Global and domestic wheat stocks will be plentiful

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It seems like there is always a headline about wheat. “It’s a drought.” “Planting delayed by wetness.” “Cold and dry in the Black Sea region.” “Frozen wheat heads turning brown.”  “European wheat frozen out.” But now, the USDA reports there is such a good crop coming on that wheat will be cheaper than corn and will do more to supply livestock with feed. So, what is the story?

In the spring of 2011 spring wheat in the Dakotas did not get in the ground in a timely manner and crops were short. But while the same might happen this year, it will be because Dakota farmers are planting corn instead of spring wheat. However, USDA is forecasting 55.9 million acres of wheat, up 3 percent from last year. In the Supply and Demand report earlier in the week, wheat received a positive report with higher amounts being fed to livestock, more disappearance in the stocks report, and a 32 million bushel drop in the carryout. There is still a lot of wheat domestically and globally, but quite a bit will be used in the coming year because corn prices are higher than wheat.

2012 plantings are higher compared to 2011:
1) Winter wheat plantings will be 41.7 mil. acres, up 3 percent from last year.
2) Soft red wheat plantings will be 8.4 mil. acres, down 200,000 acres from last year.
3) White wheat plantings will be 3.1 mil. acres, down by 3.2 mil. from last year.
4) Spring wheat plantings will be 14.2 mil. acres, down 400,000 from last year.
5) Durum wheat will be planted on 2.2 mil. acres, up 1.3 million acres from 2011.
Total marketing year supply for the old crop is 2.982 bil. bu. But USDA says there were many challenges to the old crop, “Year to year, the planted area for the 2011 HRW crop is slightly smaller than 2010, but the rate of abandonment is up sharply and yields are down from the previous year due to the severe drought on the Central and Southern Plains.” 

Domestic use for the old crop is projected at 1.189 bil. bu., up 61 mil. bu. from last year. Food use will be 930 mil. bu., with feed use at 180 mil, up from 145 mil. Exports are projected at 1.0 bil. bu, down by 289 mil. from last year. Ending stocks are estimated at 793 bil. bu. USDA economists are projecting the average farmgate price to be $7.20 to $7.40 per bushel.

For the current week, USDA’s crop progress report rated wheat as 61 percent in good to excellent shape, with 10 percent poor to very poor. That is substantially better than one-third of the crop being in each of those categories at the same time last year, blamed for the shortage of moisture in 2010. Conditions are reported to be poor in Texas, but not as bad as a year ago. “Oklahoma is much improved. This year, only 4 percent of the Oklahoma crop is rated poor to very poor, compared with 60 percent for the 2011 crop. The year to year improvement in crop conditions for Kansas, Nebraska and Colorado follow a similar pattern.” 

The soft red wheat states in the Eastern Cornbelt say their crop is even better, “2012 crop averages 73 percent rated good to excellent and only 5 percent poor to very poor. Last year at this time, the average percent rated good to excellent for these States was 66 percent with 7 percent poor to very poor. Among these States, Ohio’s crop is in the most difficult situation, with 50 percent rated good to excellent and 17 percent rated poor to very poor.”

Globally, the supply of wheat is down slightly, with slight changes in the supply and demand.  Total world ending stocks are down 3.3 mil. tons. With a lower carry-in for the new marketing year, and a 2 mil. tons higher rate of consumption, there are expectations for a lower carryout at the end of the new crop’s marketing year. Wheat fed to livestock will be up for the 2012 marketing year due to lower prices for wheat, relative to corn. USDA says meat production is driving that truck, “Foreign wheat feeding is up 21 million tons, or nearly 20 percent, on the year, while foreign coarse grain feeding is up about 15 million tons, or less than 3 percent on the year. A striking example is China where wheat feeding is projected up 6.5 million tons (or 50 percent) on the year while corn feeding is projected up only 3.0 million tons (or 2 percent) on the year.”

Summary

U.S. wheat stocks will be sufficient, and will supply cattle with feed. Global stocks will also be plentiful, but will be tapped for cattle feeding.


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