Taking Stock of the World Wheat Crop
By Stephanie Bryant-Erdmann, USWheat Associates Market Analyst
As a very informative Grain Risk Management and Procurement course at the Northern Crops Institute wraps up this week, many of the 24 other participants from 16 countries have been discussing the world’s 2016/17 wheat crop. While production volume and supply are once again remarkably high, the buyers here are concerned about how much of the new crop will meet quality and milling requirements.
USDA’s latest forecast of total world wheat production stands at 745 million metric tons (MMT). That is up 1 percent from 2015/16. At the same time, USDA expects global wheat consumption to be 4 percent higher at 737 MMT, compared to 709 MMT in 2015/16. The following is a look at production and quality expectations for major exporting regions and countries outside the United States.
Black Sea. On Sept. 19, Russia’s Ministry of Agriculture reported that wheat harvest there was 90 percent complete. To date, the reported average yield is 2.90 metric tons per hectare (MT/ha) compared to 2.65 MT/ha on the same date in 2015. Russian consultancy SovEcon pegged 2016/17 Russian wheat production at 70.8 MMT, down 500,000 MT from its previous estimate, but still up 16 percent from 2015/16 levels. Strategie Grains (SG) has reported that Ukrainian farmers harvested 24.2 MMT of wheat this year, down 5 percent from 2015/16 despite a record yield of 3.9 MT/ha. Kazakhstan wheat harvest is advancing despite scattered showers. SG pegged 2016/17 Kazakh wheat production at 17.9 MMT, which would be up 31 percent from 2015/16. USDA expects Black Sea exports to total 53.5 MMT, up 6 percent from 2015/16, if realized.
SGS Russia, an independent crop inspection service, classified 31 percent of the Russian wheat crop as feed wheat compared to 26 percent in 2015/16. The milling quality wheat supply (with protein of 11.0 percent to 12.3 percent on a 12 percent moisture basis) remains large because of the overall larger crop size. SGS reports that some areas have more Fusarium damage than in 2015 and some areas have high levels of sprout damage and very low falling numbers; there are also areas with a larger share of high test weight values than seen last year. SGS reports the average protein of Ukraine's 2016 wheat crop as 10.5 percent (12 percent mb) compared with 9.9 percent in 2015. The crop has lower average moisture and a much higher average falling number compared with 2015.
Canada. In its Sept. 20 report, StatsCan projected a 4 percent increase in spring wheat production at 20.6 MMT due to an estimated 13 percent improvement in yields year over year. This more than offset a 9 percent decline in spring wheat planted area. Canadian durum production is estimated at 7.30 MMT, up 36 percent year over year due to a 4 percent increase in planted area and a 30 percent year over year increase in yields.
According to crop reports from the province of Alberta, rainfall is slowing spring wheat harvest and damaging quality. As of Sept. 16, only 31 percent of the crop there had been harvested compared to 60 percent at this time last year. Producers in Saskatchewan are also fighting wet conditions with quality issue. As of Sept. 15, Saskatchewan spring wheat and durum harvests were 29 and 30 percent complete, respectively, compared to 23 and 26 percent complete the week prior. Preliminary durum grade data from the Saskatchewan weekly crop report shows 51 percent of the crop graded as #4 or #5 Canadian Western Amber Durum (CWAD). On average, Saskatchewan produces 85 percent of the Canadian durum crop.
European Union. Stratégie Grains (SG) forecasts total European Union (EU) wheat production at 146 MMT, down 9 percent year over year. Durum production is expected to increase to 9.10 MMT, up from 8.10 MMT in 2015/16, but soft (non-durum) wheat production will fall 10 percent to 136 MMT. Persistent rain hurt yields in top wheat producers France, Germany, United Kingdom and Poland. The rain also damaged wheat quality in France, Poland and parts of Germany, resulting in milling output percentages below their 5-year averages. Current SG estimates peg EU milling quality wheat output at 59 percent of total 2016/17 production, putting total EU soft wheat milling quality production at 81.1 MMT. That is 14 percent below the 5-year average and 25 percent lower than 2015/16. SG expects EU total wheat exports to fall to 26.6 MMT, down 21 percent year over year, if realized.
Argentina. Bolsa de Cereales Buenos Aires (Buenos Aires Grain Exchange) recently estimated farmers in Argentina planted 4.30 million hectares (10.6 million acres) of wheat for 2016/17, up 19 percent from 2015/16 in response to President Macri’s elimination of the wheat export tariff and currency devaluation. As of Sept. 1, Bolsa rated 63 percent of Argentine wheat in very good to excellent condition compared to the prior year when excessive rain damaged the crop. IGC pegged Argentine wheat production at 14.2 MMT, up 20 percent from 2015/16 if realized. However, the expected higher production will not offset an estimated 78 percent decrease in carry-in stocks, which fell to 1.0 MMT. Total Argentine wheat supply is predicted to fall 4 percent year over year to 15.2 MMT. Despite the smaller supply, IGC expects Argentina to export 8.50 MMT, on par with 2015/16 levels.
Australia. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) forecasts 2016/17 wheat production at 28.1 MMT, up 16 percent from 2015/16 due to very favorable weather conditions. If realized, production volume would be the second largest ever, behind the 2011/12 harvest of 29.6 MMT. Australian farmers increased planted wheat area for 2016/17 to 12.9 million hectares, up one percent from 2015/16. USDA expects Australian exports to increase to 19.5 MMT, up 22 percent from 2015/16 and 3 percent above the 5-year average.
Just this week, ABARES also reported that China’s wheat crop may also have quality problems and said, "the margins between milling and feed wheat prices are expected to be larger than usual" for the 2016/17 crop.
Together with its partner organizations across the United States, USW is testing more than 2,000 samples of wheat this year for its annual Crop Quality survey. The preliminary results are reported every Friday in the USW Harvest Report, and the final results for all classes are published in by-class reports and in our annual Crop Quality Report near the end of October