The most recent wheat market report: Wheat Market Snapshot June 30, 2013 Weather and markets are intrinsically related for Northwest wheat growers entering summer. Key drivers impacting producers’ bottom line include: 1) Precipitation: Producers in Montana received up to 10” of rain between May and June. Precipitation deficits in Washington and Idaho were stabilized with mid- and late June rains, while Oregon growers generally face rain deficits. 2) Crop conditions: Above average crops are expected in Montana. Yields are expected to be average in Washington and Idaho and below average in northeastern Oregon. 3) GMO market response: After initially falling, soft white wheat markets rebounded following identification of isolated GMO wheat in an Oregon farmer’s field. 4) Tight old crop corn stocks: Wheat continues to enjoy support from corn. Most producers have sold their entire 2012 crop and up to 35 percent of their 2013 crop. 5) Uncertain markets going forward: Although world wheat ending stocks are only forecast up slightly in 2013/14, a large corn crop may drive feed grain and wheat prices lower. 6) Crop insurance risk management: Montana growers have aggressively purchased hail insurance, attempting to protect a bumper crop. Wheat produces in other areas should mitigate losses with crop insurance provided revenue protection. Northwest Grain growing regions in the Northwest reflect extremes, with crop conditions ranging from above average in Montana to below average in North Central and Northeastern Oregon. Second quarter agronomic practices included increased input costs associated with rust (i.e. fungus) control in some areas. Harvest is expected to be near historic dates. Most producers have sold their entire 2012 crop and forward contracted between 25 to 35 percent of their 2013 crop. Where crop losses may occur, producers with crop insurance have a revenue floor providing financial security. Throughout Central and Eastern Montana, May and June rains have reversed drought-like conditions. Precipitation totals range between several inches to 10 or more inches. Dry conditions in Washington and Northern Idaho were also alleviated with mid- and late June rains. In North Central and Northeastern Oregon, high temperatures and too little rain parched wheat crops on lighter soils. Expectations are for above average wheat crops in Montana. Crops should be average in Washington and Northern Idaho, while below average yields are anticipated in Eastern Oregon. High precipitation has resulted in only limited spraying for leaf rust in Montana. Rust is a fungus that is relatively uncommon in Montana, but frequently associated with above average precipitation in Washington, Idaho and Oregon. Left untreated, yield losses due to rust can be as high as 50 percent. Although farmers in Washington and Northern Idaho have struggled with below average precipitation, many have sprayed for rust, noting infestations associated with limited rain, but cooler temperatures. The costs of spraying for rust are approximately $10 per acre (including aerial application). ©Northwest Farm Credit Services 2013 2 With strong yields expected, wheat producers in Montana have purchased above average levels of hail insurance, attempting to secure a bumper crops reward. In drier areas, crop insurance will play a key role in offsetting producers’ losses where yields are below average. Overall, crop insurance should assure wheat growers’ financial security in 2013. Wheat producers should initiate harvest near historic dates, with early indications suggesting harvest as early as the first week of July in North Central Oregon. Land values remain strong, bolstered by producers’ sense of scarcity or strategic purchases. However, higher land prices are generally not reflected in higher cash rents. In Northwest wheat industry news, the USDA reports no indication that genetically modified soft white wheat found in an Oregon farmer’s field spread beyond the field. Japan and Korea have temporarily suspended imports of western white wheat as the USDA investigates. Northwest white wheat markets have rebounded after initially falling in response to the news. U.S. and Global Wheat Markets All wheat planted acres are projected at 56.5 million with the USDA’s June 30, 2013 Acreage Report, up 1 percent from last year. Old wheat stocks in the USDA’s June 30, 2013 Grain Stocks Report totaled 718 million bushels June 1, 2013, down 3 percent from June 1, 2012. Acreage and stock reports are initially bearish to neutral, pressured by ample wheat stocks. The USDA forecasts 2013/14 U.S. wheat production of 2.080 billion bushels, 8.3 percent lower than estimated 2012/13 production. Total 2013/14 U.S. wheat supplies are also projected lower, down 5.8 percent from 2012/13, limited by lower production. United States total projected 2013/14 wheat use is down 3.9 percent, slowed primarily by lower feed and residual uses and exports, down 19.4 and 3.5 percent respectively. Wheat feeding is expected to be less attractive by late summer, limited by large supplies and lower prices for feed grains. Strong crops in major exporting countries are projected to limit exports in 2013/14. Ending U.S. 2013/14 stocks are forecast at 659 million bushels, down 11.7 percent from 2012/13. United States ending stocks to use of 28.7 percent for 2013/14 is substantially higher than the record low of 13.2 percent in 2007/08. Lower U.S. production is due to 2.1 million fewer expected harvested acres in 2013/14 and a forecasted yield of 46.1 bushels per acre, down 1.1 bushels from 2012/13. Hard Red Winter wheat production is down most significantly at 781 million bushels, 223 million bushels lower than a year ago. Factors constraining hard red winter wheat production include a forecasted lower planted area, higher expected abandonment rate and reduced yield due to drought and spring freeze damage. Conversely, soft red winter wheat production is forecast up 89 million bushels from 2012/13 at 509 million bushels, while soft white winter wheat production of 219 million bushels is forecast down 3 million bushels from the prior year. Overall, year-over-year winter wheat conditions are poorer, with 43 percent of the crop rating ‘Very Poor’ or ‘Poor’ as of July 16 compared to only 17 percent of the crop with similar ratings in 2012. ©Northwest Farm Credit Services 2013 The World Agricultural Outlook Board projects 2013/14 world wheat ending stocks of 181.3 million metric tons, up 0.8 percent from 2012/13, but 9.1 percent lower than 2011/12. The projected yearover- year increase in ending stocks is partially attributed to higher forecasted production in 2013/14, up 6.1 percent from 2012/13 and 4 percent greater than the 5-year average. At 181.3 million metric tons, 2013/14 ending stocks to use is 26.2 percent; above the historic low of 21.0 percent stocks to use in 2007/08. Chinese ending wheat stocks of 62 million metric tons account for 34 percent of global ending wheat stocks. Although Russian and Ukrainian wheat production is up a forecasted 37 percent from 2012/13, both areas face production challenges. A six-week period of extreme heat with little rain beginning in the second half of April and lasting through mid- to late May is expected to reduce wheat yields. Similarly, Russia’s South District (bordering Ukraine) experienced a heat wave during wheat flowering and early filling with the number of days with temperatures above 86o F nearly four times higher than the 30- year average. Global wheat exports are forecast at 144.1 million metric tons in 2013/14, 3.5 percent higher than 2012/13, but 9.1 percent lower than 2011/12. U.S. Wheat Associates reports the Russian government recently announced its intentions to limit wheat exports to 20.0 million metric tons, responding to lower winter wheat production in its South and attempting to rebuild domestic grain stocks. The USDA forecasts 2013/14 Russian exports at 17 million metric tons. Notwithstanding these developments, projected tightening in U.S. ending stocks is likely to limit U.S. 2013/14 export prospects. ©Northwest Farm Credit Services 2013 4 World Ending Wheat Stocks and Price Source: World Wheat Supply and Demand Situation; U.S. Wheat Associates; June 2013 The projected year-over-year increase in world wheat ending stocks is partially attributed to higher forecasted production in 2013/14, up 4 percent from the 5-year average. Ending stocks to use is 26.2 percent; above the historic low of 21.0 percent stocks to use in 2007/08. Chinese ending wheat stocks account for 34 percent of global ending wheat stocks. U.S. Wheat Associates highlights from the June 12, 2013 USDA 2013/14 wheat supply and demand estimates include: 1. Strong production in the Black Sea region, with production up 34 percent from 2012/13; and Indian production at 92.0 million metric tons, down 3 percent from 2012/13, but still the second largest on record. 2. Record wheat consumption of 691 million metric tons in 2013/14, up 2 percent from 2012/13. 3. The second highest world wheat fee use on record at 134 million metric tons. 4. More trade, rising 4 percent from 2012/13 to 144 million metric tons, 1 percent greater than the 5- year average. 5. Rising exports from the Black Sea and India and lower exports from the U.S. and EU in 2013/14. a. Black Sea exports are forecast to rebound 31 percent to 33.2 million metric tons. b. Indian exports are forecast at a record 8.0 million metric tons. 6. Lower world beginning stocks, falling 10 percent from 2012/13 to 180 million metric tons. a. But, U.S. 2013/14 beginning stocks of 20.3 million metric tons, 5 percent above the 5-year average. Outlook The USDA’s 2013/14 season-average farm price for all wheat is projected at $6.25 to $7.55 per bushel; down from the record $7.80 per bushel expected for 2012/13. Daniel O’Brian, Extension Agricultural Economist with Kansas State, proposes uncertainty surrounding 2013/14 global wheat production, concern surrounding the U.S. hard red winter wheat crop, and cross market support from extremely tight U.S. feed grain supplies are likely to support wheat prices through early summer 2013. Longer-term, wheat prices face pressure from larger corn supplies and lower corn prices in the fall of 2013. Northwest FCS analysts estimate wheat producers’ breakeven price at approximately $6.50 to $7.00 per bushel.
Posted on: Thu, 01 Aug 2013 18:32:33 +0000
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