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Wheat Outlook Summary (February 13, 2017)

Core Content

This report provides an overview of the U.S. wheat market and global outlook for the 2016/17 marketing year. It highlights export trends, domestic use, production levels, and the impact of international factors on the U.S. and global wheat markets.

Main Points

U.S. Wheat Exports

• Export Increase: U.S. wheat exports are projected to increase by 50 million bushels this month, reaching 1.025 billion bushels.
• Currency Impact: The weakening U.S. dollar relative to other major wheat exporters has enhanced U.S. competitiveness.
• Key Classes:
  • Hard Red Winter (HRW) exports increased by 25 million bushels.
  • Hard Red Spring (HRS) exports increased by 15 million bushels.
• Total Use: Despite a slight reduction in food use (down 3 million bushels to 960 million), total use is up by 47 million bushels, leading to a reduction in ending stocks to 1.139 billion bushels.
• Ending Stocks: Ending stocks for 2016/17 are 164 million bushels higher than the previous year and are the highest in 29 years.

Domestic Outlook

• Food Use: Food use is slightly below the previous year, with HRW and HRS experiencing shifts in usage due to changing consumer preferences and market conditions.
• Price Trends: The season-average all-wheat farm price is raised by 5 cents to $3.85 per bushel, driven by higher cash prices for HRW and HRS.
• Farm Income: Net cash farm income for wheat producers is expected to rebound in 2017, though still lower than the peak in 2013.
• Market Rebalancing: The shift in food use toward lower-protein HRW and away from higher-protein HRS reflects market dynamics and consumer trends.

International Outlook

• Global Production: World wheat production is projected down by 4.5 million tons to 748.2 million tons, still a record high.
• Production Shortfalls:
  • India production is revised down to 87.0 million tons due to high prices and reduced stocks.
  • Kazakhstan production is also reduced by 1.5 million tons due to lower yields despite higher area harvested.
• Global Trade: World wheat trade is projected to increase by 1.3 million tons to 178.3 million tons, with the U.S. and Ukraine leading the growth.

Cross-Commodity Focus: Korea and Japan

• Rice Feed Use: Both countries are increasing rice use in feed markets to reduce rice stocks and alleviate domestic market pressures.
• Korea: Released 0.55 million tons of rice for feed in 2016/17, with rice prices at 88% of corn prices, affecting the use of other feed grains.
• Japan: Subsidies and incentives are being used to encourage the switch from table rice to feed rice and whole-crop silage, with a significant increase in feed rice production from 2010 to 2016.
• Impact on Feed Markets: The rise in rice feed use is expected to reduce demand for alternative feed grains like wheat, corn, and sorghum.

Key Information

• Export Sales: Strong export sales, especially to China and Asia, are driving the increase in U.S. wheat exports.
• Ending Stocks: Despite increased use, U.S. ending stocks remain high, indicating a surplus.
• Market Trends: The gluten-free food trend is influencing wheat use patterns, particularly reducing per capita wheat consumption.
• International Factors:
  • India and Kazakhstan are experiencing production shortfalls.
  • Ukraine and Argentina are seeing increased exports due to currency depreciation and competitive pricing.
  • Russia is facing reduced exports due to currency appreciation and high domestic prices.
• Import Trends:
  • Vietnam, Morocco, and China are increasing wheat imports.
  • EU and Korea are reducing imports due to increased production and domestic use.

Tables and Figures

• Table 1: Summary of U.S. wheat supply and utilization for 2016/17, showing production, imports, exports, and ending stocks.
• Table A: Overview of global wheat production changes, highlighting India and Kazakhstan as key producers with reduced output.
• Table B: Summary of wheat feed and residual use changes, showing increased use in Vietnam and China, and reduced use in Korea and Ukraine.
• Table D: Summary of global wheat trade changes, showing increased exports from the U.S., Ukraine, and Argentina, and increased imports in Vietnam, Morocco, and China.

Outlook

• Global Wheat Trade: Expected to increase, driven by U.S. and Ukrainian exports.
• U.S. Wheat Market: Strong export performance and rising prices suggest a positive outlook for the 2016/17 marketing year.
• Domestic Use: Slightly reduced food use is offset by increased exports, leading to a net increase in total use and a reduction in ending stocks.
• Long-Term Projections: Revisions to the 2017/18 marketing year forecasts will be presented at the Agricultural Outlook Forum.

Summary of Key Trends

• Export Growth: U.S. wheat exports are rising due to a weaker dollar and strong demand from key markets.
• Domestic Use: Food use is decreasing, influenced by consumer trends and market dynamics.
• Production Adjustments: India and Kazakhstan are experiencing production declines, impacting global supply.
• Feed Market Shifts: Increased use of rice in feed is reducing demand for other grains like wheat and corn.
• Price Volatility: Wheat prices are rising, influenced by export demand and reduced supply in some regions.

This summary captures the essential trends and forecasts for the U.S. and global wheat markets as of February 13, 2017.