Wheat Outlook: U.S. Yield Projected To Hit Record High

    Excellent growing conditions for much of the United States, especially the Great Plains States of Kansas, Montana, North Dakota, Nebraska, and Oklahoma, contribute to U.S. winter wheat yields that are up nearly 3 bushels per acre from the May forecasts and up 8 bushels per acre above the 2015/16 estimate. The new crop U.S. winter wheat average yield is now projected to be record high at 50.5 million bushels and production is projected at 1.506 billion bushels despite an 8-percent year-to-year decline in area harvested.

    The improved outlook for winter wheat lifts aggregate wheat production for 2016/17 to 2,077 million bushels, an increase of nearly 80 million bushels from the May projection and an increase of 25 million bushels over the 2015/16 crop. The increase in new-crop wheat supplies is partly offset by expanded feed and residual use—up 30 million bushels and exports—up 25 million bushels.

    The season-average price is reduced 10 cents per bushel to $3.60 on the low end and $4.40 on the high end.

    Domestic Outlook

    Record High Winter Wheat Yield Lift All Wheat Production

    This month, revised yield and production forecasts were released in the USDA, National Agricultural Statistics Service (NASS) Crop Production report. Excellent growing conditions for much of the United States, especially the Great Plains States, contributes to winter wheat yields that are up nearly 3 bushels per acre from the May estimate and up 8 bushels per acre above the 2015/16 estimate.

    The newcrop U.S. winter wheat average yield is now projected to be record-high at 50.5 million bushels. With area harvested projected at 29.8 million acres, implied production is 1.506 billion bushels. Projected production for 2016/17 is 136 million bushels larger than for 2015/16, despite winter wheat harvested area declining nearly 8 percent year to year.

    The boost in winter wheat production subsequently lifts aggregate production, now estimated at 2,077 million bushels, an increase of nearly 80 million bushels from the May projection. Newly abundant supplies support increases in multiple use categories and put downward pressure on the season average price, down 10 cents to $4 per bushel.

    Winter Wheat Production

    The USDA-NASS June Crop Production report provides the second survey-based forecast of 2016/17 marketing year. In this publication, U.S. winter wheat production is projected at 1,506 million bushels, up nearly 10 percent or about 136.4 million bushels from 2015. Based on the objective yield survey, the U.S. winter wheat yield is forecast at 50.5 bushels per acre, up 8 bushels from the previous year and exceeding the previous record yield set in 1999.

    Yields for the 2016/17 winter crop were raised 2.7 bushels per acre from May to June based on improving conditions in several key States. Month-to-month yield gains per acre include Colorado (up 4 bushels), Kansas (up 5 bushels), Montana (up 4 bushels), Nebraska (up 1 bushel), Oklahoma (up 3 bushels), Texas (up 2 bushels), and Washington (up 1 bushel).

    Sizable yield year-to-year gains combine with a higher projected harvest-to-planted ratio to more than offset declines in area planted. As of June 1, the winter wheat expected harvested area is 29.831 million acres, down 2.4 million acres from last year. The 2016/17 projected winter wheat harvest-to-planted ratio is 82.4 percent, slightly higher than the 81.7 percent realized in 2015.

    All classes of winter wheat, with the exception of Soft Red Winter (SRW), are projected to experience growth in volume production in 2016. Hard Red Winter (HRW) output is up 110.7 million bushels to 937.7 million. Aggregate white winter wheat production is 214.4 million bushels; Hard White Winter (HWW) is up 19 percent and 3 million bushels to 19.0 million; Soft White Winter (SWW) production is up 27 million bushels to 195.4 million, a 16-percent year-to-year increase.

    Only SRW production is expected to be down year to year with a slight, 4.45-million-bushel or 1.2-percent, decline in production from 2015.

    Harvested area for all 2016 winter wheat is 29.8 million acres and anticipated to decline 8 percent relative to the 2015 estimate. Both HRW and SRW harvested area are down year to year, 9 percent and 8 percent, respectively. Thus production increases are attributable to yield increases which were up year to year and month to month for nearly every State. Rising yields have been attributed to near-ideal growing conditions in many States.

    Grain Commentary

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    However, there are some notable exceptions. In Texas, where close to 10 percent of the U.S. winter wheat crop is harvested, heavy rains in May and recent hail in the Northern Low Plains and Edwards Plateau have damaged the crop and impeded field operations. For the week ending June 5, 16 percent of the winter wheat crop in Texas had been harvested and compares to 17 percent the previous year and 26 percent average over the previous 5 years.

    On net, despite largely isolated incidents of unfavorable weather, reports of stripe rust and some cutworm damage, the quality of the 2016/17 winter wheat crop remains high. For the week ending June 5, fully 62 percent of the winter wheat crop was reported to be in “good” to “excellent” condition; up 13 percent from the previous year.

    Ninety-one percent of the crop is headed and compares to 89 percent in 2015 and the 5-year average of 83 percent. Just 2 percent of the winter wheat crop was harvested by the week ending June 5; as fields dry out in Texas and other early-harvest States, the pace is anticipated to pick up.

    Once out of the field, new-crop winter wheat will compete for storage space alongside ample supplies of 2015/16 wheat. Potential storage challenges have been reported for several States. In Kansas, where much of the bumper crop of winter wheat will be harvested and stored, grain elevators are said to be bracing for the arrival of crops. Recent investments in additional storage capacity in the State will aid in finding harvested grains a home. However, in Kansas and other locations, as grain stocks swell with the arrival of the fall crop, use of nontraditional storage options may become a necessity.

    Desert durum production in California and Arizona is forecast at 15.2 million bushels for 2016. This production is smaller than the 20.3 million bushels produced in these two States in 2015 and is due to significant reductions in harvested area, projected at just 144,000 for 2016 and down 56,000 acres. Most of the reduction in harvested area is due to a 51,000-acre decline in area harvested for Arizona.

    Anticipated year-to-year yield increases of 6 bushels per acre and 1 bushel per acre in Arizona and California, respectively help to offset the production sapping effects of reduced harvested area. Between May 1 to June 1, desert durum yields were increased by 1 bushel per acre in Arizona to 107 but took a sizable cut in California, down 8 bushels month to month to 104 bushels per acre.

    Spring Wheat Production 2016/17

    Spring wheat and durum production for 2016 is projected to decline fully 16 percent based on lower planted area, relative to 2015, and return to near trend yields based on current conditions. In the USDA-NASS March Prospective Plantings report, 11.3 million acres of other spring wheat were projected to be seeded in 2016.

    If realized, farmers will have planted less spring wheat than at any time since 1972. The March 31 report captured intentions as of early March. The next official, survey-based data on spring plantings will be released in the June 30 USDA-NASS Acreage report.

    As of June 5, 96 percent of the spring wheat crop had emerged in the six major cultivating States. Emergence is well above the 5-year average pace of 78 percent though on par with the 2015 emergence of 95 percent. As with winter wheat, spring wheat growing conditions have been very favorable; fully 79 percent of the crop is rated “good” to “excellent” and compares to 69 percent rated similarly in 2015.

    All Wheat Supply, Use, and Stocks Raised

    Over the past month, weather in most winter and spring wheat growing regions provided near-ideal conditions for cultivation, lifting the projected all wheat yield to 48.6 bushels per acre. The present yield is 5 bushels higher than last year’s forecast and 1.9 bushels above the May projection. Record-high yields overcome significant year-to-year reductions in planted and harvested area and result in both production and supplies that are projected up in the new marketing year.

    Historic high yields aside, the current supply level is not record-high, in fact, supplies in 2010/11 were 3,235 million bushels, nearly 54 million bushels larger than the current 2016/17 forecast. However, the size of the new crop combines with lackluster export marketing opportunities to raise ending stocks to levels not observed since the late 1980s.

    This month, ending stocks are raised 22 million bushels to 1,050 million, up 70 million bushels from 2015/16. With storage capacity already stretched from an ample 2015/16 crop, prices have started to decline, increasing wheat’s appeal for use in feed rations and exports markets. Last week, in Garden City, Kansas wheat and corn prices were near parity, giving an indication that conditions are favorable for feeding wheat.

    This month’s 15-cent increase in the corn price and lowering of wheat prices reduced the wheat-corn price ratio to 1.14 and is further supportive of an increase in wheat feed use. Accordingly, feed and residual is raised fully 30 million bushels this month to 200 for the 2016/16 marketing year.

    In 1987/88, when ending stocks were last above the 1-billion-bushel mark, feed and residual settled at more than 290 million bushels and 18 percent of total use. Over the past 5 years, the feed and residual category has oscillated between 6 and 15 percent of total use or about 9 percent over the period. Currently, feed and residual use is pegged at 9 percent of total use, on par with the average.

    Some of the nearly 80-million-bushel increase in production is offset with a slight 5-million-bushel decline in imports. Exports are raised 25 million bushels to 900 million this month as a lower wheat price is anticipated to help U.S. wheat become more competitive in international markets. Opportunities abroad may be limited, however, by competitor production that is also raised this month. More details follow in the international section.

    All Wheat Price

    The all-wheat season average price for 2015/16 is unchanged this month and remains at $4.90 per bushel. June is the first month in the wheat marketing year and thus the 2016/17 wheat marketing year is officially underway. The preliminary price reported in last month’s World Agricultural Supply and Demand Estimates (WASDE) is lowered by 10 cents this month to a midpoint of $4.00 per bushel.

    Prices on the low and high end of the range are $3.60 and $4.40 per bushel, respectively. Wheat prices have not been projected this low since the 2005/06 less than for 2015/16.

    Review: 2015 Spring Wheat Production Estimates by Class

    Hard Red Spring (HRS) wheat production is estimated at 564 million bushels, unchanged from May, and up nearly 9 million bushels from 2014. The production gain is attributable to expanded harvested area, despite a slight year-to-year decline in yields. Forecast planted area, harvested area, yield and year-to-year changes for 2015 are, respectively, 12.5 million acres (up 0.3 million), 12.2 million acres, (up 0.2 million), and 46.2 bushels per acre (down 0.1 bushels).

    White spring wheat production is estimated at 34.9 million bushels, unchanged from May, but down 4.5 million bushels from 2014. The planted and harvested areas, production, and yield for white spring wheat are as follows (Hard White Spring = HWS and Soft White Spring = SWS):

    2015    HWS    SWS
    Planted area (million acres)    0.086    0.648
    Harvested area (million acres)    0.082    0.636
    Yield (bushels/acre)    67.4    46.3
    Production (million bushels)    5.53    29.45

    2014    HWS    SWS
    Planted area (million acres)    0.140    0.638
    Harvested area (million acres)    0.133    0.615
    Yield (bushels/acre)    67.2    49.7
    Production (million bushels)    8.943    30.552

    Durum wheat production is forecast to total 82 million bushels, unchanged from May, and up 28 million bushels from a year ago. Forecast planted area, harvested area, and yield and year-to-year changes for 2015 are, respectively, 1.94 million acres (up 0.53 million), 1.90 million acres, (up 0.55 million), and 43.5 bushels per acre (up 3.3 bushels).

    Desert durum production in California and Arizona is forecast at 20.3 million bushels for 2015, nearly double the size of the 2014 crop.

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