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Timely Rains Should Help Stabilize Global Wheat Conditions

May 07, 2015
By Casey Chumrau, USWheat Associates, Market Analyst   www.uswheat.org
 
What were serious concerns about wheat production in key growing areas around the world have eased somewhat in the last few months thanks to timely rainfall. The northern hemisphere’s winter crop is maturing and spring seeding is underway, while southern hemisphere farmers are seeding their winter crops. On May 12, USDA will release its World Agricultural Supply and Demand Estimates report with the first forecast for the 2015/16 marketing year. Several other key agricultural organizations have already made projections, providing a preview of what USDA might say next week. 
 
Bloomberg this week reported that April rains might have saved a significant part of the 2015/16 U.S. HRW crop, especially in Texas, Oklahoma and most of Kansas. The news service quoted David Schemm, Sharon Springs, KS, farmer and NAWG officer, saying this will probably be his best crop in four years. Farmers in Pacific Northwest are concerned about how dry conditions to date will affect their soft white (SW) crop, but any rain that comes over the next several weeks would help boost yield potential for the entire 2015/16 SW crop. 
 
As of May 3, winter wheat crop conditions are stable and spring planting is well ahead of average. USDA reported 75 percent of the intended spring acres as planted, well above the five-year average of just 40 percent. The crop needs additional moisture to reach its full potential. The International Grains Council (IGC) expects 2015/16 U.S. production to rebound by 7 percent to 59.0 million metric tons (MMT), which would be greater than the five-year average of 57.5 MMT. 
 
Canadian farmers are just starting to plant spring wheat. Seeding conditions are much more favorable than the past two years when excessive moisture delayed planting. According to a survey, Canadian farmers intend to plant more wheat this year than in 2014. StatsCanada expects total planted area to reach 9.91 million hectares (24.8 million acres), up from 9.52 million hectares (23.8 million acres) last year. That includes 2.2 million hectares (5.5 million acres) of durum, which would be a 16 percent jump from last year due to high durum prices and low stocks. Winter wheat this year covers 506,000 hectares (1.27 million acres), or 5 percent of the total estimated wheat area. Winter wheat planted area is lower this year after a late soybean harvest prevented farmers from planting before cold weather set in. IGC predicts total 2015/16 Canadian wheat production will reach 30.0 MMT, which would be up from 29.3 MMT last year and the fourth largest crop on record. 
 
The top EU wheat producing countries also saw timely rains last week, putting an end to a month-long dry spell that threatened to stress the wheat crop. In fact, the EU’s crop monitor raised its yield forecast for soft (non-durum) wheat due to good soil moisture. In its first 2015/16 projection, IGC predicted another large EU crop of 148 MMT, down 5 percent from last year’s record but still well above the five-year average. Analysts say that France, the EU’s top wheat producer, could come close to record output of 38.0 MMT. The country planted the most wheat acres in 80 years and traders expect above-average yields. Germany’s farm cooperatives expect a 4 percent decline in production in 2015/16 to 26.7 MMT, but additional rain in the next few weeks could help the country reach last year’s unusually high mark. 
 
Recent rains also helped replenish low soil moisture in the Black Sea region and warm temperatures have allowed early spring planting. ICG predicts more total winter wheat planted area, but high input costs and lower local currency values will likely cut spring wheat seeding. Production concerns persist in the southern region of Russia, the country’s main wheat producing area, where a very dry fall season affected a significant portion of the winter crop. Ukraine’s Agrarian Policy and Food Ministry expects total winter wheat, which averages 90 percent of Ukraine’s production, to yield 22.9 MMT. IGC is less optimistic, predicting a 19 percent decline to 20.0 MMT from record yields in 2014/15. 
 
Planting is just beginning for the 2015/16 crop in the southern hemisphere. Soils in Australia are slightly drier than last year. IGC expects Australian planted area to be similar to last year’s 13.9 million hectares (34.8 million acres). With average yields, production would be 14 percent greater than last year at 27.0 MMT compared to the 5-year average of 25.8 MMT. Recent rains in Argentina boosted soil moisture just in time to begin planting. However, ongoing political issues that supported large carry-over supplies and poor returns the past few years may put farmers on a detour away from planting wheat. IGC predicts a 13 percent decline in planted area to 4.6 million hectares (11.5 million acres). Again assuming average yields, production would fall 10 percent from last year to 12.5 MMT, just below the 5-year average of 13.0 MMT. 
 
Overall, IGC expects global production to fall from a record 721 MMT set in 2014/15 to 705 MMT, which would be the third highest on record. Record wheat supplies have depressed prices throughout 2014/15 and the USDA estimates next week will help determine if that trend might continue. As the situation stands now, it appears that world wheat supplies will be abundant again in 2015/16.