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Wheat Outlook Summary - September 14, 2017

Core Content

This report provides an overview of the 2017/18 global and U.S. wheat market outlook, highlighting production trends, export forecasts, and price projections. The focus is on the favorable weather conditions in the Black Sea region, particularly Russia, which are expected to drive higher yields and increase its trade share. It also addresses the impact of Hurricane Harvey on U.S. wheat exports and the continued stability of U.S. supply and demand estimates.

Main Points

Global Wheat Outlook

• World wheat production for 2017/18 is forecast at 744.9 million tons, up by 1.7 million tons from the previous month, nearing last year's revised record of 753.3 million tons.
• Russia is expected to set a new all-time wheat production record at 81.0 million tons, surpassing the previous record by 8.5 million tons.
• Ukraine and Turkey, also Black Sea countries, are forecast to have increased wheat production by 0.5 million tons each.
• Australia and the European Union (EU) are expected to see reductions in wheat production, with Australia's output dropping to 22.5 million tons and the EU's to 148.9 million tons.
• Global wheat exports are expected to increase due to Russia's higher production and improved competitiveness.

U.S. Wheat Outlook

• U.S. wheat supply and demand estimates for 2017/18 remain unchanged from August.
• Midpoint season-average farm price is lowered by 20 cents to $4.60 per bushel, reflecting increased global production and competition.
• Hurricane Harvey has disrupted rail and port services in the Texas Gulf region, temporarily halting wheat exports. However, recovery is expected, and export forecasts remain at 975 million bushels.
• Domestic buyers are seeking to increase demand for U.S. durum and spring wheat due to expected lower production in these categories.
• NASS will release updated production and supply data on September 29, which will be reflected in the October WASDE report.

Key Information

Production Trends

• Winter wheat production for 2017/18 remains at 1,287 million bushels, 23% below the 2016/17 estimate.
• Durum production is unchanged at 50.5 million bushels, but drought conditions persist in key producing states.
• Other spring wheat production is forecast at 402 million bushels, with abnormally dry to extreme drought conditions in key growing areas.

Export and Import Forecasts

• U.S. all-wheat exports remain at 975 million bushels, with HRW and HRS exports reduced by 10 million bushels each.
• White wheat exports are increased by 20 million bushels, driven by strong demand from Asia and Mexico.
• U.S. all-wheat import forecasts remain at 150 million bushels, with HRS imports raised to 73 million and durum to 45 million.
• Ukraine's wheat exports are forecast to increase by 0.5 million tons to 16.5 million, while Russia's are expected to rise to 32.5 million tons.

Price Projections

• The 2017/18 all-wheat season-average farm price (SAFP) is now projected between $4.30 and $4.90 per bushel, with a midpoint of $4.60 per bushel.
• The wheat-to-corn price ratio remains stable at 1.44, supporting the current feed and residual value projections.

Regional Impact

• Hurricane Harvey caused widespread flooding in the Texas Gulf region, significantly affecting rail transport and export shipments.
• Russia's favorable weather has been a key factor in its record wheat production, but non-weather-related improvements in agricultural practices and management have also contributed.
• Southern European Russia has led the progress in wheat yields due to better soil, climate, and infrastructure, along with the emergence of agroholdings.

Future Outlook

• Russia is expected to test the limits of its export infrastructure, with grain exports projected at 43.0 million tons.
• EU wheat exports are forecast to decrease by 1.0 million tons to 28.5 million, due to lower domestic supplies.
• U.S. wheat exports are expected to slow as new crop wheat from the EU and Black Sea regions becomes more available in the market.

Additional Highlights

• NASS will release the Small Grains Summary and Grain Stocks report on September 29, providing updates on production, trade, and stock levels.
• U.S. Census Bureau data indicates class-specific shifts in wheat trade, which are expected to be reflected in future reports.
• U.S. wheat trade-year exports for 2017/18 remain at 26 million metric tons, supported by declining domestic prices and a weakening U.S. dollar.

Contacts and Resources

• Jennifer Bond (domestic): jkbond@ers.usda.gov, (202) 694-5326
• Olga Liefert (international): oliefert@ers.usda.gov, (202) 694-5155
• Beverly Payton (Web Publishing): bpayton@ers.usda.gov, (202) 694-5165
• Data and Charts: Available at USDA Wheat Data and Wheat Chart Gallery.
• Subscription Information: Readers can subscribe to ERS e-newsletters for updates on reports and data. Printed copies can be ordered via the USDA Order Desk at 1-800-363-2068.

Summary of Key Figures

• Figure 1: Russia leads wheat exporters' growth.
• Figure 2: Spring wheat condition (percent rated poor to very poor).
• Figure 3: Rail grain deliveries to Texas Gulf ports.
• Figure 4: U.S. wheat imports by class.
• Figure 5: Vegetation Health Index in Russian spring wheat areas.
• Figure 6: Cumulative precipitation in the Ural region.
• Figure 7: World 2017/18 countries' shares in wheat exports.
• Figure 8: Russia and Ukraine as major wheat exporters to Bangladesh.

Conclusion

The report outlines a positive outlook for global wheat production, especially in the Black Sea region, with Russia leading the charge. However, U.S. exports face temporary disruptions due to Hurricane Harvey, and domestic price stability remains a concern due to increased global competition. The U.S. wheat market is expected to adjust as new crop availability and trade dynamics evolve.