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Wheat Outlook Summary: March 2022

Core Content

The March 2022 Wheat Outlook report from the USDA Economic Research Service (ERS) outlines the global and U.S. wheat market conditions, focusing on price surges, export and import trends, and the impact of the Russia-Ukraine conflict on supply and demand dynamics. The report also provides an update on drought conditions affecting U.S. wheat production areas.

Main Points

Global Wheat Market Overview

• Global wheat prices are surging due to the Russia-Ukraine conflict, which has disrupted supply chains and raised concerns about the ability of these countries to export.
• U.S. wheat prices have seen significant increases, with Hard Red Winter (HRW) and Soft Red Winter (SRW) leading the rise, up over 80% from the previous year.
• U.S. Hard Red Spring (HRS) prices are currently lower than HRW and SRW, but are still relatively high.
• Global wheat production for 2021/22 increased by 2.1 million metric tons (MT) to 778.5 million MT, with Australia and Poland showing notable increases.
• Global ending stocks rose by 3.3 million MT to 281.5 million MT, driven by reduced exports from Russia and Ukraine.

U.S. Wheat Market

• U.S. export forecast for 2021/22 was reduced by 10 million bushels to 800 million bushels, the lowest since 2015/16.
• U.S. import forecast was reduced by 5 million bushels to 95 million bushels, with Hard Red Spring (HRS) imports down by 5 million bushels to 40 million bushels.
• Season-average farm price for the 2021/22 marketing year is $7.50 per bushel, up $0.20 from the previous month, driven by high futures prices and drought conditions in key producing states.
• U.S. exports are currently at 84% of the revised marketing year forecast, indicating a slow pace of sales and shipments.

Drought Conditions

• 73% of U.S. winter wheat areas are in drought as of March 1, with key states like Kansas, Colorado, Oklahoma, and Texas most affected.
• Winter wheat conditions have deteriorated significantly from November 2021.
• Spring wheat areas have seen a slight improvement in drought conditions, with the percentage of production in drought areas dropping from 55% to 41%.

Key Information

Export and Import Adjustments

• Global wheat exports for the 2021/22 trade year are down 3.6 million MT to 204.8 million MT.
• Ukraine wheat exports are down 4.0 million MT to 20.0 million MT.
• Russia wheat exports are down 3.0 million MT to 32.0 million MT.
• India exports are up 3.0 million MT to a record 10.0 million MT.
• Australia exports are up 1.0 million MT to 27.0 million MT.
• Egypt imports are down 0.5 million MT to 12.5 million MT.
• Turkey imports are down 1.0 million MT to 10.0 million MT due to currency depreciation and high prices.
• Belarus and Kazakhstan imports are up 300,000 MT and 200,000 MT, respectively.
• Vietnam imports are up 300,000 MT to 4.1 million MT due to increased feed-quality wheat imports from Australia.

Trade Flow Impacts

• The Black Sea region is experiencing disruptions in rail and vessel shipments, reducing Ukraine and Russia exports.
• Financial sanctions on Russia are creating instability in its banking system and currency depreciation.
• India and Australia are stepping in to fill the supply gap caused by the conflict.
• Global wheat consumption is down 0.7 million MT to 787.3 million MT, with FSI use reduced by 2.2 million MT and feed and residual use increased by 1.5 million MT.

Summary Table of Major Changes

Conclusion

The Russia-Ukraine conflict has had a profound impact on global wheat markets, leading to price increases, supply disruptions, and shifts in trade flows. U.S. wheat prices remain high, and while exports are down, importers are turning to alternative suppliers like India and Australia. Drought conditions in the U.S. are affecting winter wheat production, but spring wheat areas are showing some improvement. The global wheat market is highly volatile, and importers are rationing demand due to rising prices and supply uncertainty.