WASHINGTON, D.C., U.S. — The U.S. Department of Agriculture in its July 11 World Agricultural Supply and Demand Estimates report, forecast the carryover of U.S. wheat on June 1, 2020, at 1 billion bushels, down 72 million bushels, or 7%, from 1.072 billion bushels as both the June forecast and the 2018 carryover estimate and below the average of trade expectations. The cut in the carryover was driven by a boost in projected 2019-20 exports as the result of a large cut in world wheat production and trade.
After the report was issued, Kansas City September wheat futures rallied 20¢ a bushel on July 11, Chicago September was up 16¾¢ a bushel and Minneapolis gained 12½¢ a bushel. All three contracts traded lower earlier in the week.
World wheat ending stocks were forecast at 286.46 million tonnes, down 7.88 million tonnes, or 2.7%, from the June forecast but still up 11.31 million tonnes, or 4.1%, from 275.15 million tonnes in 2018-19. The lower ending stocks forecast was driven by a 10-million-tonne reduction in forecast production among the world’s major exporters, with export forecasts lowered for three of the top six exporters, including Russia, the world’s largest wheat exporter, with production forecast at 74.2 million tonnes, down 3.8 million tonnes, and exports at 34.5 million tonnes, down 2.5 million tonnes. Still, Russia’s production, if realized, would be the second largest on record.
“Lower forecast production in five of the world’s six major exporters was really the story,” said Paul Meyers, vice-president of commodity analysis, Foresight Commodity Services, Inc.
In addition to Russia, the USDA cut its production forecasts for Australia, Canada, the European Union and Ukraine, leaving Argentina unchanged and boosting its U.S. production and export forecasts. Export forecasts for Australia and Ukraine were cut along with Russia, while Argentina’s and Canada’s export forecasts were unchanged and the E.U. forecast was raised slightly.
Production forecasts were lowered due to hot, dry weather in Europe and Russia, with lower outturn in Australia and Canada due mainly to lower area, the USDA said.
The USDA forecast U.S. wheat exports at 950 million bushels in 2019-20, up 50 million bushels from June and up 14 million bushels from 936 million bushels in 2018-19.
Beginning stocks were lowered 30 million bushels from June to 1.072 billion bushels based on the June 28 USDA Grain Stocks report estimate of June 1 wheat stocks, which comprised the 2019 carryover.
U.S. 2019 wheat production was forecast at 1.921 billion bushels, up 1% from June based on Crop Production report survey results. Forecast 2019-20 imports were unchanged at 140 million bushels, with total supply forecast at 3.133 billion bushels, down 12 million bushels from June but up 15 million bushels from last year.
Projected food use of wheat in 2019-20 was unchanged from June at 965 million bushels. Seed use was unchanged at 68 million bushels, and feed and residual use was raised 10 million bushels to 150 million bushels.
The average price of wheat paid to farmers in 2019-20 was forecast at $5.20 per bushel, up 10c from June.
Meyers suggested there still was much uncertainty about the higher USDA 2019-20 U.S. wheat export projection. He noted that U.S. wheat has not been competitive in the world market at lower values recently, and that it may be even less competitive after prices rallied on the USDA world wheat data.
Other analysts noted that much of the trade was focused on USDA corn and soybean projections after surprising acreage estimates in the agency’s June 28 Acreage report, and that they may have been caught off guard by the large changes in world wheat production forecasts.