20180117-USDA-USDA_Wheat_Outlook_2018.01.17_24页_1mb

Summary of Wheat Outlook Report (WHS-18a, January 17, 2018)

Core Content

This report provides an overview of the U.S. and global wheat market conditions for the 2017/18 marketing year, highlighting supply and demand changes, export and import trends, and the impact of international competition, particularly from Russia and Argentina. It also discusses yield performance and volatility in Russia, as well as the implications for global wheat prices and trade dynamics.

Main Views

U.S. Domestic Outlook

• Wheat Disappearance: All-wheat disappearance was lower than expected during the first half of the 2017/18 marketing year, leading to upward revisions in ending stocks.
• Ending Stocks: U.S. all-wheat ending stocks increased by 29 million bushels, reaching 960.3 million bushels, due to higher imports and reduced domestic use.
• Winter Wheat Seedings: Winter wheat seedings for 2018/19 are estimated at 32.6 million acres, slightly below the 2017/18 estimate, but still higher than expected.
• Seed Use: Seed use for 2017/18 is projected at 62 million bushels, a 4 million bushel reduction from the previous estimate, due to lower planted area.
• Feed and Residual Use: Feed and residual use is reduced by 20 million bushels to 100 million bushels, reflecting lower demand and higher stocks.
• Farm Price: The U.S. all-wheat season-average farm price (SAFP) remains unchanged at $4.60 per bushel, with a price range between $4.50 and $4.70 per bushel.

Global Wheat Outlook

• World Production: World wheat production for 2017/18 is projected at 757.0 million tons, up 1.8 million tons from the previous month, surpassing last year's record.
• Russia: Russia's wheat production for 2017/18 is up 2.0 million tons to 85.0 million tons, driven by increased harvested area and yield, as well as a record-high conversion rate from bunker to clean weight.
• Yield Volatility: Russian winter wheat yields are more volatile than spring wheat yields and have shown increasing variability over the past 20 years. This volatility is expected to rise as winter wheat's share of total output increases.
• Export Competitiveness: Russia has become a major player in the global wheat export market, with exports reaching a record 35.0 million tons this month, supported by government policies and large stocks.
• Argentina: Argentina's wheat exports increased by 500,000 tons to 13.0 million tons, making it a formidable competitor. A recent devaluation of the Argentine peso has improved its export price competitiveness.
• Australia: Australia's wheat output for 2016/17 was reduced by 3.1 million tons to 30.4 million tons, leading to lower global supplies and affecting global wheat stocks and use.

Supply and Demand Changes

• Supply: Total U.S. wheat supply increased by 5 million bushels due to higher imports (mainly from Canada), with no change in production.
• Demand: Total wheat use decreased by 24 million bushels due to reduced seed and feed/residual use.
• Global Supply and Use: World wheat consumption slightly decreased by 0.4 million tons to 741.7 million tons, while feed and residual use increased by 0.7 million tons.
• Global Stocks: Global wheat ending stocks are reduced by 0.4 million tons to 268.0 million tons, while foreign stocks are reduced by 1.2 million tons due to lower production in Australia.

Key Information

• Competition: Increased competition from Russia and Argentina has put downward pressure on U.S. exports, particularly in North African markets.
• Weather Impact: Unseasonably warm temperatures in the Sea of Azov and Black Sea regions have improved Russia's export potential.
• Russian Policies: Government policies, including export taxes and quotas, may be implemented in response to poor weather or low yields to protect domestic supplies.
• Import Trends: U.S. wheat imports from Canada increased significantly, contributing to higher supplies and lower domestic use.
• Yield Trends: Russian winter wheat yields have a strong growth trend, while spring wheat yields remain flat. Winter wheat now constitutes about 70% of total Russian wheat output.

Summary Table

Conclusion

The U.S. wheat market is experiencing reduced domestic use and increased competition from global exporters, particularly Russia and Argentina. Russia's record wheat production and export volumes, combined with its growing share of global trade, are influencing world prices and market dynamics. Yield volatility in Russia, especially in winter wheat, is a growing concern for global markets, as it may lead to significant price fluctuations and market disruptions in the future. The U.S. continues to rely on strong imports from Canada to maintain its supply levels, while its domestic wheat price remains stable.