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US Wheat: Production Forecast Add Some Balance To Global Wheat Supply And Demand.

Jun 16, 2016

Production Forecast Add Some Balance to Global Supply and Demand
By Stephanie Bryant-Erdmann, USWheat Market Analyst

In its monthly World Agriculture Supply and Demand Estimate, USDA projected a more balanced Supply and Demand situation for wheat than those seen in recent years. While its latest world wheat production estimate of 731 million metric tons (MMT) is up because of improved growing conditions, USDA also expects 2016/17 global consumption to set a new record for the fourth consecutive year at 716 MMT. The difference of 14.9 MMT in 2016/17 is down 44 percent from 2015/16.

With global supply and demand closer to equilibrium, albeit with abundant supply, weather news going forward will likely be the source of some price fluctuations. . Nearly all of the major winter wheat producing regions received adequate, or even excessive, moisture this year with the notable exception of India and Morocco. Reuters recently reported that a leading Indian agribusiness firm believes India’s 2016/17 wheat imports could jump to 5.0 MMT, compared to about 470,000 MT in 2015/16. USDA pegged Indian 2016/17 wheat production at 88.0 MMT, up slightly from 2015/16 production, but still 4 percent lower than the 5-year average.

USDA expects Moroccan wheat production will fall to 2.6 MMT, down 67 percent year over year. Reuters also reported that Moroccan officials will increase the soft (non-durum) wheat import tariff to 65 percent from 30 percent from June 15 to August 15 to protect the local harvest. Due to the lower domestic production, Morocco will import 5.5 MMT of wheat in 2016/17, up 17 percent from 2015/16, according to USDA.

In Russia and France, yield-enhancing rains are also causing concern about quality. France, the European Union’s top wheat producing country, received more than double its seasonal average rain in May according to Meteo France. On June 9, FranceAgriMer rated 75 percent of French soft wheat in good or excellent condition, down from 79 percent the prior week. Strategie Grains forecast French wheat production at 39.3 MMT on May 19, down 3 percent from 2015/16.

While plentiful rains boosted yield potential in Russian wheat, agricultural consultancy IKAR noted the rain could also affect crop quality. IKAR expects Russian wheat production to reach a record 64.5 MMT, up from its May estimate of 63.5 MMT.  

May was also a rainy month for wheat in the United States. It has delayed harvest in the southern Great Plains, but favorable weather so far in June is allowing farmers to make better progress. On June 13, USDA reported winter wheat harvest at 11 percent complete, behind the 5-year average pace of 18 percent complete on the same date. USDA rated 61 percent of the U.S. winter wheat crop as good to excellent, down one percentage point from the prior week. USDA rated 9 percent of the crop as poor or very poor, up one percentage point week-over-week. USDA rated 79 percent of the spring wheat crop in good to excellent condition, on par with wheat conditions at the same time last year and unchanged from the prior week.

USDA increased its forecast for U.S. production to an estimated 56.5 MMT, up one percent from 2015/16. The agency also expects total U.S. supply to climb9 percent to 83.2 MMT, buoyed by the larger production and larger beginning stocks. Beginning stocks totaled 26.7 MMT, up 30 percent year-over-year, and the largest beginning stocks since 1988/89.

With winter wheat harvest underway, weather is still a concern across the wheat growing regions, and U.S. futures markets will react to weather news until the wheat is safely in the bin. To see the latest WASDE supply and demand presentation, click here.