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2017/18 U.S. and Global Wheat Outlook Summary

Core Content

This document provides a detailed outlook for U.S. and global wheat production, stocks, and trade for the 2017/18 marketing year, based on USDA data and analysis. It highlights changes in yield, supply, and demand across major wheat-producing regions and discusses the implications for domestic and international markets.

Main Points

U.S. Wheat Outlook

• Winter Wheat Production and Yield:

  • Winter wheat yield for 2017/18 is projected at 48.9 bushels per acre, up slightly from 48.8 bushels in May.
  • Total winter wheat production is forecast at 1,250 million bushels, up 3.8 million bushels from the previous month.
  • Despite the increase, this is still projected to be nearly 25 percent lower than the 2016/17 record of 1,671 million bushels.

• Imports and Supplies:

  • U.S. wheat imports for 2017/18 are raised to 130 million bushels, up 5 million bushels from the previous month.
  • Total U.S. wheat supplies for 2017/18 are increased to 3,115 million bushels, with a 10.8 million bushel increase in ending stocks.

• Stocks-to-Use Ratio:

  • The stocks-to-use ratio for 2017/18 is projected at 0.42, which is closer to the 5-year average of 0.39 and lower than the 2016/17 ratio of 0.52.
  • Ending stocks for 2017/18 are forecast at 924.3 million bushels, a 20.4 percent decrease from 2016/17 levels.

• Class-Specific Production:

  • Hard Red Winter (HRW): Production is down 338.7 million bushels to 743.0 million.
  • Soft Red Winter (SRW): Production is down 47.1 million bushels to 298.2 million.
  • Winter White: Production is down 35.6 million bushels to 209.0 million.

• Crop Conditions:

  • As of June 11, 50 percent of the U.S. winter wheat crop is in good-to-excellent condition, down 11 percent from the previous year.
  • In Texas and Oklahoma, HRW protein levels are below average, affecting demand for high-protein wheat.

• Spring Wheat:

  • Spring wheat production remains unchanged for 2017/18.
  • Dry conditions in the Northern Plains have affected spring wheat yields, particularly in North Dakota, South Dakota, and Montana.

Global Wheat Outlook

• Global Production:

  • Global wheat production for 2017/18 is projected at 739.5 million tons, up 1.7 million tons from the previous month, but still 14.6 million tons below the 2016/17 record.
  • Foreign production is up 1.6 million tons to 689.9 million tons, with Russia, Argentina, and Turkey leading the increase in output.

• India's Wheat Production and Trade:

  • India's 2017/18 wheat production is projected slightly lower than the previous month.
  • India is the third-largest wheat producer globally, and its output fluctuations can impact world trade.
  • The Government of India (GOI) estimated the 2016/17 wheat crop at 92.3 million tons, significantly higher than other analysts' estimates.
  • Government procurement was low at 23.0 million tons, inconsistent with the high production estimate, suggesting factors other than production affected procurement.
  • Procurement shares in some states, like Madhya Pradesh and Rajasthan, were reduced due to the elimination of state procurement bonuses.

• Open Market Supplies and Prices:

  • Open market supplies in India were below trend in 6 of the 8 years prior to 2016/17, possibly due to reduced private stock levels.
  • The new National Food Security Act (NFSA) implemented in 2016 may have increased private competition for wheat, leading to higher market prices.
  • The GOI also reduced open-market releases to the private trade from 7.5 million tons in 2015 to 4.6 million tons in 2016.

• Trade and Consumption:

  • Global wheat use is projected to decrease slightly to 734.8 million tons, while foreign use is down to 702.4 million tons.
  • Food, seed, and industrial use (FSI) is forecast down 0.7 million tons, mainly due to reduced wheat output in India.
  • Feed and residual use is slightly up by 0.6 million tons, primarily due to increased Russian production.

• Ending Stocks:

  • Global ending stocks are projected to increase to a record 261.2 million tons, up 2.9 million tons from the previous year.
  • Russia is the largest contributor to the increase in ending stocks, up 2.0 million tons, while Iran's stocks are projected to decline by 0.7 million tons.

Key Information

• U.S. Winter Wheat:

  • The 2017/18 winter wheat yield and production are slightly up, but still below the 2016/17 record.
  • Increased carryover from 2016/17 and higher projected imports have led to a rise in ending stocks.

• International Production:

  • Russia, Argentina, and Turkey have improved their production prospects, contributing to the global increase.
  • India's wheat production and procurement data show inconsistencies, likely due to policy changes and market dynamics.

• Protein Premiums and Market Demand:

  • High-protein wheat premiums are supporting U.S. all-wheat prices.
  • Lower protein levels in new-crop HRW are causing concern for millers, who rely on blending with high-protein stocks.

• Trade Policies and Impacts:

  • The removal of quantitative restrictions and tariff adjustments in India allowed private sector imports, increasing competition.
  • The new trade policy may influence future wheat trade dynamics and domestic supply management.

• Future Outlook:

  • The 2017/18 U.S. wheat season is expected to see increased supplies and ending stocks, though the stocks-to-use ratio remains below the 5-year average.
  • Continued dry conditions in key U.S. wheat-producing states may affect spring wheat yields and production.

Summary Table

Conclusion

The 2017/18 U.S. wheat outlook shows a modest increase in production and ending stocks, driven by improved yields in key states and increased imports. However, the stocks-to-use ratio remains below the 5-year average, indicating continued tight supply conditions. Globally, production is slightly up, with Russia, Argentina, and Turkey leading the growth, while India's production and procurement data remain a point of concern due to discrepancies and policy changes. The document emphasizes the importance of monitoring protein levels, trade policies, and market dynamics to accurately assess future wheat supply and demand.