Surprising Wheat Woes
On Thursday, August 10th, the USDA released their August grain report for world agricultural supply and demand estimates. To everyone’s disappointment, the USDA came out very bearish. U.S. corn yields were only lowered by 1.2 bushels to 169.5 per acre. Average American soybean yields were actually increased by 1.4 bushels to 49.4 an acre! And while U.S. wheat production downgrades were as aggressive as the market was expecting, the global numbers were even more surprising.
Overall, global wheat production is forecasted by the USDA at 743.2 million tonnes, more than 5 million tonnes higher than July’s forecast. You can blame the Black Sea mainly for this increase. This is also about 11 million tonnes lower than last year’s record of 755 MMT. With the bigger production, global wheat carryout was raised by more than 4 million tonnes to a record of 264.7 MMT. That number will surely keep a lid on wheat prices.
In the U.S., spring wheat production estimates were lowered by 21 million to 364 million bushels (or 9.91 million tonnes). U.S. durum output was also lowered by 6 million bushels to a 51-million-bushel crop (or nearly 1.4 million tonnes). Australian production was kept at 23.5 million tonnes despite private firm downgrades to 22 MMT and lower. Meanwhile, Canadian wheat production was dropped by nearly 2 MMT from July's estimate to 26.5 million tonnes. Average yields are forecasted at 43.7 bushels per acre. That's down 7% from July's forecast and 18% lower than last year's yields.
Ukrainian wheat production was also increased, up 2.5 million tonnes from July's estimate to 26.5 million tonnes. The market was instead expecting a downgrade. Yes, hot weather hit part of the country that produces about 40% of the crop. Apparently, the other areas made up for it though. The USDA pegged average nationwide wheat yields at nearly 60 bushels per acre! With 92% of the Ukrainian wheat harvest done, put a fork in this number because it's done (READ: not being revised).
The biggest surprise was Russia! They've got something going on in the soil over there because the USDA just increased wheat production by 5.5 million tonnes from their July forecast to 77.5 MMT. This is 5 million tonnes above last year's record. The USDA says the reason for the increase was two-fold. First, higher yields were seen in the winter wheat areas. Second, satellite imagery in spring wheat-growing areas of Russia shows some pretty deluxe conditions. Overall, total average wheat yields in Russia are pegged at 43 bushels per acre. That’s up 10% from last month’s estimate, 8% higher than last year’s record, and 25% above the 5-year average.
All things being equal, there continues to be a shorter supply of higher-protein / higher quality wheat around the world. That’s why it’s important to know the quality of your grain. If you’re looking to sell your wheat into the milling market, you NEED to know protein, moisture, Hard Vitreous Kernels (HVK), Falling Number, and disease issues like vomitoxin and fusarium. At FarmLead, we recently launched GrainTests.com to help farmers like you know your grain. You can easily order from 5 different labs and get both U.S. and Canadian grading down. We strongly recommend it in a year like this when your wheat’s price might surprise you (to the upside).
President & CEO | FarmLead.com