing conditions. For Linnebur, that challenge is conserving water resources for his dryland crops. The Linnebur family farm has thrived in part because they use no-till and innovative practices like fertilizing with bio-solids to maximize soil health and production together. This formula is one that all farmers strive to balance, and each go about it in ways that make the most sense in their region. Sustainability is not “one size fits all.”

Learn more about Linnebur and his farm at www.uswheat.org/factsheets. U.S. farmers, ranchers, fishermen and foresters also share their values, sustainability experiences and conservation practices at the U.S. Sustainability Alliance.

/by
thumbnail
, ,

Digging Deeper: How Global Supplies Will Tighten in 2017/18

By Stephanie Bryant-Erdmann, USW Market Analyst

While markets focused on USDA’s latest global supply and demand values, a deeper look provides perspective for wheat buyers. Breaking the supply values down into three categories — importer, exporter and China — shows some interesting trends. USDA expects world wheat supply in 2017/18 to fall 2 million metric tons (MMT) year over year to 993 MMT due to a 2 percent decline in its estimated production of 738 MMT. If realized, it would be the first production decline since 2012/13. The anticipated decrease in exporter and importer supplies will be larger, but that decrease is masked by estimated increases for China. Removing China’s 2017/18 projected beginning stocks and production from global wheat supply reveals an 18.2 MMT or approximately 2 percent decline in global supplies.

Importing countries. Ending stocks in major wheat importing countries for 2016/17 — soon to be 2017/18 beginning stocks — are expected to fall to a 6-year low of 68.0 MMT. Production in the importing countries is expected to increase 5 percent year over year, lifted by a 10 MMT increase in India after two poor crops there. Total importing country supplies are expected to remain stable at 300 MMT, with beginning stocks falling and production increasing only marginally in importing countries. However, it should be noted that 107 MMT, roughly 35 percent, of that supply will remain in India.

Exporting countries. USDA forecasts supplies in the top wheat exporting countries of Argentina, Australia, Canada, the European Union (EU), Kazakhstan, Russia, Ukraine and the United States to decrease by 4 percent or roughly 19 MMT year over year to 451 MMT. A 10.5 MMT year over year increase in exporter beginning stocks partially offsets the anticipated 7 percent decrease in production. Of the major eight exporters, only the EU and Argentina expect to see increases compared to last year.

China. USDA expects Chinese beginning stocks to climb to 111 MMT, up 14 percent over 2016/17. If realized, China will hold 43 percent of 2017/18 total global wheat beginning stocks. Chinese wheat production is also expected to rise in 2017/18 to 131 MMT, up 2.15 MMT from 2016/17, yet Chinese wheat consumption is expected to decline 2 percent to 116 MMT due to an anticipated decrease in wheat feeding. With supply up and consumption down, 2017/18 Chinese ending stocks are expected to grow to 128 MMT, up 15 percent from last year and a new record. If realized, Chinese ending stocks would account for 49 percent of all global wheat ending stocks for 2017/18.

Global supply and demand estimates give broad perspective for purchasing decisions, but customers should take care to remove Chinese stocks from the equations because the entire volume will stay in China. Thus, China’s ending stocks skew the total global stocks-to-use ratio higher to 35 percent. Without China, the global ratio would be 21 percent.

Buyers should also note that USDA’s first estimates for 2017/18 wheat production use trendline yields and average harvested area. As last year demonstrated, weather can significantly affect yield potential, abandoned acres, quality and total production. For example, the actual effect of the late April freeze and snow, as well as increasing plant disease pressure, on hard red winter (HRW) production and quality will not be revealed until harvest. Buyers should continue to monitor conditions around the world, and recognize that global wheat supplies are much tighter than traditional global supply and demand estimates show.

To keep up to date on the 2017/18 U.S. wheat harvest and initial quality analysis, it is easy to subscribe to USW Weekly Harvest Reports. To read the first report, click here.

/by
thumbnail
, , , ,

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.

 

/by
thumbnail
,

Profiling U.S. Wheat Sustainability: Roy Motter, Desert Durum® Farmer

By Elizabeth Westendorf, USW Policy Specialist

Roy Motter farms 2,500 acres in the Imperial Valley of California, and while that may be small compared to other U.S. wheat farms, his operation supports three families. Motter has been farming with his two brothers-in-law since the 1970s, and he oversees their wheat production. They grow Desert Durum® wheat, as well as lettuce, cabbage, onions, sugar beets, sugar cane, alfalfa seed and hay, Sudan grass, melons and tomatoes.

“I chose to start farming more than 40 years ago because I like being outdoors, and I like the dynamics of working for yourself and making those decisions,” said Motter. “Farming is multi-dimensional; every crop is different and has different demands.”

Motter is one of six U.S. wheat farmers featured in a USW series on wheat sustainability representing the six U.S. wheat classes, grown in distinct regions and local micro-climates. The series suggests that while aggregate measures of sustainability are important, but they fail to capture the nuances of a crop that is grown across many different climates, soil types and farm environments. These profiles show the differences in farming practices across the country and how those practices enhance the sustainability of U.S. agriculture.

For Motter, wheat is a pivotal part of their approach to sustainable farming.

“We can’t grow our money crops — lettuce, onions and sugar beets — year after year,” said Motter. “You have to have a rotation, and wheat is a good rotational crop for us. It lets us control weeds and disease that affect the other crops and gives the ground a chance to rest.”

Farmers in the Southwest increase economic water productivity (the dollar value of crop production per acre-foot of water consumed) by 9 to 21 times by rotating wheat production with vegetable production. And in an arid climate like the Imperial Valley, maximizing water productivity is vital.

“We get a lot of criticism for using irrigation water from the Colorado River. But if you want to sustain a growing world population with food and fiber, you must modify the environment to satisfy those needs,” said Motter. “If we want to talk about sustainability issues in relation to wheat crops, the primary issue is to use our water as efficiently as we can, and we work to improve that every year.”

Motter’s reliance on irrigation does not mean his farm is less sustainable. The Imperial Valley grows 85 percent of the nation’s lettuce in the winter months of the year, and with or without its wheat production, the region will continue to grow its vegetable crops. By rotating wheat with that lettuce production, Motter reduces the amount of water his farm uses. In fact, over the past 30 years, farmers in the desert Southwest have reduced their water usage for barley and wheat by approximately 30 percent and consistently invest money in water and energy conservation efforts.

U.S. wheat farmers deal with unique challenges and growing conditions. For Motter, those challenges are managing water use in an arid climate and controlling crop diseases without the benefit of a cold winter in between growing seasons. Motter and his family’s farm have thrived because they use rotation and best practices to maximize soil health and production while minimizing required inputs. This formula is one that all farmers strive to balance, and each go about it in ways that make the most sense in their region. Sustainability is not “one size fits all.”

Learn more about Motter and his farm at www.uswheat.org/factsheets. There is also more information about U.S. farmers, ranchers, fishermen and foresters share their values, sustainability experiences and conservation practices at the U.S. Sustainability Alliance.

/by
thumbnail

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.

/by
thumbnail
, , , ,

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.

/by
thumbnail
, ,

USTR Report Highlights Need for Rules-Based Trading System

By Ben Conner, USW Director of Policy

Every year, the USW Wheat Letter features an article on the annual release of the National Trade Estimate (NTE) report by the Office of the U.S. Trade Representative (USTR). While the issues it quantifies do not change rapidly, the latest NTE shows the extent of the problems facing the Trump Administration, which has made trade enforcement a cornerstone of its economic policy.

The NTE is the U.S. government’s most comprehensive report on trade barriers. It covers more than 40 countries or country groupings. In just under 500 pages, it clearly shows that these barriers pose a major challenge for U.S. exporters and investors. Most of the issues are policies that violate rules of a U.S. trade agreement or the World Trade Organization (WTO).

Considering trade enforcement, the NTE may understate the challenge. For the wheat industry alone there are several barriers not listed in this massive report. If USTR decided to pursue every long-standing issue facing the United States through dispute settlement, it would stretch its resources far past the breaking point. Unfortunately, new problems seem to arise faster than it takes governments to fix old problems.

This underscores the need for countries to commit strongly to a rules-based trading system. Trade disputes are one way to address the problems, but even a country with considerable resources for trade disputes like the United States, which has sued or been sued in nearly half of all WTO disputes, can barely begin to address outstanding issues through disputes alone.

However, strategic enforcement is important to maintaining the effectiveness of international trade rules. There are economic benefits from fixing specific trade barriers, but just as vital is the deterrence effect on countries that would consider implementing new barriers. If we must litigate every issue, the system could collapse.

Last year, USTR took a big step in challenging non-compliant domestic support programs in China — a growing problem for at least a decade. The NTE mentions similar problems in India, Turkey and Brazil and the hope is that the China cases lead to serious reforms to subsidies in these countries as well. USW and USTR need to stay vigilant to help reverse the trend of increasing WTO-violating subsidies and ensure that countries consider their trade commitments before implementing new policies.

Every country, including the United States, has unique internal pressures that may divert them from trade commitments at the margins. The NTE is an important way to demonstrate how those pressures affect U.S. industries, but without effective enforcement and negotiated solutions, it is just a very long list.

As an industry stakeholder, USW provided input on its key trade barriers through comments submitted in October 2016. Read those comments here. The full 2017 NTE report is posted online here.

/by
thumbnail
, ,

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.

/by
thumbnail
, ,

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.

/by

Think Farm Export Programs Don’t Matter? Think Again.

GET THE REST OF THE STORY

DTN Wheat Detail
DTN Corn Detail

2008-2013 U.S. Wheat Associates. All Rights Reserved
Privacy Policy | Non-Discrimination Statement