Large World Wheat Supply is Certain; Quality is the Question
By Casey Chumrau, USW Market Analyst
Northern Hemisphere farmers are close to finishing their winter wheat harvest and beginning to cut spring wheat. While persistent drought reduced hard red winter (HRW) production in the southern plains, it is evident that better-than-expected yields around the world so far will likely lead to a record wheat crop. USDA significantly increased its 2014/15 world production projection by 10.9 million metric tons (MMT) to 716 MMT in its August World Agricultural Supply and Demand Estimates (WASDE) report. If realized, it would be the fifth record-breaking crop in seven years. While there is little doubt that world supplies will be plentiful, the quality of the world crop has been variable.
The Black Sea region accounts for most of the increased world production forecast. Reports of very high winter wheat yields led USDA to push the 2014/15 Russian production forecast up 6.0 MMT to 59.0 MMT and boost expected Ukrainian output 1.0 MMT higher to 22.0 MMT. If realized, it would be the second bumper crop in a row for both countries. While Russian quality is mostly good, excessive rain considerably diminished wheat quality in Ukraine. Analyst group ProAgro estimates about 35 percent of the total wheat harvest in Ukraine will not meet food quality levels, up from 25 to 30 percent last year. However, a local flour milling association estimates the percentage of feed wheat will be much higher, going as far as sending a letter on Aug. 14 to Ukrainian President Petro Poroshenko asking him to stop wheat exports temporarily to protect the domestic market. USDA projected Ukrainian exports will reach 9.0 MMT. That would be down from 9.65 MMT last year but well above the five-year average of 7.18 MMT.
Concerns regarding wheat quality are also high in France, the EU’s largest wheat producer and exporter. In July, frequent and abundant rain just before harvest resulted in sprouting and reduced test weight. Reports suggest the country’s overall protein content will average around 11.0 percent, which would be the lowest since 2001. Higher than average protein levels in the northern regions helped to offset very low protein in the south. It is still unclear what percentage of the estimated 37.3 MMT crop was affected, but fears that less exportable milling quality wheat will be available has weighed heavily on European markets. In its August report, the group estimated France's milling wheat at 62 percent, down from 88 percent in July. Strategie Grains also cut its French wheat export projection by nearly 3.0 MMT to 8.81 MMT, citing an inability to meet minimum quality requirements of many of its regular customers.
Worries about the Canadian crop quality have diminished with favorable late summer weather. Considerable rain in June and July put crop development behind schedule and looked to hurt quality potential. Warm, dry August weather seems to be putting Canada back on track to harvest its second-largest crop in six years. USDA estimated 2014/15 Canadian production will hit its five-year average of 28.0 MMT, down from the record-breaking 37.5 MMT last year. Analysts expect some crops will need an extended growing season to fully mature, so the race is on to beat the first frost, which usually occurs mid-September.
Reports concerning U.S. crop quality have been as diverse as the growing regions. In many parts of the southern plains, severe drought conditions stunted HRW development, but resulted in high protein, and untimely harvest rains added to the woes by affecting quality in some cases. The northern plains HRW crop improved the average quality for the class, despite suffering some late disease pressure. White wheat protein levels are also running higher this year — not ideal for low-protein uses. Drought conditions and hot weather stressed winter white wheat, which accounts for 83 percent of all white wheat acres this year. In the early stages of spring wheat harvest, USDA rated 68 percent of the crop in good or excellent condition and just 6 percent poor or very poor. Hard red spring (HRS) protein levels have been lower than normal in early tests, likely due to summer rains and mild temperatures.
Wheat quality variations can have a serious impact on the milling and baking qualities of the commodity, but the geographic diversity of U.S. wheat growing regions helps to balance out regional fluctuations. USW strives to keep customers informed and updated on U.S. wheat crop developments. Read the most current data in the USW Harvest Report released each Friday during the harvest season. As the harvest season ends, final crop quality data will be available for each class, including the following story on the 2014/15 U.S. soft red winter (SRW) quality.