Robynne Anderson's Emerging Thoughts on Ag

Wheat on the Edge

After some very bleak years, wheat bounced back as a profitable part of the farm mix. However, there is news in the USDA Outlook that suggests some troubled times for wheat. Excerpts of the USDA report are below.

Wheat Supply, Demand, and Price Outlook for 2013/14
Wheat production for 2013 is expected to decrease more than 7 percent to 2,100 million bushels despite increased planted area. The year-over-year reduction stems from a lower yield and a lower harvested-to-planted ratio. Harvested area for 2013 is projected at 46.5 million acres, down 2.5 million acres from the previous year. Winter wheat conditions are substantially worse in the Great Plains compared with last year at this time.

In the US “domestic use of wheat for 2013/14 is expected to decrease 68 million bushels year to year. Food use is expected up 8 million bushels from the 2012/13 forecast. Feed use is projected down 75 million bushels from the 2012/13 projection. This decrease reflects an expected larger corn crop with normal weather and yields, a smaller HRW wheat crop, and a less favorable wheat/corn price relationship for wheat feeding in 2013/14 than in 2012/13.”

U.S. wheat exports for 2013/14 are expected to drop 100 million bushels from the 2012/13 forecast to 950 million with tighter supplies and intensified competition from other major exporters. World wheat production is expected to recover significantly from last year with all major exporting countries except the United States expected to have larger crops. Kazakhstan, EU-27, Russia, and Ukraine account for the majority of the increase. High wheat prices spurred additional planting in Northern Hemisphere winter wheat producing countries and are also favoring increased spring plantings in Canada, as well as higher acreage in Argentina and Australia.

The 2013/14 season-average farm price is projected at $7.00 per bushel, down $0.90 from the midpoint of the record high range projected for 2012/13. Farmers traditionally market more than half of the wheat crop from June through September.