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Wheat Outlook Summary

Core Content

This report provides an overview of the U.S. and global wheat market outlook for the 2018/19 marketing year. It highlights production trends, export opportunities, and domestic and international demand changes, with a special focus on China's wheat quality challenges and their impact on the market.

Main Points

U.S. Domestic Outlook

• All-wheat production in 2018 is up 8 percent and nearly 141 million bushels from 2017.
• Other spring wheat production is projected at 613 million bushels, up 32 percent due to record yields and a 27-percent increase in harvested area.
• Winter wheat production is forecast at 1,881 million bushels, up slightly from the June projection.
  • Hard red winter (HRW) production increased by 10.3 million bushels.
  • Soft red winter (SRW) production decreased by 12.3 million bushels.
  • White winter wheat production increased by 3.0 million bushels.
• All-wheat exports are raised to 975 million bushels, up 25 million from the previous year.
• Ending stocks for 2018/19 are projected at 984.7 million bushels, up 39.1 million bushels from the previous month.
• All-wheat season-average farm price (SAFP) is projected at $5.00 per bushel, down from $4.73 per bushel in 2017/18, due to increased supplies and lower corn prices.
• Domestic use of all-wheat is up to 1,157 million bushels, with a 10-million-bushel increase in feed and residual use.
• Durum wheat production is expected to rebound by nearly 20 million bushels, or 36 percent, due to improved yields.

International Outlook

• Global wheat production for 2018/19 is projected down 8.4 million tons to 736.3 million tons.
• Foreign wheat production is reduced by 9.9 million tons to 685.1 million tons, with the EU leading the decline by 4.4 million tons.
• Australia is projected to reduce production by 2.0 million tons due to drought.
• Russia is projected to cut winter wheat production by 2.5 million tons, while spring wheat production is up 1.0 million tons.
• Ukraine is projected to reduce production by 1.0 million tons due to poor growing conditions.
• China is projected to reduce wheat production by 1.0 million tons to 128.0 million tons, a 0.7 percent decrease, due to lower estimated wheat area.
• China's wheat quality is a significant issue, with an oversupply of moderate-gluten varieties and a shortage of high-quality wheat types.
• China's wheat imports are expected to grow from 3 million tons in 2017/18 to 4.5 million tons in 2027/28, but a new WTO tariff-rate quota restricts volumes.
• China's wheat ending stocks are forecast down 2.5 million tons to 136.1 million tons, due to lower production and higher feed use, partly offset by increased imports.

Key Information

U.S. Production and Exports

• Other spring wheat production reached a record high due to improved weather and expanded harvested area.
• U.S. exports are expected to increase by 25 million bushels to 975 million bushels, aided by reduced production from major competitors like the EU, Australia, Russia, and Ukraine.
• Durum wheat production is expected to rise by nearly 20 million bushels, with U.S. imports of durum wheat forecast to drop by 11 million bushels.

International Production and Trade

• Global wheat production is forecast down 8.4 million tons, with the EU and Australia experiencing the largest declines.
• China is the second-largest wheat producer but faces a chronic quality mismatch, with low-quality wheat dominating the market.
• China's wheat imports are expected to rise in the long term but are currently constrained by trade policies.
• World wheat trade is projected at 185.7 million tons for 2018/19, a record despite a 0.5-million-ton decline in South Korea's wheat imports.

Domestic and International Use

• Domestic use of all-wheat is projected to increase, driven by higher supplies and lower prices.
• Wheat feed and residual use is up 10 million bushels due to expanded supplies and lower prices.
• International feed and residual use is projected to decline in several countries, including the EU, South Korea, Indonesia, and Kazakhstan, but increase in China and Australia.

Summary Table

Conclusion

The 2018/19 wheat outlook indicates a mix of increased production and export opportunities in the U.S., driven by favorable weather and reduced competition. Internationally, production declines in major wheat-producing regions like the EU and Australia are expected to boost U.S. export prospects. However, China's chronic wheat quality issue continues to challenge its domestic market and export dynamics, with a focus on high-quality wheat imports. The overall global wheat market is expected to see a modest decline in production, but increased supplies and improved trade conditions are anticipated to support higher trade volumes and stabilize prices.