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Generally cool spring conditions delayed the start of the 2018/19 U.S. winter wheat harvest, but the combines are now in the fields and U.S. Wheat Associates (USW) published a preliminary Harvest Report on May 25. USW Harvest Reports are published every Friday afternoon, Eastern Daylight Time, throughout the season with updates and comments on harvest progress, crop conditions and current crop quality for hard red winter (HRW), soft red winter (SRW), hard red spring (HRS), soft white (SW) and durum wheat.

The weekly Harvest Report is a key component of USW’s international technical and marketing programs. It is a resource that helps customers understand how the crop situation may affect basis values and export prices.

USW’s 14 overseas offices share the report with their market contacts and use it as a key resource for answering inquiries and meeting with customers. USW also publishes the report in Spanish as  “Trigonoticias,” distributed to Latin American wheat buyers and millers and posted on www.uswheat.org.

Anyone may register to subscribe to an email version of the Harvest Report. For the first time this year, USW includes links in the email to additional wheat condition and grading information, including the U.S. Drought Monitor, USDA/NASS Crop Progress and National Wheat Statistics, the official FGIS wheat grade standards and USDA’s World Agricultural Supply and Demand Estimates report. Harvest Reports are also posted online at www.uswheat.org/harvest.

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By Stephanie Bryant-Erdmann, USW Market Analyst

According to the March 29 USDA Prospective Plantings report, U.S. total spring-planted area will jump to an estimated 14.1 million acres (5.71 million hectares), 12 percent above 2017/18, if realized. The estimate includes 12.1 million acres (4.90 million hectares) of hard red spring (HRS), up 17 percent from 2017, if realized. It is important to note that this is an estimate, as farmers in the top four HRS producing states of Minnesota, Montana, North Dakota and South Dakota have not started planting due to extremely cold, snowy weather across the region.

USDA expects a 1.05 million acre (425,000 hectare) increase in North Dakota spring wheat area, which is forecast at 6.40 million acres (2.59 million hectares). If realized, that would be up 20 percent year over year. Spring wheat acres in Minnesota are also expected to increase 38 percent from 2017/18 levels to 1.6 million acres (648,000 hectares). South Dakota 2018/19 HRS planted area is forecast at 1.05 million acres (425,000 hectares), up 80,000 acres (32,000 hectares). However, the planting window for spring wheat in North Dakota and Minnesota is no more than three weeks; after that the yield potential starts to decrease and farmers choose to plant alternative crops.

“This cold, wet spring could work against spring wheat planting in eastern North Dakota and western Minnesota,” said Mike Krueger, an independent market analyst based in North Dakota. “Farmers in these areas are reluctant to plant spring wheat after late April and right now the forecast is calling for another two weeks of cold weather and snow. If planting is delayed until May, we will probably see a switch to soybeans or other crops.”

USDA forecast Montana HRS planted area at 2.50 million acres (1.00 million hectares), in line with 2017/18 planted area. But, in contrast to eastern North Dakota and western Minnesota, the late spring may increase HRS planted acres in parts of Montana according to Cassidy Marn, marketing program manager with the Montana Wheat & Barley Committee.

“Farmers in Montana have fewer alternatives and, since we can only grow limited quantities of corn and soybeans here, wheat tends to be the last alternative,” said Marn. “Planting peas and lentils is possible, but given the amount of snow we still have on frozen ground, some farmers could miss the window for those crops. Planting spring wheat in June is not ideal, but it is preferable to planting nothing.”

USDA expects U.S. durum planted area to total 2.00 million acres (809,000 hectares), down 13 percent from 2017/18, if realized. The predicted decline is driven in large part by USDA’s expectation that North Dakota farmers will switch from durum to HRS or oilseed crops due to lower returns on durum in recent years. In addition, growers near the border are frustrated by a large volume of durum freely crossing the border from Canada that increases pressure on durum prices. Weather conditions will also affect durum planting decisions.

USDA also updated the winter wheat planted area from its January 2018 estimate, increasing winter wheat planted area by 50,000 acres (20,000 hectares) to 32.7 million acres (13.2 million hectares). The new estimate is still 2 percent below the 2017/18 planted area. The increase came from hard red winter (HRW) area, estimated at 23.2 million acres (9.39 million hectares), up slightly from the previous projection, but still 2 percent below the year prior and 17 percent below the 5-year average.

The decreased HRW planted area makes crop conditions even more crucial. The April 2 USDA Crop Progress report rated 10 percent of Kansas HRW, 9 percent of Oklahoma HRW and 17 percent of South Dakota winter wheat as good, with virtually none of the crop rated as excellent in those states.

Soft red winter (SRW) planted area decreased from the previous estimate to 5.85 million acres (2.37 million hectares), but is still 4 percent above 2017/18 planted area. Overall, conditions for SRW are similar to what growers faced at the same time last year with a majority of the crop rated in good to excellent condition.

USDA expects white wheat acres — planted in both winter and spring — to reach 4.15 million acres (1.68 million hectares) for 2018/19, up 3 percent from 2017/18, but in line with the 5-year average. The U.S. Drought Monitor shows adequate moisture for Washington, but southern Idaho and Oregon are experiencing abnormally dry to moderate drought conditions. Still, USDA reported that the majority of the white wheat crop in those states are in good to excellent condition.

The expected increase in spring wheat area would increase total U.S. wheat planted area to 47.3 million acres (19.1 million hectares) in 2018/19, up 3 percent year over year. The increase was unexpected, but if realized it would still be the second lowest planted wheat area since 1919 when USDA records began.

As always, spring brings the waiting game — all we can do is watch how the crops respond to conditions going forward.

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By Stephanie Bryant-Erdmann, USW Market Analyst

Total U.S. planted wheat area will rise 500,000 acres (202,000 hectares) in 2018/19 due to an expected increase in spring wheat area (including durum) according to Joanna Hitchner of the USDA World Agricultural Outlook Board. The USDA held its annual Agricultural Outlook Forum on Feb. 22 to 23, where Hitchner presented the 2018/19 Grain and Oilseeds Outlook.

USDA forecasts 2018/19 combined spring wheat and durum planted area at 13.9 million acres (5.63 million hectares). If realized, that would be up 2 percent from 2017/18 and the largest spring and durum planted area since 2015/16. Increased spring wheat and durum planted area is expected to more than offset the lowest U.S. winter wheat planted area since 1909. USDA currently estimates 2018/19 (June to May) wheat acreage at 46.5 million acres (18.8 million hectares), a one percent increase from last year, if realized.

Wheat buyers should note that factors affecting planting decisions can change before seed is sown. Long-term dry conditions in top hard red spring (HRS) and durum producing states of Montana, North Dakota and South Dakota may significantly alter farmers’ plans.

In January, USDA reported U.S. farmers planted 32.6 million acres (13.2 million hectares) of winter wheat last fall, down slightly from 2017/18, but 15 percent below the 5-year average. Increases for soft red winter (SRW) and white wheat offset a decrease in hard red winter (HRW). USDA assessed 2018/19 HRW planted area at 23.1 million acres (9.35 million hectares), down 2 percent from 2017/18 with planted acreage down year over year in nearly every HRW-producing state. However, 2018/19 total SRW planted area of 5.98 million acres (2.42 million hectares) increased 4 percent from last year, and white winter wheat planted area increased to an estimated 3.56 million acres (1.44 million hectares), up 1 percent from the prior year. Winter durum planting in the Southwestern United States was estimated at 74,000 acres (30,000 hectares), down 41 percent from 2017/18 and 51 percent below 2016/17.

Based on trend yields, USDA expects the national average yield to grow to 47.4 bushels per acre, up from 46.3 in 2017/18 due to expected increases in spring and durum wheat yields which were hard hit by last year’s drought. USDA projects the wheat harvested-to-planted ratio will increase to 0.83, up slightly from last year’s 0.82 due to a small decrease in expected abandonment rates. Total U.S. 2018/19 wheat production is forecast to rise by 6 percent year over year to 50.0 million metric tons (MMT).

In addition to lower planted area for winter wheat, crop conditions for many HRW-producing states are deteriorating due to sustained drought conditions. On Feb. 26, USDA rated 12 percent of Kansas winter wheat in good to excellent condition, down from 14 percent at the end of December. Winter wheat condition remained unchanged in Oklahoma with just 4 percent rated good to excellent, but declined in Colorado, Montana, Nebraska, North Dakota and South Dakota. SRW conditions improved in Illinois, where 45 percent of the winter wheat crop was rated in good to excellent condition compared to 38 percent last month. USDA will resume weekly U.S. crop progress reports in April.

A decrease in carryover stocks is expected to offset increased production, and the total U.S. wheat supply is expected to fall in 2018/19. USDA forecasts 2018/19 U.S. supplies at 77.5 MMT, down 2 percent from 2017/18, if realized, in part because USDA anticipates a slight increase in domestic use, from 30.4 to 30.7 MMT.

Price competition and large supplies in other wheat exporting countries will continue to pressure demand for U.S. wheat. USDA expects U.S. exports to fall to 25.2 MMT, down 3 percent from the forecasted 2017/18 U.S. wheat export level of 25.9 MMT.

To read more from the USDA Outlook Forum or to download presentations, please visit https://www.usda.gov/oce/forum/.

To see the latest Drought Monitor, please visit https://droughtmonitor.unl.edu/

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By Stephanie Bryant-Erdmann, USW Market Analyst

In the Nov. 2, 2017, issue of “Wheat Letter,” we analyzed the tight supply of high protein U.S. wheat (minimum of 13.0 percent protein at 12 percent moisture basis (mb)) and its effects on pricing. The latest production and quality analysis suggests that global high protein wheat production in marketing year 2017/18 is down as much as 39 percent from average. That strengthens the conclusion that price premiums will continue at least into the first quarter of marketing year 2018/19 (June to May).

Based on available data, U.S. Wheat Associates (USW) has estimated that the world’s wheat suppliers produce about 50 million metric tons (MMT) of high protein wheat in an “average” year. Of that total, USW estimated that about 27 MMT on average are available to export markets, including:

  • 0 MMT of hard red spring (HRS) from the United States;
  • 0 MMT of Canadian Western Red Spring (CWRS);
  • 0 MMT from Kazakhstan, Russia and Ukraine; and
  • 0 MMT of Australian Prime Hard (APH) and Australian Hard (AH).

Looking at 2017/18, high protein wheat production was well below average.

USDA data showed that total U.S. HRS production was down 26 percent year over year at 10.5 MMT, with about 9.0 MMT having at least 13.0 percent protein (12 percent mb). Roughly half of U.S. HRS is exported annually, putting U.S. high protein HRS exports at 4.5 MMT. Carry-in stocks from 2016/17 totaling 6.4 MMT push total HRS supply higher, and potentially also enlarge the supply of high protein HRS. In 2016/17, the average protein was 14.6 percent (12 percent mb), but the protein content of the remaining stocks carried into 2017/18 is unknown. Year to date, the Federal Grain Inspection Service has inspected 3.94 MMT of HRS, 98 percent of which had at least 13.0 percent protein (12 percent mb), and USDA reported an additional 1.26 MMT of HRS sales that have not yet shipped as of Jan. 25. To meet that demand, high protein HRS stocks will need to be pulled out of storage, indicating premiums for HRS are unlikely to shrink in 2017/18.

Of the 19.2 MMT of CWRS produced in 2017/18, about 78 percent, or 15.0 MMT, graded #1 CWRS according to Canadian International Grains Institute (CIGI) data. The average protein for #1 CWRS is 13 percent (12 percent mb), with roughly 75 percent of #1 CWRS samples averaging above 13.0 percent (12 percent mb). If production values match sampling ratios, then Canada produced roughly 11.0 MMT of high protein wheat in 2017/18. On average, Canada exports roughly 70 percent of total wheat production putting total high protein wheat exports at an estimated 8.0 MMT. Weber Commodities, a Canadian-based analyst firm, believes Canada carried in just 1.0 MMT of high protein stocks, putting the estimated total Canadian high protein wheat exportable supply at 9.0 MMT.

Black Sea high protein exports are expected to fall to 3.0 MMT — all from Kazakhstan — due to above average rainfall that significantly lowered protein levels in Russian and Ukrainian wheat.

Australian Prime Hard is only produced in Queensland and New South Wales where La Niña-related drought conditions have sharply cut yields. Generally dry conditions are also expected to hurt Australian Hard wheat yields. USW estimates that Aussie high protein exportable supplies will only reach about 1.5 MMT.

The shrinking supply of high protein wheat can be seen in the prices of the top suppliers. According to the International Grains Council (IGC), the average price for 13.5 percent protein (12 percent mb) HRS exported from the Pacific Northwest (PNW) is up 16 percent year over year. IGC uses the Canadian designation of CWRS as 13.5 percent protein (13.5 percent mb). It reports CWRS prices from both Vancouver and St. Lawrence show an increase of 24 percent year over year. Meanwhile, lower protein wheat producers, such as Argentina, have seen prices fall 4 percent year over year due to the large supply of lower protein wheat.

Here is a table summarizing USW’s estimate of the big cut in global high protein wheat supplies in 2017/18 compared to an average, or “typical” year.

                                    Average Export Supply            2017/18 Estimated Supply

U.S. HRS                        6.0 MMT                                   4.5 MMT

CWRS                          11.0 MMT                                    8.0 MMT

Black Sea                       7.0 MMT                                   3.0 MMT

APH/AH                          3.0 MMT                                   1.5 MMT

Total                            27.0 MMT                                  17.0 MMT

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By Stephanie Bryant-Erdmann, USW Market Analyst

Six months into marketing year 2017/18 (June to May), total U.S. export sales of 19.5 million metric tons (MMT) are 8 percent behind last year’s pace according to USDA Export Sales data through Jan. 4. However, the estimated total value of U.S. wheat export sales is 4 percent greater than last year on the same date at $4.72 billion, due to slightly higher export prices according to USDA Export Sales data and USW Price Report data.

A deeper analysis of USDA data shows total sales to six of the top 10 U.S. export markets in 2016/17 are ahead of last year’s pace, demonstrating strong demand for U.S. wheat. Sales of soft red winter (SRW) and soft white (SW) are both ahead of last year’s pace. USDA projects total 2017/18 exports will fall slightly to 26.5 MMT, which, if realized, would be 8 percent below 2016/17 but 1 percent above the 5-year average pace.

USDA reported hard red winter (HRW) year-to-date exports at 7.79 MMT, down 10 percent from the prior year. Still, 2017/18 export sales are 10 percent ahead of the 5-year average due to competitive prices for medium protein HRW and the good, overall quality of this year’s crop. The estimated value of year-to-date HRW export sales is 6 percent above 2016/17 due to a 14 percent increase in the average U.S. HRW free-on-board (FOB) price that is supported by the increased premiums for HRW with higher protein. Mexico is currently the number one HRW purchaser. As of Jan. 4, HRW sales to Mexico totaled 1.58 MMT, up 28 percent from last year’s pace. Sales to Indonesia are also up 28 percent year over year at 430,000 metric tons (MT). HRW purchases by Algeria total 456,000 MT, more than double last year’s sales on this date. To date, HRW sales to Venezuela totaling 120,000 MT are nearly four times great than the 2016/17 pace.

Both export sales volume and value of SRW for 2017/18 are up due to the excellent quality of this year’s crop and relatively competitive pricing. Export sales are up 7 percent year over year at 2.02 MMT, boosting estimated export sales value to $400 million, or 12 percent more so far this year. As of Jan. 4, total sales to 11 of the top 20 U.S. SRW export markets from 2016/17 are higher than last year. Sales to Colombia are 12 percent ahead of 2016/17 at 198,000 MT. Nigerian SRW purchases total 234,000 MT, up 12 percent from last year. Sales to other Central and South American countries, including Brazil, Peru, Panama, Venezuela and El Salvador, are also ahead of the 2016/17 pace.

Hard red spring (HRS) sales of 5.15 MMT are down 25 percent year over year and 7 percent below the 5-year average. Higher prices due to smaller 2017/18 production have slowed HRS exports thus far in 2017/18, but global demand for HRS is strong. Year-to-date in 2017/18, the average FOB price of HRS is $293 per metric ton ($7.97 per bushel), compared to $241 per metric ton ($6.55/bu) in 2016/17, according to USW Price Report data. As of Jan. 4, buyers in Japan purchased 878,000 MT, up 20 percent from 2016/17. Sales to Taiwan of 518,000 MT are up 17 percent from last year’s sales on the same date. The Philippines continues to import the largest volume of HRS, though at a 6 percent slower pace so far.

As of Jan. 4, exports of soft white (SW) wheat are up 22 percent year over year at 4.30 MMT. That is 28 percent greater than the 5-year average. Sales to the top 10 SW customers are ahead of last year’s pace, supporting an estimated export value of $896 million, up 25 percent from the prior year. Philippine millers purchased 946,000 MT, up 16 percent compared to last year’s sales on the same date. South Korean sales are up 43 percent at 674,000 MT. U.S. SW sales to China, Thailand and Indonesia are also up. Year-to-date, Indonesia has purchased 515,000 MT, compared to total 2016/17 purchases of 270,000 MT. Thailand sales are up 18 percent year over year at 217,000 MT. Chinese purchases of 306,000 MT are already greater than 2016/17 total SW sales.

Year to date durum exports total 272,000 MT, down 32 percent from the same time last year, and below the 5-year average, with tighter supplies and resulting higher prices. The average export price for U.S. durum is up 5 percent over last year at this time according to USW Price Report data. To date, Nigeria, the European Union (EU), Algeria and Guatemala are the top durum buyers. A significant portion of the first quarter 2017/18 sales is designated as “sales to unknown designations.

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By Stephanie Bryant-Erdmann, USW Market Analyst

As the Dec. 12 World Agricultural Supply and Demand Estimate (WASDE) confirms, global wheat supplies are at a record high this year. USDA increased its estimate for 2017/18 global wheat production to 755 million metric tons (MMT), up slightly from 2016/17 and a new record high. If realized, it would be the fifth consecutive year of increased global wheat production.

The record large global wheat production has pressured U.S. wheat futures to six and twelve-month lows. Since the beginning of the 2017/18 marketing year, the Chicago Board of Trade (CBOT) soft red winter (SRW) wheat futures and the Kansas City Board of Trade (KCBT) hard red winter (HRW) wheat futures have fallen 37 cents and 32 cents, respectively to levels not seen since last December. The Minneapolis Grain Exchange (MGEX) hard red spring (HRS) wheat futures climbed in July, supported by concerns over severe drought in the U.S. Northern Plains, but has since fallen to within 14 cents of the June 2 price. This decline in wheat futures prices represents a significant opportunity for customers to lock in low futures values to hedge the risk of growing protein premiums due to the tight global supply of high protein wheat.

The USDA report also noted that lower year over year wheat production for 2017/18 was reported in Canada, Kazakhstan, Ukraine and the United States, and is also expected in Australia. This is important for customers needing high protein wheat, because nearly all the world’s high protein wheat exports (13 percent protein on a 12 percent moisture basis (mb) or higher) originate from those five countries plus Russia.

While Russian wheat yields exceeded expectations and boosted total production, high protein wheat supplies are very limited according to the Federal Centre of Grain Quality and Safety Assurance for Grain and Grain Products (Centre) preliminary data for winter wheat. According to Centre data, 25 percent of samples graded as Russian 3rd class wheat (10.5 to 11.9 percent protein on a 12 percent mb); 44 percent of the samples graded as Russian 4th class wheat (8.8 to 10.5 percent protein on a 12 percent mb); and 31 percent as 5th class wheat (feed wheat). Less than 1 percent of samples graded as Russian 2nd class wheat (11.9 to 12.8 percent protein on a 12 percent mb).

With global high protein wheat supplies shrinking for the second consecutive year and demand continuing to be strong, the premium between MGEX and KCBT wheat futures has continued to widen. In 2016/17, the inter-market spread between MGEX and KCBT averaged $1.05 compared to just 40 cents the prior marketing year. Year to date in 2017/18, the MGEX to KCBT spread averages $2.09.

The demand for higher protein wheat also supports HRW protein export basis spreads, which have widened significantly this year at both Gulf and Pacific Northwest (PNW) ports. Over the past 15 years, the average premium for 12 percent protein (12 percent mb) at the Gulf has been 14 cents per bushel. This year that premium is $1.96 per bushel. The 15-year average premium for 12 percent protein HRW at the PNW is $1.09 per bushel. Since the beginning of the 2016/17 marketing year on June 1, that average premium is $1.94 per bushel.

Despite the increased premiums for high protein HRW and HRS, a review of USDA Federal Grain Inspection Service (FGIS) data reveals an increased percentage of high protein exports. Seventy-seven percent of 2017/18 HRS exports have at least 14 percent protein (12 percent mb), compared to the 5-year average of 70 percent. The percentage of HRW exports of 13 percent protein and above (12 percent mb) is double the 5-year average.

With six months left in the marketing year, many customers are securing their high protein wheat demands for the year. While premiums for high protein continue to grow, U.S. wheat futures markets have fallen for four straight weeks, which offers a good opportunity for customers to lock in the lowest HRS futures prices seen since June and the lowest SRW and HRW futures prices since last December.

Please call your local U.S. Wheat Associates (USW) representative if you have any questions about the U.S. wheat marketing system or U.S. wheat supply.

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By Stephanie Bryant-Erdmann, USW Market Analyst

The common refrain right now is “the world is awash with wheat.” While that is true in the aggregate, in terms of milling wheat and, more specifically, high-protein milling wheat, supply is very tight. The impact of the small supply of high-protein milling wheat can be seen in the protein premiums for both U.S. hard red spring (HRS) and hard red winter (HRW) wheat. The following is a breakdown of pricing and availability of the U.S. high-protein wheat supply by class and port of export. Please note that U.S. wheat protein is expressed on a 12 percent moisture basis, not on a dry matter basis, thus U.S. 11.5 percent protein is equal to 13.1 percent protein on a dry matter basis.

Hard Red Winter

According to USDA, HRW production fell 32 percent from 2016/17 to 20.4 million metric tons (MMT), putting total HRW supply at 36.5 MMT. According to USW Crop Quality data, the average protein of this year’s HRW crop is 11.4 percent. That is similar to last year, but below the 5-year average. Overall, 55 percent of HRW samples were less than 11.5 percent protein; 26 percent had 11.5 to 12.5 percent protein and 19 percent had protein levels above 12.5 percent. Extrapolating that to HRW production, there is roughly:

  • 9 MMT of HRW with protein greater than 12.5 percent;
  • 3 MMT with protein between 11.5 and 12.5 percent; and
  • 2 MMT with less than 11.5 percent protein available.

The smaller crop and lower protein support both the Kansas City Board of Trade HRW futures market and protein premiums; however, that support varies by export tributary.

Gulf. The 2017/18 marketing year (beginning June 1) average protein premium for Gulf HRW 12.0 percent protein on a 12 percent moisture basis (mb) is 51 percent above the 2016/17 marketing average at $69 per metric ton (MT) and $20 dollars per MT above the 5-year average. The HRW Gulf export tributary region experienced its second consecutive year of higher yields and very limited heat stress during the growing season, resulting in lower than normal protein. According to USW Crop Quality data, the average protein for Gulf export tributary HRW is 11.2 percent, compared to the 5-year average of 12.8 percent protein. This means that while protein premiums for high-protein HRW are climbing, ordinary HRW from the Gulf represents a significant bargain for customers with export basis levels 31 percent below the 5-year average at $28/MT.

Pacific Northwest (PNW). Unlike the Gulf export tributary states, HRW in the PNW tributary states was stressed by high temperatures and little rainfall in 2017/18, boosting protein content but cutting yields. According to USW Crop Quality data, the average protein for PNW export tributary HRW is 12.0 percent, similar to the five-year average but higher than the average of 11.7 percent protein in 2016/17. USDA estimates the PNW HRW tributary states sampled by USW produced 3.5 MMT, or just 17 percent of the total U.S. HRW supply. With the PNW supply limited, albeit a supply with higher protein than the Gulf, the average price for 12.0 percent protein HRW is 9 percent higher than the 2016/17 value at $238/MT, but still well below the 5-year average of $277/MT. This represents an excellent opportunity for customers to lock in prices before supplies dwindle in the second half of the marketing year.

Hard Red Spring

According to USDA, HRS production fell 22 percent to 10.5 MMT in 2017/18. Total HRS supply declined 18 percent from 2016/17 to 20.8 MMT on smaller production and beginning stocks. According to USW Crop Quality data, the average protein of this year’s HRS crop is 14.6 percent. That is above both last year and the 5-year average of 14.0 percent. Overall, 22 percent of HRS samples tested had less than 13.5 percent protein; 23 percent of samples had 13.5 to 14.5 percent protein and 55 percent of samples had greater than 14.5 percent protein. If that is extrapolated out to HRS production, then roughly:

  • 8 MMT of HRS was produced with protein greater than 14.5 percent;
  • 4 MMT having protein between 13.5 and 14.5 percent; and
  • 3 MMT with less than 11.5 percent protein available.

This distribution caused protein premiums for HRS to fall below the 5-year average, but supported HRS MGEX futures, which spiked in July and remain an average $49/MT above last year’s futures prices due to the smaller supply. Like HRW, price impacts of the smaller supply vary by export tributary region but were more evenly distributed due to a nearly even production split between regions.

Eastern Region. The average cash price for Gulf HRS 14.0 percent protein is 16 percent above the 2016/17 marketing average at $298/MT. The higher price is supported by the extreme drought across the U.S. Northern Plains which cut production but boosted protein content. USW Crop Quality data showed the average protein for Gulf export tributary HRS was 14.4 percent, compared to the 5-year average of 14.0 percent protein.

Western Region. The drought had devastating effects on yields in the Western Region, specifically in Montana and western North Dakota and South Dakota, but did boost protein levels. According to USW Crop Quality data, the average protein for the PNW export tributary is 14.9 percent, compared to the 5-year average of 14.2 percent protein. With the increased availability of high-protein HRS, the average protein premium for 14.0 protein HRS fell 10 percent year over year to $53/MT, well below the 5-year average of $67/MT.

With Canadian wheat production falling an estimated 5.5 MMT year over year and the sharp drop in U.S. high-protein wheat production, the global supply of high-protein wheat has tightened. Depending on what protein specifications customers need, this may be the best time to lock in lower HRS protein premiums. Low-protein HRW also represents an excellent buying opportunity for specific customers.

Harvest Report

USW and its partner organizations have completed the crop quality analysis of the 2017/18 U.S. hard red spring (HRS), soft white (SW) and durum crops. The final data is summarized below. The complete analyses will appear in class-specific reports and USW’s 2017 Crop Quality Booklet, and shared with hundreds of customers around the world as part of USW’s annual Crop Quality Seminars.

Full regional quality reports for the 2017 HRS, SW, northern durum and Desert Durum® crops are posted at www.uswheat.org/cropQuality.

Hard Red Spring. USDA estimates that the total 2017/18 HRS supply (excluding imports) is down 19 percent from 2016/17 due to smaller production and beginning stocks.

Overall, 97 percent of Eastern Region and 83 percent of Western Region samples graded U.S. No. 1. The overall average test weight is 61.6 lb/bu (81 kg/hl), similar to the 5-year average, though the Western Region average is lower due to drought. The average protein is 14.6 percent (12 percent mb), higher than both 2016 and the 5-year average. More than one-half of all samples have greater than 14.5 percent protein in 2017 compared to just 36 percent in 2016.

The smaller 2017 HRS crop has many positive attributes, including high grades, plentiful protein, little to no DON and very good functional performance. Protein levels, shrunken and broken kernels and thousand kernel weights are more variable than recent years due to the vast differences in growing conditions across the region. Diligent contract specifications are still encouraged on this high-quality crop to ensure buyers get the quality expected.

Soft White. USDA estimates total 2017 SW production at 6.14 MMT, down slightly from 2016. Of that, the Washington Grain Commission estimates white club (WC) accounts for 359,000 MT.

The 2017 SW and WC overall average grade is U.S. No. 1. The average SW test weight of 60.9 lb/bu (80.1 kg/hl) is close to last year’s 60.8 lb/bu (80.0 kg/hl), while WC test weight of 60.2 lb/bu (79.2 kg/hl) is slightly less than 2016’s 60.8 lb/bu (80.0 kg/hl). The overall SW and WC wheat protein contents (12 percent mb) of 9.6 percent and 9.4 percent, respectively, are each 0.5 percentage point below the respective 2016 values and well below the wheat protein 5-year averages.

The 2017 PNW soft white wheat crop is generally characterized by having similar kernel characteristics to last year with good test weight, lower moisture content, lower protein content, higher falling number values and acceptable finished product characteristics. This year’s WC quality characteristics follow the same trend as SW. The high protein segment of the SW crop provides opportunities in blends for Asian noodles, steamed breads, flat breads and pan breads.

Durum. Production in the U.S. Northern Plains is down by more than 50 percent from 2016 due to a small decline in acreage and sharply lower yields caused by severe drought. Scattered rain delays toward the end of harvest affected the color of a portion of the crop.

The 2017 Northern durum crop average grade is U.S. No. 1 Hard Amber Durum (HAD). However, a larger portion of the samples than in 2016 graded U.S. No. 1 or 2 Amber Durum due to color loss in some areas. Average test weight of 60.9 lb/bu (79.4 kg/hl) is slightly below last year. Hot, dry conditions pushed protein levels higher, with the 2017 average at 14.5 percent (12 percent moisture basis).

Buyers will be pleased with this year’s excellent grading Northern durum crop boasting strong protein levels, overall high vitreous kernel levels, higher semolina extraction and improved mixing and pasta quality characteristics. With reduced supply and isolated areas with lower vitreous kernel levels, lighter thousand kernel weights and some DON detections, buyers should always remain diligent in their contract specifications.

2017 Desert Durum® production acreage was less than in 2016, largely due to lower prices available at planting time. Yields were average, and quality was uniformly good. The crop exhibits consistently large kernels and low moisture, traits that contribute to efficient transportation costs and high extraction rates. The 2017 crop will deliver the valuable milling, semolina and pasta quality traits that customers have learned to expect and appreciate.

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By Stephanie Bryant-Erdmann, USW Market Analyst

USDA’s Sept. 30 Small Grains Summary reported that U.S. farmers harvested 37.6 million acres (15.2 million hectares) of wheat for the 2017/18 crop, a 14 percent reduction from 2016/17 and the smallest harvested area since 1890. USDA estimated U.S. 2017/18 wheat production at 47.4 million metric tons (MMT) (1.74 billion bushels), down 25 percent year over year and 15 percent below the 5-year average. The smallest planted area since USDA record began in 1919, adverse weather conditions and wheat streak mosaic virus all contributed to reduced harvested area.

The largest beginning stocks since 1988/89 will partially offset lower production. USDA expects 2017/18 U.S. beginning stocks to total 32.2 MMT (1.18 billion bushels), up 21 percent year over year and 57 percent greater than the 5-year average. Total 2017/18 U.S. wheat supply is forecast at 79.6 MMT (2.92 billion bushels), down 11 percent from 2016/17 but in line with the 5-year average. Despite the sharp year over year reduction in yields, USDA expects the final average yield to reach 46.3 bu/acre (3.11 MT/ha), similar to the 5-year average of 46.6 bu/acre (3.13 MT/ha).

Last fall, low farm gate prices and large carry-in stocks prompted U.S. farmers to plant 32.7 million acres (13.2 million hectares) of winter wheat, down 9 percent from 2016/17. The winter wheat crop went into winter dormancy in good or above average condition. A mild winter and early spring was beneficial for both winter wheat and, unfortunately, the mites that carry wheat streak mosaic virus. The disease was widespread in Kansas, Oklahoma and parts of Nebraska, cutting yields and causing higher rates of abandonment in affected hard red winter (HRW) areas. A late spring blizzard in western Kansas cut yields and increased abandonment. Soft red winter (SRW) generally came out of dormancy in better than normal conditions, but growing conditions also varied widely across the Southeast. In some areas, excessive moisture helped boost yields, in others it delayed or prevented emergence.

As with winter wheat, low spring wheat and durum farm gate prices and large carry-in stocks reduced planted areas. After planting (which is generally early), drought conditions spread across Montana, North Dakota and South Dakota with devastating effects on yield. As a result, the rate of abandonment in South Dakota, which was particularly hard hit, is estimated at 37 percent — nearly triple the state’s 5-year average.

Here is a by-class breakdown of the Sept. 30 report.

Hard Red Winter (HRW). USDA estimates total 2017/18 HRW production fell to 20.4 MMT (750 million bushels), down 31 percent from 2016/17 and 15 percent below the 5-year average. USDA forecast 2017/18 HRW beginning stocks at 16.1 MMT (593 million bushels), up 33 percent year over year and 81 percent above the 5-year average. Even with large beginning stocks, total HRW supply will fall 12 percent year over year to 36.5 MMT (1.34 billion bushels). Total HRW planted area fell to 23.8 million acres (9.63 million hectares), down 10 percent from 2016/17. Yields also fell an average 13 percent from 2016/17 in the top HRW-producing states of Texas, Oklahoma and Kansas.

Hard Red Spring (HRS). USDA estimates total 2017/18 HRS production fell to 10.5 MMT (385 million bushels), down 22 percent from 2016/17 and 26 percent below the 5-year average. USDA forecast 2017/18 HRS beginning stocks at 6.40 MMT (235 million bushels), down 14 percent year over year but still 21 percent above the 5-year average. Total HRS supply will fall 12 percent year over year to 16.9 MMT (620 million bushels). USDA estimates farmers planted 10.3 million acres (4.17 million hectares) to HRS, 10 percent below 2016/17 levels. The drought cut yields an average of 11 bu/acre (0.74 MT/ha) in Montana, North Dakota and South Dakota. Abandonment in Montana and North Dakota was double the respective 5-year averages at 9 and 6 percent, and South Dakota farmers abandoned 37 percent of wheat fields due to the drought. The single bright spot for HRS production was Minnesota, with a record high average yield of 67.0 bu/acre (4.50 MT/ha) offsetting lower harvested area.

Soft Red Winter (SRW). USDA estimates total 2017/18 SRW production fell to 7.95 MMT (292 million bushels), down 15 percent from 2016/17 and 32 percent below the 5-year average. USDA reported 24 percent of SRW acres were abandoned compared to 17 percent last year. Record high yields in six SRW producing states partially offset the lower harvested area. USDA forecast 2017/18 SRW beginning stocks at 5.85 MMT (215 million bushels), up 37 percent year over year and 47 percent greater than the 5-year average. So, total SRW supply will rise slightly year over year to 13.8 MMT (507 million bushels). USDA estimates total 2017/18 SRW planted area at 5.61 million acres (2.27 million hectares), 15 percent lower than 2016/17 and 30 percent below the 5-year average.

Soft White (SW). USDA estimates total 2017/18 SW production declined to 6.14 MMT (226 million bushels), down 11 percent from 2016/17 due to small declines in harvested area and average yields in Washington and Idaho that were down 7 and 10 percent, respectively. USDA reports white wheat planted area decreased 3 percent year over year. White wheat planted area fell to 4.02 million acres (1.63 million hectares), 2 percent below the 5-year average. USDA projected white wheat beginning stocks will increase 42 percent year over year to 3.02 MMT (105 million bushels). If realized, that would be 65 percent above the 5-year average.

Durum. U.S. durum production fell 51 percent in 2017/18 to 1.49 MMT (54.9 million bushels) from lower planted area and yields in Montana, North Dakota and South Dakota. USDA estimates 1.91 million acres (773,000 hectares) were planted to durum, down 11 percent from 2016/17 but still 6 percent above the 5-year average of 1.80 million acres (729,000 hectares). Abandonment also increased this year from 2 percent in 2016/17 to 8 percent in 2017/18, due to the drought. USDA projected 2017/18 durum beginning stocks to climb to 980,000 metric tons (MT) (36 million bushels), nearly double the 5-year average and 29 percent above 2016/17 levels. USDA forecast total U.S. durum supply at 2.48 MMT (91 million bushels), down 31 percent year over year.

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By Stephanie Bryant-Erdmann, USW Market Analyst

Three months into the 2017/18 marketing year (June to May), total U.S. export sales-to-date of 12.1 million metric tons (MMT) are 2 percent ahead of last year’s pace and in line with the 5-year average pace. Though hard red winter (HRW) and hard red spring (HRS) sales are currently below last year’s levels, both are ahead of the respective 5-year averages. As of Aug. 24, total sales to eight of the top 10 2016/17 U.S. export markets are higher than last year. In addition, the other three U.S. wheat classes are all ahead of last year’s pace. USDA projects 2017/18 exports will fall to 26.5 MMT, which, if realized, would be 8 percent below 2016/17, but 1 percent above the 5-year average pace.

USDA reported HRW year-to-date exports at 4.49 MMT, down 7 percent from the prior year but 10 percent ahead of the 5-year average due to competitive prices and good quality. Mexico is currently the number one HRW purchaser. As of Aug. 24, before Hurricane Harvey’s catastrophic flooding closed Texas Gulf ports, HRW sales to Mexico totaled 973,000 metric tons (MT), up 72 percent from last year’s pace. Sales to Nigeria are also up 19 percent year over year at 488,000 MT. HRW purchases by Indonesia total 335,000 MT, three times greater than last year’s sales on this date. To date, HRW sales to Algeria totaling 273,000 MT are five times greater than the 2016/17 pace. It is too early to tell if Texas Gulf closures will affect total exports for 2017/18, but current reports suggest that rail and port facilities are making good progress toward resuming operations (Read more in Rail and Port Operation Recovery in Texas Gulf is Encouraging, below).

Sales of soft red winter (SRW) for 2017/18 are up 8 percent year over year at 1.19 MMT due to the excellent quality of this year’s crop. As of Aug. 24, total sales to four of the top 10 U.S. SRW export markets from 2016/17 are higher than last year. Sales to Mexico are 12 percent ahead of 2016/17 at 472,000 MT. Colombian SRW purchases total 121,000 MT, up 50 percent from last year. Sales to other Central and South American countries, including Ecuador, Peru, Panama, Brazil, Guatemala and El Salvador, are also ahead of the 2016/17 pace.

HRS sales of 3.26 MMT are down 13 percent year over year, but remain 4 percent above the 5-year average. Higher prices due to smaller 2017/18 production have slowed HRS exports thus far in 2017/18, but global demand for HRS is strong. As of Aug. 24, buyers in the Philippines held the top purchaser post with 746,000 MT, up 27 percent from 2016/17. Sales to seven of the top ten HRS customers are also ahead of last year’s pace. Sales to Japan of 475,000 MT are up 25 percent from last year’s sales on the same date, while year-to-date sales to Taiwan of 321,000 MT are up 93 percent from 2016/17.

As of Aug. 24, exports of soft white (SW) wheat are up 47 percent year over year at 2.93 MMT. That is 56 percent greater than the 5-year average. Sales to nine of the top 10 SW customers are ahead of last year’s pace. Philippine millers purchased 578,000 MT, up 19 percent compared to last year’s sales on the same date. South Korean sales are up 65 percent at 477,000 MT. Sales to Japan are up 24 percent year over year at 301,000 MT. U.S. SW sales to China, Thailand and Indonesia are also up. Year-to-date, Indonesia has purchased 266,000 MT, compared to total 2016/17 purchases of 193,000 MT. Thailand sales are up 72 percent year over year at 147,000 MT. Chinese purchases of 271,000 MT are already greater than 2016/17 total SW sales.

On average, 24 percent of U.S. total durum sales occur in first quarter of the marketing year, compared to 29 percent from September through November. Year to date durum exports total 211,000 MT, up 20 percent from the same time last year, still 14 percent below the 5-year average. Many durum buyers may be waiting for final quality reports for the Canadian crop before making purchasing decisions. To date, Nigeria, the European Union (EU), Algeria and Nigeria are the top durum buyers. A significant portion of the first quarter 2017/18 sales is designated as “sales to unknown designations.”