Overview of Wheat Market Outlook
Since USDA’s World Agricultural Supply and Demand Estimates (WASDE) and Crop Production reports on October 9th, U.S. and World wheat market prices have been volatile and generally lower.
For the “new crop” 2015/16 marketing year the USDA projected that 1) World wheat total supplies and total use would be at record high levels, 2) World wheat export trade would be down moderately from a year ago – with export sales competition occurring in what can be termed a “buyer’s market”, and c) World wheat ending stocks would be record high, with percent ending stocks-to-use at their highest level in 14 years (since MY 2001/02).
Underlying concerns still exist in World wheat markets about such factors as
- a) potential wheat production problems and supply prospects in India, Russia, Ukraine, and elsewhere,
- b) ongoing geopolitical problems in the Black Sea region and Middle East, and
- c) uncertainty in World economic, financial and currency markets.
Even so, the “large crop-over supply” situation existing in World & U.S. wheat markets continues to negatively influence price prospects. For wheat prices to recover in late 2015-2016 it is likely that significant World wheat production problems and/or trade disruptions would need to occur. For the United States, ongoing strength in the U.S. dollar exchange rate is a serious negative factor that is limiting U.S. wheat exports and price prospects.
USDA U.S. Wheat Supply-Demand & Price Forecast
The USDA adjusted its supply-demand estimates for U.S. wheat in the “new crop” 2015/16 marketing year – forecasting 54.644 million acres (ma) planted (down 1.435 ma), 47.094 ma harvested (down 1.360 ma), 43.6 bu/ac yields (down 0.5 bu), and 2.052 billion bushels (bb) production / 2.930 bb total supplies (both down 84 million bushels or ‘mb’).
The USDA also forecast 180 mb feed & residual use (down 20 mb), 850 mb of exports (down 50 mb), 2.069 mb of total use (down 70 mb), 861 mb ending stocks (up 14 mb), and 41.6% ending-stocks-to-use (up from 40.9% in September, 39.3% in August and 38.5% in July, up to the highest level since 48.6% in MY 2009/08). The USDA adjusted its U.S. average wheat price forecast for “new crop” MY 2015/16 to the range of $4.75-$5.25 /bu. – leaving unchanged the midpoint forecast of $5.00 – down to the lowest level since $4.87 /bu in MY 2009/10.
KSU U.S. Wheat Supply-Demand & Price Forecast
Kansas State University projections of “new crop” MY 2015/16 supply-demand balances and prices are given in two scenarios:
A) “Lower Exports” Scenario: 70% prob. of the same U.S. wheat supply estimates as the USDA, but with U.S. exports dropping below “old crop” 2014/15 levels, i.e., 825 mb exports, 886 mb ending stocks, 43.35% S/U, and $4.85 /bu U.S. average price,
B) “Higher Exports” Scenario: 30% prob. of supply prospects equal to the USDA’s but with higher U.S. wheat exports, i.e., 1.000 bb exports, 711 mb ending stocks, 32.0% S/U, and $5.85 /bu U.S. average price.
USDA World Wheat Supply-Demand
The existence of record large World wheat supplies and ending stocks estimates are a “limiting burden” on World wheat markets – driving wheat prices lower. Record World total wheat supplies of 944.9 mmt in “new crop” MY 2015/16 are up from the previous record of 919.3 mmt in “old crop” MY 2014/15, and from 892.3 mmt in MY 2013/14. These are the three highest years of World wheat production on record.
Projected record high World wheat ending stocks in “new crop” MY 2015/16 of 228.5 mmt (31.9% S/U – 14 year high) are up from 212.1 mmt (30.0% S/U) in “old crop” MY 2014/15, and up from 193.8 mmt (27.7% S/U) in MY 2013/14. For perspective, these supply-demand figures are comparable to the 38 year low World wheat ending stocks of 128.8 mmt and percent ending stocks-to-use of 21.0% S/U in MY 2007/08.