Wheat Outlook: U.S. Exports Unchanged Among Global Trade Reductions

    Texas A&M AgriLife Communications photo by Kay Ledbetter

    The outlook for global 2019/20 wheat production was lowered 2.5 million metric tons this month on cuts in wheat output for multiple major exporting nations. Tenacious dry weather in Eastern Australia underpins a 2-million-metric ton production cut.

    Deteriorating wheat production conditions in Kazakhstan led to a 1.5-million-metric ton reduction. Elsewhere in the Black Sea region, wheat production for both Russia and Ukraine are each trimmed 0.5 million metric tons.

    A million-ton-increase in European Union wheat production does not fully offset reductions elsewhere in the globe. Despite net reduced global production, ample worldwide stocks and strong export price competition constrain sales opportunities.

    Thus, the U.S. wheat export projections of 26.5 million metric tons (975 million bushels) are not increased.

    Domestic Outlook

    Domestic Changes at a Glance:

    • The 2019/20 U.S. all-wheat supply and demand estimates are unchanged from the August projections.
    • The all-wheat season average farm price (SAFP) is lowered 20 cents this month on declines in wheat by class cash prices through the first 3 months of the new marketing year.
      • Through the end of August, nearly one third of the 2019/20 wheat crop has been marketed, on par with the 5-year average.
    • As of the week ending 2019/20 winter wheat harvest is complete while 78 percent of the U.S. spring wheat harvest was complete as of September 1, 2019.
    • On September 30, USDA, National Agricultural Statistics Service (NASS) will release the 2019 Small Grains Summary and the Grain Stocks report.
      • The Small Grains Summary will contain any production revisions for winter, other spring, and durum wheat, as well as wheat-by-class production estimates.
      • The Grain Stocks report will provide indications of 2019/20 first quarter wheat disappearance and inform potential updates to quarterly stocks and feed and residual use projections.

    2019/20 SAFP Cut on Persistent Price Declines, Balance Sheet Unchanged

    Although the all-wheat balance sheet is unchanged this month, both monthly all-wheat prices reported by USDA NASS and monthly wheat-by-class prices reported by USDA AMS show a strong trend of decline and have fallen short of earlier expectations.

    With nearly one-third of the U.S. wheat crop marketed, persistent low prices in the first quarter of the marketing year pull down projections for the season average farm price and support a 20 cent month-to-month cut to the 2019/20 all-wheat price. A reflection of weak cash market price prospects, nearby wheat futures contract prices have reached multi-year lows in recent months.

    On September 3, 2019, the nearby Kansas City hard red winter wheat (HRW) contract fell to 361 ¾ cents, the lowest level since December 2005. The Chicago Board of Trade (CBOT) soft red winter (SRW) contract hit a 3-month low on the same day.

    Modest price recovery was observed in the second week of September; however, abundant global wheat stocks and strong price competition in global markets are expected to constrain U.S. wheat price recovery prospects for the balance of the marketing year.

    Ahead of the September 30 release of USDA, NASS’ Small Grains Summary, the August winter, other spring, and durum wheat production forecasts for 2019/20 are unchanged. With no changes made to aggregate imports or beginning stocks, total supplies for the 2019/20 marketing year are unchanged.

    There are some minor shifts in exports across the classes, but there are no changes to the all-wheat ending stocks projection. When NASS releases the latest Grain Stocks report, also on September 30, it will provide indications of implied disappearance during the first quarter of the new marketing year.

    Full report.

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