Monday, May 16, 2011

Wheat Update and Outlook

The USDA's Wheat Outlook report mentions high corn prices as displacing wheat acreage a number of places around the globe even though wheat prices are also high. The report is counting on favorable weather in Russia, the Ukraine, and Kazakhstan to pick up the slack from lower production in other areas. That is concerning, as this area is prone to droughts. Next, please find highlights from the report.

  • Beginning stocks for 2011/12 are down 14 percent from 2010/11, but remain the second-highest in a decade.
  • All-wheat production is projected at 2,043 million bushels, down 7 percent from 2010/11.
  • U.S. wheat supplies for 2011/12 are projected at 2,992 million bushels, down 9 percent from 2010/11.
  • U.S. exports are projected at 1,050 million bushels, down 225 million from the 2010/11 projection.
  • At a projected 702 million bushels, 2011/12 ending stocks are expected down 137 million from 2010/11 and 274 million below 2009/10.
  • World wheat production is expected to increase in 2011/12, but remain lower than global use, resulting in slightly declining world wheat stocks.
  • Significant shifts in market shares are expected among wheat-exporting countries.
  • The eventual resumption of Russian and Ukrainian exports is expected to fill in the gap caused by lower supplies in the United States, EU-27, and Argentina.
  • Exports by Russia, Ukraine, and Kazakhstan, combined, are projected to more than double to 26.0 million tons.
  • Uncertainty as to when grain exports by Russia will resume wears strongly on projected world trade.
  • As competitors’ wheat harvests become available for export, U.S. shipments are projected to slow down.
  • U.S wheat exports are projected to drop 6.5 million tons from 2010/11 to 29 million tons in the 2011/12 July-June trade year.

Winter Wheat Production
  • The survey-based forecast of winter wheat production, at 1,424 million bushels, is down 61 million bushels (4 percent) from 2010.
  • Based on May 1 crop conditions, the U.S. winter wheat yield is forecast at 44.5 bushels per acre, down 2.3 bushels (5 percent) from the previous year.

Winter Wheat Production Estimates by Class
  • HRW production is forecast to be down 256 million bushels (25 percent) from a year ago to 762 million bushels this year.
  • The higher planted area for the 2011 crop has been more than offset by the higher abandonment rates and lower yields due to the severe drought on the central and southern plains.
2011 Crop Conditions Vary Widely Across the Country
  • The National Agricultural Statistical Service’s (NASS) May 9 Crop Progress reported that 33 percent of the winter wheat crop is rated good to excellent and 42 percent was rated poor to very poor.
  • A year ago at this time, 66 percent of the winter wheat crop was rated good to excellent and only 8 percent was rated poor to very poor.
Projected 2011 Spring Wheat Production
  • Durum and other spring wheat production is projected at 619 million bushels, down 14 percent from 2010/11, based on 10-year harvested-to-planted ratios and State yield trends for 1985-2008.
  • Total durum wheat production is projected at 79 million bushels for 2011, down 26 percent from 2010.

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International Situation and Outlook - World Wheat Production To Increase Following FSU-12 Recovery in 2011/12
  • World wheat production in 2011/12 is projected to reach 669.6 million tons, up 21.4 million, or 3 percent from the previous year.
  • Foreign wheat production is projected to increase 25.9 million tons, or 4 percent compared to 2010/11.
  • If realized, this year’s wheat output would be the third largest in history, just behind the record harvests of 2008 and 2009.
  • Some major wheat producers (Canada, Australia, Argentina, and India) did plant--or intend to plant--more wheat in 2011/12 than in the previous year, while wheat area in the EU-27 is projected to remain virtually unchanged on the year.
  • A recovery from the 2010/11 drought in the FSU-12 coupled with higher yields in a number of other countries is projected to more than offset anticipated lower yields in the United States, Australia, Argentina, Canada, and several other countries and boost global wheat yield in 2011/12 by 2 percent, and foreign yield by 3 percent.
  • April was exceptionally dry across northern France and Germany, northwestern portions of Poland, and southeastern England (in the UK). Several dry pockets have as well developed in the northern Balkans.
  • China is expected to be the second largest wheat producer in 2011/12 (about 17 percent of world production), reaching 115.5 million tons, an increase of 0.5 million tons from the previous year.
  • Wheat production in the FSU-12 is forecast at 100.6 million tons, up 19.6 million, or 24 percent from a year earlier.
  • The inability to export in Russia has resulted in high grain stocks, such that there is very little excess storage capacity. The high stocks have driven Russian domestic grain prices down to about 2/3 of world levels. These developments are reducing Russian grain producers’ incentives for planting wheat and encouraging producers to plant other spring crops.
  • In Kazakhstan, a long-term government policy of diversifying grain production away from wheat towards feed grains, as well as rising prices for fuel and other inputs, are projected to lower wheat area in 2011/12 by 0.5 million hectares.
  • India is projected to produce a record wheat crop of 84.0 million tons, up 3.2 million, or almost 4 percent from a year earlier.
  • In Pakistan the wheat crop is forecast down 0.4 million tons on the year to 23.5 million.
  • The Middle East is projected to produce a 37.9-million-ton wheat crop, 6 percent lower than the previous year.
  • North Africa’s wheat production in 2011/12 is projected up 19 percent to 19.1 million tons.
  • Surveys of Canadian planting intentions indicate a 17-percent increase in total wheat sowings, a rebound from the last year’s planting, the lowest in 40 years. The intended planting of Canadian western red spring wheat is up 17 percent (mainly in Saskatchewan), planned area for durum wheat is up sharply 60 percent (mainly in Saskatchewan, but also in Alberta), and winter wheat seeding is up 9 percent in eastern Canada (mainly in Ontario), due to improved planting conditions last fall.

Wheat production in 2011/12 is forecast up 12 percent to 26.0 million tons.
  • South America is expected to produce 23.3 million tons of wheat, down 8 percent from the previous year.
  • In Australia, early indications suggest an increase in wheat area by 0.5 million hectares to 13.8 million. Winter wheat will be planted in late May-July, and the subsoil moisture level in eastern Australian provinces is very good following last year’s heavy rains. Western Australia, however, is still seasonably dry, and will need abundant precipitation to recover from last year’s drought. Based on trend yields, Australian wheat production is projected at 24.5 million tons, 1.5 million tons lower than last year’s second highest wheat output on record.

World Wheat Trade Nearly Unchanged, U.S. Exports Down in 2011/12
  • Egypt in 2011/12 is projected to remain the world’s largest wheat importer at 9.5 million tons.
  • The EU-27 is expected to boost its wheat imports by 33 percent, or 1.5 million tons to 6.0 million.
  • Afghanistan is expected to import 50 percent more wheat, to compensate for wheat output decline.
  • Reduced beginning stocks and smaller production of lower quality are expected to cut Brazilian exports 1.4 million tons, to 0.5 million.
  • The eventual resumption of Russian and Ukrainian exports is expected to fill in the gap caused by lower supplies in the United States, EU-27, and Argentina.
  • Exports by Russia, Ukraine, and Kazakhstan, combined, are projected to more than double to 26.0 million tons.
  • Uncertainty as to when grain exports by Russia will resume wears strongly on projected world trade.

U.S. Exports To Drop Later in the Year
  • U.S. wheat exports for the 2011/12 July-June international trade year are projected to drop 6.5 million tons from last year to 29 million tons.
  • U.S outstanding sales for the 2010/11 year for the first week of May were more than double last year’s volume, indicating that U.S. wheat exports will start strong.
  • However, as competitors’ supplies become available and their wheat prices decline, U.S. exports are expected to slow.

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