Wheat Outlook: U.S. Crop Shrinks on Reduced Production Forecasts

    Wheat heads. Photo: Oklahoma State University

    The 2020/21 U.S. wheat crop was cut 53 million bushels this month to 1,824 million (49.6 million metric tons) on newly released survey data. Winter wheat production is lowered 48 million bushels from the June estimate and accounts for most of the all-wheat production decline.

    At 550 million bushels, other spring wheat production is slightly smaller than the previous 2020/21 projection. Durum, soft red winter, and spring white wheat varieties are the only wheat classes for which production is expected to increase year-to-year.

    The smaller outlook for U.S. wheat combines with reduced production forecasts for both the European Union (cut 1.5 million metric tons) and Russia (cut 0.5 million) and contributes to a reduction of more than 4 million metric ton for global wheat production.

    Despite this month’s reduction, global wheat production remains record-large and supports the outlook for record-high exports.

    Domestic Outlook

    Domestic Changes at a Glance:

    • Based on the USDA-National Agricultural Statistics Service (NASS) June Acreage and July Crop Production reports, U.S. all-wheat production in 2020 is lowered 53 million bushels from the June forecast to 1,824 million, down 5 percent from the year before.
      • Hard red winter wheat production is down 4 percent from the prior forecast to 710 million bushels.
      • Soft red winter wheat production is forecast is down 6 percent from the June forecast to 280 million bushels.
      • White winter wheat production is raised 1 percent from last month to 227 million.
    • This month, NASS provided the first 2020/21 survey-based forecasts for other spring wheat production—forecast at 550 million bushels, down 2 percent from last year on reduced yields (down 1.6 bushels per acre).
      • As of 2019, the NASS other spring wheat survey no longer includes Colorado,Nevada, Oregon, and Utah; these States produced less than one percent of the other spring wheat crop in 2018.
    • Based on the NASS Grain Stocks report issued on June 30, ending stocks for 2019/20 are increased by nearly 61 million bushels.
    • U.S Department of Commerce, Bureau of Census trade data through May was released this month, completing the import and export estimates for the 2019/20 marketing year.
      • Revisions to official trade data resulted in several, mostly slight, adjustments in import and exports back to the 2016/17 marketing year.
    • With trade figures known and food use unchanged this month, significantly smaller disappearance in the fourth quarter results in a 61 million bushel decrease in 2019/20 feed and residual.
    • Based on the Grain Stocks report, carryin for the 2020/21 marketing year is increased by 61 million bushels, more than offsetting a production reduction of 53 million bushels.
    • Resulting total supplies for the 2020/21 marketing year are raised more than 7 million bushels to 3,007 million and, if realized, would be the smallest since 2015/16.
    • New marketing year balance sheets for the five major classes of wheat were released in the July World Agricultural Supply and Demand Estimates report.

    Outlook for 2020/21 All-wheat Balance Sheet

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    Based on newly released data in multiple NASS reports and the latest U.S. Department of Commerce, Bureau of the Census trade data, the updated outlook for the 2020/21 balance sheet is for increased supplies month-to-month (though down nearly 100 million bushels compared with 2019/20), slightly reduced feed and residual use compared to the June forecast, and modestly increased carryout.

    With ending stocks of 942 million bushels, the 2020/21 balance sheet remains tighter than the 2019/20 and reflects and improved stocks-to-use ratio of 45.6 versus 50.6.

    However, at $4.60 per bushel, the 2020/21 all-wheat season average farm price is virtually unchanged from the previous marketing year’s $4.58 per bushel as record-large global wheat supplies and a continue to dim U.S. wheat price prospects.

    U.S. Other Spring Wheat Yields Cut on Emergent, Widespread Dryness

    At the outset of the spring and the start of the 2020 planting window, much of the other spring wheat growing regions were located in areas considered to be at a relative high risk of flooding.

    In the subsequent months, a lack of rain and persistent warmth have reversed the situation with saturated soils giving way to dry and even droughty conditions in portions of the Northern Plains and both central and western U.S.

    At the end of June, a much-needed weather event provided moisture that replenished top soil levels and aided in the development of later-planted other spring and durum wheat. Earlier-planted crops did not reap as many benefits from the moisture and, according to some industry reports, the rain may have come too late to materially boost production.

    Indeed, the effects of dry conditions were made clear when USDA, NASS reported reduced yields based on objective yields survey gathered between June 24 and July 7. At 46.6 bushels per acre, other spring wheat yields for 2020/21 are 1.6 bushels per acre below last year’s yield though well above the most recent low of 41 bushels per acre realized for the 2017/18 crop.

    Year-to-year yield reductions are especially pronounced in North Dakota where nearly 50 percent of the 2020/21 other spring harvest originates. Yields in this state are down 4 bushels per acre from the 2019/20 estimate.

    2019/20    HRS    HWS    SWS    Durum
    Planted area (million acres)    12.012    0.143    0.505    1.339
    Harvested area (million acres)    11.027    0.138    0.495    1.175
    Production (million bushels)    521.557    11.831    28.992    53.557

    Planted area (million acres)    11.502    0.164    0.534    1.500
    Harvested area (million acres)    11.117    0.156    0.520     1.444
    Production (million bushels)    502.183     13.036     35.006     55.580
    Note: HRS=hard red spring wheat; HWS=hard white spring wheat; SWS=soft white spring wheat.

    Winter Wheat Yields, Harvested Area, Lowered in Recent NASS Reports

    As of July 5, 2020, the majority of 2020/21 winter wheat crop (56 percent) had been harvested, about 14 percent behind last year’s pace. On June 30, NASS released the June Acreage report indicating winter wheat harvested area had fallen from the prior forecast of 24.3 million acres to 23.4 million.

    The July Production report further indicated that winter wheat yields had fallen 0.1 bushels to 52.0 bushels per acre from the June forecast.

    On the combination of reduced harvested area and yields, winter wheat production is now forecast at 1.217 billion bushels, down 4 percent from the June 1 forecast and down 7 percent from 2019.

    2019/20    HRW    SRW    HWW    SWW
    Planted area (million acres)    22.458    5.201    0.434    3.066
    Harvested area (million acres)    17.292    3.733    0.386    2.916
    Production (million bushels)    833.181    239.166    19.954    211.702

    Planted area (million acres)    21.498    5.633    0.401    3.018
    Harvested area (million acres)    15.959    4.265    0.348     2.867
    Production (million bushels)    710.306    280.309    15.476    211.693
    Note: HRW=hard red winter wheat; SRW=soft red winter wheat; HWW=hard white winter wheat; SWW=soft white winter.

    Stocks Report Indicates Significantly Smaller-than-Expected Fourth Quarter Disappearance

    The USDA, NASS June 1 Grain Stocks report indicated all-wheat totaled 1,043 million bushels on June 1, 2020, of which 42.8 million were durum. These figures represent ending stocks or “carryout” for the 2019/20 marketing year which then become beginning stocks or “carryin” for the 2020/21 marketing year.

    Based on this carryout figure, estimated disappearance from March to May is 372 million bushels, down 28 percent from a year prior but nearly 60 million bushels above the earlier, June ending stocks forecast.

    With exports meeting expectations in the fourth quarter, sluggish feed and residual use and potential food use are likely contributors to the larger-than-expected ending stocks. For durum, carryout in June was estimated at 21 million bushels while the NASS-reported carryout totaled 42 million.

    Slowing U.S. export sales in the fourth quarter were expected, however steady imports of feed-quality wheat from Canada and into the Northern Plains region is expected to have contributed to domestic durum stocks.

    First 2020/20 Balance Sheets by Wheat Class Released in July WASDE

    Following the release of NASS’ 2020/21 wheat-by-class production estimates, the July World Agriculture Supply and Demand Estimates (WASDE) contained the first forecasts of wheat-by-class supply and use for the new marketing year. Supplies of hard red winter and soft red winter wheat are both down year-to-year.

    However, on the realization of greater-than-expected carryout for 2019/20, hard red spring and white wheat supplies are forecast to rise. With utilization for the new marketing year set to increase by just 4 million bushels, use for most classes is similar to the year before.

    Exceptions are hard red spring for which reduced feed and residual use is expected to more than offset a slight gain in exports, resulting in a net decline in utilization of approximately 17 million bushels. In contrast, hard red spring utilization is forecast to rise nearly 25 million bushels on the combination of enhanced use in all but the seed category.

    Full report.

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