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Shifted Trade Flows: Black Sea Durum Enters the Global Market

World durum supplies were tight early in marketing year 2023/24 as drought in the Middle East and Canada and quality issues in the European Union (EU) decreased durum availability and put upward pressure on global durum prices. However, as the marketing year continued, non-traditional durum exports from Russia and Türkiye began flooding markets with low-priced durum, weighing on global durum values.

The following will evaluate the current world durum situation and provide an initial outlook for marketing year 2024/25.

Tight Situation in Major Exporters and Importers

International Grains Council (IGC) data indicated that global durum production decreased by 10% to 31.4 million metric tons (MMT) in 2023/24, and consumption exceeded production by 2.6 MMT, leading to a tight durum balance sheet. In Canada, the world’s largest exporter, durum production fell 30% to 4.0 MMT due to drought in the primary growing areas, as reported in the Canadian Outlook for Principal Field Crops. In the EU, a drought in Spain reduced output, resulting in total EU production of 7.0 MMT, 7% below the previous year, according to IGC. Simultaneously, harvest rains in Italy compromised durum crop quality. As a result, EU durum imports rose by 26% to 3.4 MMT.

The combined impact of decreased durum availability and the increased import requirements supported world durum prices throughout the final quarter of calendar 2023 and into the early months of 2024. In October 2023, French durum prices hovered at $428/MT, U.S. durum (photo above) at $467/MT, and Canadian durum at $450/MT, as reported by IGC, U.S. Wheat Associates, and AgriCensus.

This bar and line chart indicates the relationships and changes in world durum ending stocks, production and consumption from 2015 through projected data for 2025 from the International Grains Council.

Global durum production decreased by 10% to 31.4 MMT in 2023/24, and consumption exceeded production by 2.6 MMT. Meanwhile, ending stocks sit at their lowest level of the last decade at 4.9 MMT. Source: International Grains Council.

Rise of Non-Traditional Exporters

As major exporters’ balance sheets remained tight, Türkiye shifted from a net durum importer to a major exporter. Turkish durum production rose by 15% to a record 4.3 MMT in 2023/24, on a higher planted area and sufficient growing season moisture.

The combination of favorable prices, above-average production, and export focused domestic support programs prompted the Turkish Grain Board (TMO) to authorize the sale of 150,000 MT of durum on February 1, 2024, at prices quoted below market values. On March 7, TMO offered an additional 150,000 MT of durum but canceled the offer as the quoted prices were too low relative to domestic price levels. Nevertheless, Turkish durum exports were estimated at 1.7 MMT for the year as prices remain ultra-competitive relative to other origins. Meanwhile, Stratégie Grains forecasted Russian durum production at 1.3 MMT, with exports projected at 800,000 MT, a 60% increase on the year.

The influx of low-priced Turkish and Russian durum has eroded world durum prices. As of April 16, French durum prices sit at $375/MT, U.S. near $351/MT, and Canadian at $360/MT, down $53, $116, and $90 from October’s prices, respectively.

This bar chart including data from Strategie Grains compares changes in durum exports in 2024 compared to 2023 for 7 countries.

As major exporters’ balance sheets remained tight, Türkiye shifted from a net durum importer to a major exporter. Turkish durum production rose 15% to a record 4.3 MMT in 2023/24. As a result, Turkish durum exports were projected to reach 1.7 MMT. Source: Stratégie Grains.

Will The Patterns Hold?

IGC forecasts a recovery in world durum production in 2024/25 to 34.6 MMT on favorable weather in Canada, EU, and Türkiye. Current estimates suggest Turkish durum production will remain strong in 2024/25 at 4.5 MMT, while exports may exceed 1.0 MMT. It is unknown if Türkiye will rise as a long-term durum exporter, but balance sheets are comfortable in the immediate future.

This line chart compares the elevator bids for US durum compared to hard red spring wheat from 1/1/22 to 4/1/24 indicating higher prices for durum.

Favorable prices for durum relative to spring wheat may incentivize producers to substitute durum acres for HRS, particularly in non-traditional durum growing areas. As of April 16, the average country elevator bid for durum sits at $7.51/bu, a significant spread compared to $6.07/bu for HRS. Source: DTN ProphetX Grain Elevator Bids.

Nevertheless, in the current lower-priced market, U.S. durum remains competitive. U.S. durum exports are up 36% on the year at 504,000 MT on increased imports from Algeria. Moreover, the 2024/25 durum area is forecast to increase by 300,000 acres (121,400 hectares) to surpass 2.0 million acres (809,400 hectares) for the first time since 2018/19. Favorable prices for durum relative to hard red spring (HRS) wheat may incentivize producers to substitute durum acres for HRS, particularly in non-traditional durum growing areas. As of April 16, the average country elevator bid for durum sits at $7.51/bu, a significant spread compared to $6.07/bu for HRS.

The U.S. has and always will be a stable producer and exporter of durum. As world markets shift and adjust, the U.S. has remained a constant supplier, providing reliable, high-quality supplies of durum and other wheat classes on which customers worldwide can rely.

By USW Market Analyst Tyllor Ledford

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A Better Start for U.S. Hard Red Winter Wheat Conditions

With U.S. hard red winter (HRW) and hard white (HW) wheat moving into its crucial vegetative state, U.S. Wheat Associates (USW) and its state wheat commission member organizations have started weekly conference calls to share wheat condition reports. Overall, wheat in Central and Southern Plains entered 2024 in better condition than compared to the prior three years. Although recent weather has turned warm, windy, and dry, industry participants remain optimistic for the 2024 crop.

The most recent 2024 USDA Crop Progress report rated 56% of the winter wheat crop in good to excellent condition, up significantly from 27% last year. As of April 8, 6% of winter wheat is headed in the Southern Plains. USDA reported as of April 9, an estimated 18% of all U.S. winter wheat production is within an area experiencing drought.

Latest HRW Wheat Conditions

As usual, Texas leads the way in crop progress with 27% of its HRW and soft red winter wheat headed. At 44% good to excellent, conditions remain encouraging.

In Central Oklahoma, wheat progress continued to benefit from recent rains with 55% at the jointing stage. Good to excellent wheat condition in the state was 68% as of April 7. USW Chair Michael Peters farms northwest of Oklahoma City and reported this week that the condition of his HRW wheat varies from excellent to “just okay.”

Conditions in Kansas are also variable with 49% rated good to excellent. Jason Ochs farms in far western Kansas and recently told Kansas Wheat that it was a nice change to get a good stand right from the start last fall. Yet he also said his topsoil is dry.

“We missed the last three of four moisture chances, so optimism is going down a little bit,” Ochs said. “As of now, it looks like we are going to raise above-average yields. I don’t know how you cannot be a little excited about that.”

Drought has eased for the 2024 U.S. winter wheat crop. On April 18, 2023, 50% of winter wheat production was within an area experiencing drought.

Mixed Bag in Colorado

High winds in eastern Colorado have dried out fields and hurt winter wheat stands.

“Overall things are looking better than they did a year ago at this time,” said Madison Andersen, Colorado Wheat Administrative Committee Director of Communications and Policy. “However, it is a critical time for moisture, especially after the high winds and warm temperatures we have seen the last two weeks.”

In Nebraska, good to excellent winter wheat was at 68% as of April 7, but with the area’s dry and windy conditions, industry representatives say more rain is needed to make the crop. And in Wyoming’s southeastern region, USDA estimates that 91% of the wheat is in fair to good condition. That is up from 63% at the same time in 2023 and from the five-year average for this date of 74% fair to good.

USW will start publishing its 2024 weekly Harvest Reports after the combines start to roll in Texas. Follow the reports, posted every Friday, online here, or sign up here to have Harvest Reports emailed to you.

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New USDA Report Estimates Less Wheat Planting, More Ending Stocks

On March 28, the United States Department of Agriculture (USDA) released its yearly Prospective Plantings and quarterly Grains Stocks reports. The reports provide crucial insights to U.S. wheat importers as we enter the concluding months of the 2023/24 marketing year and look ahead to the 2024 harvest. This article will analyze USDA’s recent reports on wheat planting and stocks and their implications as we look ahead to 2024/25.

Seeding Less

USDA estimates put the total U.S. wheat area at 47.5 million acres (19.2 million hectares), marking a 4% reduction from the previous year.

Breaking down the estimates by class, the area for winter wheat fell by 7% to 34.4 million acres (13.9 million hectares), with Hard Red Winter (HRW) wheat plantings decreasing by 5% on the year, Soft Red Winter (SRW) falling by 15%, and white wheat (winter and spring) decreasing by 2%. Meanwhile, the Hard Red Spring (HRS) area is expected to increase by 2%, while durum may rise by up to 22%.

Bar chart showing seeded area of 5 wheat classes between 15/16 and 24/25.

The 2024 wheat area is forecast at 47.5 million acres (10.2 million hectares), down 4% from 2023 but 500,000 acres (202,350 hectares) higher than the USDA Outlook Forum Estimates. The area consists of 24.3 million acres of HRW (approximately 9.83 million hectares), 6.26 million acres for SRW (about 2.53 million hectares), and 4.2 million acres of white wheat (roughly 1.7 million hectares). The HRS area is projected to reach 10.7 million acres (around 4.33 million hectares), while durum is estimated at 2.0 million acres (approximately 0.81 million hectares). The wheat area is forecast at 47.5 million acres (10.2 million hectares), down 4% from 2023 but 500,000 acres (202,350 hectares) higher than the USDA Outlook Forum Estimates. The area consists of 24.3 million acres of HRW (approximately 9.83 million hectares), 6.26 million acres for SRW (about 2.53 million hectares), and 4.2 million acres of white wheat (roughly 1.7 million hectares). The HRS area is projected to reach 10.7 million acres (around 4.33 million hectares), while durum is estimated at 2.0 million acres (approximately 0.81 million hectares).

When the 2023 U.S. winter wheat crop was seeded in 2022, income potential looked favorable, with prices still elevated by Russia’s invasion of Ukraine. As a result, total seeded wheat area for 2023 was up 8% from the prior year. With current prices falling in line with pre-war trends, and input prices lagging, profit margins have tightened, placing additional pressure on farmers and driving the downward shift in acres. Although the 2024 wheat area is down from last year, the overall area remains 2% higher than the five-year average and represents the second-largest area since the 2018/19 season.

Though the spring wheat and durum is not yet planted, favorable prices for durum relative to spring wheat may incentivize producers to substitute durum acres for HRS, particularly in non-traditional durum growing areas. As of April 3, the average country elevator bid for durum sits at $9.88/bu, a significant jump from an average bid of $5.92 for HRS. The favorable price spreads may push durum area as high as 2.0 million acres (810,000 hectares). If realized this would be the largest durum area since 2018/19.

Crop Competition

Profitability continues to drive crop competition, but an increasing reliance on crop rotations is moderating the impact. Farmers use rotations to reduce price risk and control disease cycles, making them less inclined to make significant acreage adjustments based on price alone.

According to USDA’s estimates, soybean area is anticipated to rise 3% to 86.5 million acres (approximately 34.99 million hectares), aligning with traders’ expectations. Meanwhile, the estimated corn area has decreased 5% to 90.0 million acres (about 36.42 million hectares), falling short of the anticipated 91.7 million acres (226.6 million hectares). However, when considering grain and oilseed acres in the context of all principal field crops, the share of acreage planted with wheat, corn, and soybeans remains relatively stable. Wheat and corn account for 15% and 29% of all acres, consistent with the ten-year average, while the proportion of acres planted with soybeans sits about 1% above the long-term average at 28%.

Line chart shows the number of acres planted to corn, soybeans and wheat annually from 15/16 to 24/25.

The combined area planted with corn, soy, and wheat decreased by 2% to 224 million acres (90.6 million hectares), down from the near-record 228.1 million acres (92.3 million hectares) from the previous year. Even so, the share of acreage planted with corn, soybeans, and wheat remains in line with the five- and ten-year averages. Source: USDA Prospective Planting s Report

Stocks: Up But Still Tight

Also released on March 28, the quarterly USDA Grain Stocks report put total wheat stocks at 29.6 MMT, as of March 1. On-farm stocks were estimated at 7.4 MMT, up 16% from last year, while off-farm stocks came in at 22.2 MMT, up 14% from the year prior. The increased stock levels bolster USDA’s ending stocks estimate of 18.3 MMT, marking an 18% rise from 2023/24 and the first increase since 2015/16. Increased ending stocks helps relieve short term pressure on the U.S. balance sheet.

Moreover, even as planted area is forecast to decrease, the prospects for increased yields and greater wheat production are optimistic as drought conditions improve across the U.S. Southern Plains. The first USDA Crop Progress report of the year indicates that 56% of winter wheat is in good to excellent condition, a significant improvement from 28% at the same time last year. Increased production will help loosen the U.S. balance sheet and diminish supply related price pressures.

Bar chart shows the annual U.S. wheat ending stocks level from 14/15 to 23/24.

On-farm stocks were estimated at 7.4 MMT, up 16% from last year, while off-farm stocks came in at 22.2 MMT, up 14% from last year. The increased stock levels help confirm higher ending stocks for 2023/24. As exports remain lackluster and domestic demand steady, the USDA ending stocks are expected to grow 18% to 18.3 MMT. Source: World Agricultural Supply and Demand Estimates

Nevertheless, underlying tightness remains. U.S. stocks still sit at one of the lowest levels since 2013/14, and with global wheat consumption surpassing production, the global stocks-to-use ratio (excluding China) has dropped to 20%, the lowest point since the 2007/08 season.

More to Come

With a looser balance sheet in the short term tempered by decreased acres, the recent 2024 crop reports provided a mixed sentiment. It is also important to note that USDA’s estimates are based on surveys of U.S. farmers current intensions and may be subject to change as planting ramps up in the coming weeks. With spring wheat planting only 1% completed and winter wheat 4% headed, a definitive statement regarding the 2024 crop is yet to be written.

Moving forward, the May 2024 World Agricultural Supply and Demand Estimates (WASDE) will provide further insights into the 2024/25 marketing year and the July 2024 WASDE will give the initial by-class wheat production estimates. Also, make sure to follow the weekly and monthly reports from USW and USDA on crop conditions, harvest, and production. As always, U.S. Wheat Associates remains committed to offering information and support as we transition into the 2024/25 marketing year.

By USW Market Analyst Tyllor Ledford.

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Wheat Price Perspectives: A Look at Long-Term Trends

Over the last year, world wheat prices have trended steadily lower, continuing their fall from the highs hit in May of 2022 after Russia invaded Ukraine. Ample wheat stocks from Russia and record exports flowing from the Black Sea continue to weigh on global wheat prices.

The average world FOB price has decreased $32/MT from the start of 2024 and is nearly $255/MT less than the May 2022 high, according to AgriCensus price data. Although the war still rages in Ukraine, the war risk premium has eroded in the market, allowing prices to revert to pre-war trends. The following will outline the current price situation and highlight factors to watch as wheat markets align with long-term trends.

This chart shows how export prices for wheat from several suppliers spiked following the start of the Russian invasion of Ukraine but have now returned to long-term trends.

World FOB prices have reverted to pre-war levels, weighed by low-priced exports flowing from the Black Sea. The average world FOB price has decreased $32/MT from the start of 2024 and is close to $255/MT below the May 2022 high. Source: AgriCensus.

A Return to Pre-War Levels

Although there is a sharp contrast between the current downward trend in global wheat markets and the volatility observed over the last year, wheat prices have fallen more in line with long-term trends. Current world FOB prices hover between $200 and $300/MT on average, in line with price levels from 2018 to 2020. Although the spread between origins is still larger than pre-war averages, the spread has narrowed over the last year. According to AgriCensus and U.S. Wheat Associates Price Report data, in Jan. 2023, U.S. soft red winter (SRW) wheat sold for $347.96/MT FOB, while Russian wheat (12.5% on a dry moisture basis) was loaded at $308/MT FOB, a nearly $40/MT spread. Jumping ahead to March 21, 2024, U.S. SRW is quoted at $216.24/MT FOB, while Russian FOB indications sit at $204/MT, down to a $12/MT spread, similar to spreads seen throughout 2019 and 2020.

Factors to Watch

U.S. Wheat Associates (USW) is monitoring several factors at work in the global wheat market. Even before Russia’s invasion in Feb. 2022, global price levels were beginning to rise. Wheat use jumped 5% to a record 787 MMT in 2020/21, exceeding production by 14.0 MMT. The March World Agricultural Supply and Demand Estimates still put the 2023/24 global wheat consumption 11.0 MMT above production, further tightening stocks. Likewise, the stocks-to-use ratio, excluding China, is forecast to tighten to 20% in 2023/24, the lowest since 2007/08, while early estimates from the International Grains Council predict a decrease in global ending stocks to 57.0 MMT in 2024/25.

This bar and line chart shows the relationship between world wheat production and use is on an upward trend from 1999 through 2024.

From 2014/15 to 2017/18, world wheat production exceeded consumption, increasing world ending stocks to a record 297.6 MMT in 2019/20 and a stocks-to-use ratio of 25%. In 2018/19, global wheat consumption began to outpace production, eroding ending stocks and tightening global balance sheets. Source: USDA PSD.

Looking ahead to marketing year 2024/25 and beyond, a continued decline in world-ending stocks and the tightening stock-to-use ratio may have a bullish influence on price trends. However, in the short term, global wheat markets remain well-supplied, and the ongoing flow of wheat from Russia, the Black Sea, and the EU weighs on prices.

This line chart from USDA shows the relationship between crop and input price indexes suggest farmer profit margins are much lower today compared to 2000.

At the 2024 USDA Agricultural Outlook Forum, USDA Chief Economist Seth Meyer indicated that output prices are falling faster than input prices, leading to tighter margins, and reducing profitability for U.S. farmers. Source: USDA Agricultural Outlook Forum.

While decreasing wheat prices benefits importers, the current situation poses unique challenges for U.S. wheat farmers. According to Seth Meyer, USDA Chief Economist, input price trends lag as the output prices fall, resulting in tighter profit margins and reduced sector profitability for wheat and other row crops. Tighter margins put additional pressure on U.S. farmers, and long-term profitability can influence production trends and planting decisions. Nevertheless, U.S. farmers planted wheat before the war and will continue to produce a range of high-quality wheat classes as markets revert to pre-war norms, ensuring a reliable supply of wheat for the world’s importers.

By Tyllor Ledford, USW Market Analyst

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Setting the Stage for the 2024/25 World Wheat Crop

As March begins, world wheat markets look to new information that may provide a glimpse into what the 2024/25 marketing year brings. As northern hemisphere winter wheat crops break dormancy, weather becomes increasingly important. Meanwhile, southern hemisphere farmers shift their focus to spring crops and the winter wheat planting season.

While world crop updates will help provide a snapshot of global wheat production and latest conditions over the next few months, U.S. Wheat Associates (USW) is taking this early look at how the 2024/25 world wheat crop is shaping up.

USDA world map showing the current state of major crops around the world including world wheat.

In March, much of the world wheat crop will enter its vegetative state in the northern hemisphere. Although, it is not as sensitive to heat and temperature stress in this stage, conditions can still influence the crop’s yield potential. Source: USDA Monthly Crop Stage Calendar.

Southern Hemisphere

The southern hemisphere planting program generally begins in April and continues through August, with harvest occurring between October and February, depending on the specific latitude. For marketing year 2023/24, the harvest is complete, with near-final production numbers available for major wheat-producing. Over the last month, Australia and Argentina have benefited from scattered showers and warm weather, boosting yield potential for summer crops, and helping replenish soil moisture for winter wheat planting. Looking ahead, weather analysts predict the potential for a rapid transition from an El Niño weather pattern to a La Niña event between June and August, which will impact weather patterns in the latter half of 2024.

This interactive image shows the predicted transition from an El Nino to La Nina global weather phenomenon that will impact world wheat production.

Climate models anticipate that the El Niño weather event will dissipate between April and June, with potential for a rapid transition into another La Niña weather cycle, influencing the 2024/25 wheat crop in the southern hemisphere. Source: NOAA.

Argentina – The 2023/24 wheat harvest is complete in Argentina, with USDA production estimates at 15.5 MMT, up 3.0 MMT from the previous year. Production is much improved from drought the year prior, though it still sits 12% below the five-year average.

Australia – USDA put Australian wheat production at 25.5 MMT, while the Australian Bureau of Agricultural and Resource Economics (ABARES) estimate was 26.0 MMT for 2023/24. ABARES projected that the 2024/25 harvest may reach upwards of 28.4 MMT due to increased precipitation expected from the transition into a La Niña weather pattern.

Northern Hemisphere

Due to the large geographic area and delineation between winter and spring wheat, northern hemisphere crop calendars vary significantly by region. Winter wheat is generally planted between September and November, while harvest runs from the south to the north from through September. Spring wheat planting typically begins in April and wraps up in June, while harvest can start in July and finish in September. Although the region is geographically diverse, recent weather has been relatively mild across the northern hemisphere; however, winterkill remains a concern in areas with low snow coverage following a cold snap in January.

Canada– The Canadian Grain Commission puts 2024 production at 33.9 MMT. Despite a decrease in acreage from 10.9 million hectares to 10.7 million hectares, the commission expects production to increase on normalized weather and alleviated drought pressure. However, moisture deficits remain in the wheat-producing provinces of Alberta and Saskatchewan. Much of the crop has not yet been planted, but Statistics Canada will release its crop intentions report on March 11.

This map of Canada shows current drought conditions as of Jan. 31, 2024.

Long term moisture deficits persist in some of the wheat producing regions of Alberta and Saskatchewan after the drought in 2023/24, a factor to watch moving into 2024 harvest. Source: Canadian Grain Commission.

United States – For harvest in 2024, USDA forecasts total winter and spring wheat planted area at 47.0 million acres (116.1 million hectares), down from 49.6 million acres (122.5 million hectares) in 2023. The USDA Prospective Plantings Report on March 31 will provide additional insight into U.S. wheat plantings. The USDA Grains and Cereals Outlook put U.S. 2024/25 production at 51.7 MMT. Weather remains generally warm in the U.S. Plains, helping winter wheat transition from dormancy.

EU – The EU planted area sits at a four-year low, down 3% to 23.3 million hectares. Wet fall weather inhibited some farmer’s ability to plant in France, Germany, and Poland. Some private analysts have 2024/25 EU production estimates at 142.3 MMT. The weather has been warm and dry in western Europe, contrasting cool and wet weather in the east.

Russia – Private analysts forecast Russian production at 87.7 MMT for 2024/25, while Russian government analysts put output at upwards of 93.0 MMT. Mild weather and above-average precipitation have prevailed across much of Russia, although a cold snap may have slowed crop development in the Volga region.

Ukraine – Similar to Russia, the weather has been warm, accelerating winter wheat transition from dormancy. Estimates are Ukraine has planted approximately 4.2 million hectares for the 2024 harvest, down from 4.4 million hectares last year.

This map of Europe, North Africa, and western Russia indicates temperatures in February 2024 were generally warmer than normal with effect on world wheat production.

Weather has been warmer than normal throughout Europe, accelerating crop development and aiding in spring fieldwork. Source: JRC MARS.

Today’s recap is only a snapshot of the current world wheat situation, which will change as the 2024/25 crop develops and enters different stages of production. As always, weather will ultimately dictate where final production numbers will land. Until then, buyers can look to U.S. Wheat Associates and its state wheat commission members for up-to-date information on crop conditions, weather, and the global supply and demand situation.

By USW Market Analyst Tyllor Ledford

 

 

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USDA Outlook Forum Provides First Glimpse into 2024/25 U.S. Wheat Balance Sheet

As the southern hemisphere wheat harvest nears completion and world anticipates the next northern crop, many buyers, mill owners, and end-product manufacturers are considering purchasing decisions that will affect their businesses into the first quarter of marketing year 2024/25. With forward thinking in mind, USDA released its latest Grains and Oilseeds Outlook on Feb. 15, providing initial projections for U.S. wheat. Though subject to change, these projections help provide a baseline for future updates and a glimpse into the issues and opportunities that may emerge as the year progresses.

Preliminary Acreage, Production, and Use Outlook

The Grains and Oilseeds Outlook projected total grains and oilseeds planted area at 225.5 million acres (91.25 million hectares), down from 227.8 million acres (92.2 million hectares) last year due to lower farm prices. USDA forecasted 2024 total wheat area at 47.0 million acres (19.0 million hectares), down from 49.6 million (20.1 million hectares) in 2023 but above the five-year average of 46.4 million (18.7 million hectares). The January Winter Wheat and Canola Seedings report estimated winter wheat area down 6% to 34.4 million acres (13.9 million hectares), leaving 12.6 million acres (5.1 million hectares) for hard red spring wheat (HRS), white spring wheat, and durum. USDA expects combined spring wheats and durum area to be slightly lower. However, private analysts and traders feel HRS acres may remain steady to slightly higher if planting conditions are favorable.

Bar chart from USDA;s 2024 outlook shows wheat harvested area over the last 10 years.

USDA forecasts wheat area at 47.0 million acres (19 million hectares), down 5% year over year but sitting just ahead of the five-year average of 46.4 million acres (18.7 million hectares). Source: USDA Grains and Oilseeds Outlook.

Despite the lower total planted area, USDA’ outlook anticipates a 2% yield increase to 49.5 bu/acre (3.33 MT/hectare). Following record abandonment in 2023, USDA’s estimated harvested area of 38.4 million acres (15.5 million hectares) is up 3%. The combined impact of improved yield and lower abandonment due to improved soil moisture conditions is expected to boost production to 51.7 MMT from 49.3 MMT in 2023/24. With the inclusion of higher beginning stocks, U.S. wheat supply estimate sits 6% higher year over year.

USDA predicts a slight decrease in domestic consumption to 30.8 MMT, marking a year-over-year reduction of 272,000 MT. In contrast, USDA expects U.S. wheat exports to bounce back to 21.09 MMT in 2024/25 on increased supplies.

A Looser Balance Sheet to Come?

Over the last seven years, there has been a steady erosion of U.S. ending stocks, falling from the recent high in 2016/17 of 32.1 MMT to a low in 2022/23 of 15.5 MMT, demonstrating the tightening of the U.S. balance sheet and providing underlying support to U.S. wheat prices. U.S. stocks will end 2023/24 slightly higher that with the improved production outlook suggests continued reversal of the downward trend.

Bar chart from USDA's outlook shows a trend down, then up in U.S. wheat ending stocks.

USDA forecasts 2024/24 U.S. ending stocks to increase 16% to 20.9 MMT on higher production and beginning stocks. Despite the increase, ending stocks still sit 35% below the peak of 32.1 MMT in 2016/17. Source: USDA Grains and Oilseeds Outlook and February 2024 WASDE.

The current outlook casts a bearish tint on the upcoming crop year, but there is ample time between now and harvest for market conditions to change. For example, U.S. wheat total commercial sales and exports for 2023/24 sit at 17.6 MMT, 7% above last year’s pace and 89% of total projected exports. Crop conditions for winter wheat are much better than in the past few years but weather going forward will dictate final production.

USDA’s Prospective Plantings report, to be released on Mar. 28, and the May 2024 WASDE will provide detailed revisions for the 2024 U.S. wheat balance sheet, while Crop Progress Reports will provide updates on current crop conditions and planting progress. In the interim between harvests, world wheat markets will continue to search for new direction and shift based on emerging information. U.S. Wheat Associates (USW) will closely watch the crop and share additional information as the season progresses.

By Tyllor Ledford, USW Market Analyst

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Early Optimism Blooms for 2024 U.S. Winter Wheat Production

Drought in major U.S. wheat-growing regions over the past few years is well-documented. The persistent dry conditions acutely impacted U.S. wheat yield and increased abandonment, with 2023/24 production coming in 6% below the pre-drought five-year average. Now, entering the second half of the marketing year, the focus has shifted to the 2024 harvest and its impact on both U.S. and global supply and demand. Although it is early, optimism has begun to bloom for the 2024 winter wheat harvest, and the following highlights the factors that have helped boost the U.S. wheat outlook.

Acreage Down, But Conditions Improved

The Winter Wheat and Canola Seedings Report, published on Jan. 12, put the preliminary winter wheat acreage at 34.4 million acres (m.a.) (34.3 million hectares), down 6% from 2023 but still 4% ahead of the five-year average. The hard red winter (HRW) wheat area is estimated at 24.0 m.a. (9.7 million hectares), down 5% on the year, while the soft red winter (SRW) area is approximately 6.89 m.a. (2.8 million hectares), a 7% decrease. The white winter wheat (including soft white and hard white winter) area came in at 3.5 m.a. (1.4 million hectares). Desert Durum® seedings in Arizona and California for the 2024 harvest are estimated at 65,000 acres (26,300 hectares) total, up 16% from 2023 and 48% below 2022.

This bar chart shows U.S. wheat planted area by class between 2013/14 to 2023/24.

According to the Winter Wheat and Canola Seedings Report, published on Jan. 12, the winter wheat acreage is estimated at 34.4 m.a., down 6% from 2023 but still 4% ahead of the five-year average. The HRW area is estimated at 24.0 m.a., SRW at 6.89 ma, and the white winter wheat area came in at 3.5 m.a. Desert Durum® seedings in Arizona and California are estimated at a combined 65,000 acres. Source: USDA Winter Wheat and Canola Seedings Report.

Moving toward fall of 2023, moisture helped replenish dry soil in the U.S. Southern Plains, aided planting, and supported early-season growth and emergence, while making visible improvements in the U.S. Drought Monitor. According to USDA, as of Jan. 30, 2024, winter wheat area in drought registered at 17%, down from 22% the week prior and 58% last year. Meanwhile, the last aggregate USDA Crop Progress Report, published on Nov. 27, 2023, put 50% of winter wheat in the good to excellent category, the highest since 2020.

This line chart shows the percentages of U.S. winter wheat rated "good to excellent" from 2015 to 2024.

The last national USDA Crop Progress Report put 50% of the U.S. winter wheat crop in good to excellent condition, the highest since 2020. Source: USDA NASS Data.

Despite the decreased acreage, the cautious optimism about wheat conditions suggests the potential for improved yield and reduced abandonment for the 2024 harvest. Improved yields will provide a welcome boost to U.S. wheat production, helping improve supply and relieving pressure on the U.S. balance sheet and wheat prices.

An Early State-by-State Snapshot

Comments from producers at a recent meeting of the U.S. Wheat Associates (USW) Wheat Quality Committee echoed the optimistic sentiment. However, despite the objectively improved crop outlook from the year prior, winter conditions have started to vary as the season progresses, serving as a reminder that much can change before harvest time.

Following are condition recaps in major winter wheat-producing states from committee members and National Agricultural Statistics Service (NASS) data as of Jan. 28:

Kansas. Data from NASS rates 54% of Kansas winter wheat good to excellent, and optimism has bloomed regarding the 2024 harvest. Kansas wheat farmer and USW Secretary-Treasurer elect Gary Millershaski highlighted visible improvements to wheat stands compared to the previous year.

Texas. NASS data put Texas wheat conditions at 42% good to excellent, while Texas farmers remain optimistic about current conditions.

Oklahoma. An Oklahoma farmer commented that soil moisture remains adequate, and the wheat entered dormancy in good condition. Oklahoma crop conditions rated 63% of the crop in the good to excellent category.

Colorado. About 61% of the crop sits in the good to excellent category, though winds and dry weather this winter may cause some condition deterioration.

Nebraska. According to a Nebraska farmer, rain during planting helped boost conditions, and the stands continue to benefit from the soil moisture. Current conditions put Nebraska winter wheat at 69% good to excellent.

South Dakota. South Dakota Wheat Commission CEO Jon Kleinjan commented that the state’s HRW wheat was seeded with adequate moisture. As good snow cover remains, he is optimistic about the 2024 crop. Likewise, NASS put 53% of winter wheat in good to excellent.

Montana. Approximately 41% of the HRW crop sits in the good category; however, cold and a lack of snow coverage have negatively impacted crop conditions this winter.

USDA/NOAA Map of Winter Wheat in Drought from Jan. 30, 2024.

According to the weekly USDA Agriculture in Drought Report, as of Jan. 30, 2024, 17% of U.S. winter wheat resides in areas experiencing drought, down from 22% last week and much improved from 58% last year. Source: U.S. Agriculture in Drought.

More Data to Come

The upcoming USDA Prospective Plantings Report will provide preliminary estimates for spring wheat, durum, and the white spring wheat area and update the winter wheat estimates. It is important to remember that the 2024 harvest is still months away, and conditions can and will change as the crop year progresses. Nonetheless, even after an extended drought, U.S. wheat farmers remain resilient and committed to growing a reliable supply of high-quality wheat for their customers around the world.

By USW Market Analyst Tyllor Ledford

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USW Analyst Shares Global Wheat Market Summary with Farmer Directors

U.S. Wheat Associates (USW) Market Analyst Tyllor Ledford compiles a comprehensive “World Wheat Supply and Demand” summary for three USW Board of Directors meetings each year. Using the USDA World Agricultural Supply and Demand Estimates (WASDE) report as her primary source, Ledford prepared the attached market summary for the USW Winter Board Meeting in Washington, D.C., Jan. 23 to 26, 2024.

Following is the start of Ledford’s report. Continue reading the entire report here.

World Wheat Supply and Demand

Released on January 12, the World Agricultural Supply and Demand Estimates (WASDE) had a bearish impact on the market, as the estimates quantified the sustained record export flows from the Black Sea and increased ending stock levels. The 2023/24 global wheat production is forecast at 784.9 MMT, up 1.9 MMT from December’s estimates. Meanwhile, world wheat demand remains at a record high of 796.4 MMT, outpacing world wheat production by 11.5 MMT

Page 2 USW World Wheat Supply and Demand Summary

USW Market Analyst Tyllor Ledford’s report to the USW Board of Directors includes highlights of world wheat supply and demand. Read more at https://www.uswheat.org/wp-content/uploads/USW-Market-Summary-Winter-2024.pdf.

Although demand surpassed supplies, the January WASDE increased world ending stocks by 1.8 MMT. The current estimate of 260.0 MMT is a 4% decrease from the year prior and the lowest level since 2015/16. In major exporting countries, wheat stocks sit at 58.7 MMT, an improvement from previous estimates but still below 60.4 MMT the year prior. Increased ending stocks in the EU and Ukraine helped support the recent increases. World wheat trade is expected to reach 209.5 MMT, down from 220.2 MMT in 2022/23.

Domestically, the January WASDE made few significant changes, while the Winter Wheat Seedings Report overshadowed the WASDE’s impacts. U.S. ending stocks came in 300,000 MT lower, though USDA foresees ending stocks at 17.6 MMT, a 14% increase year over year and the first increase since 2015/16. That estimate helps loosen the U.S. wheat balance sheet and relieve underlying price pressure, though ending stocks still sit 13.9 MMT below the recent highs hit in 2016/17.

 

 

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U.S. Wheat Export Basis Levels Support On-Going Competitiveness

During the summer of 2023, U.S. wheat export basis levels hovered near record lows as slow demand met seasonal weakness. Across almost all the U.S. wheat classes and export points, export basis levels hovered below average, signaling a unique pricing opportunity for U.S. wheat. Historical trends indicate that basis levels generally hit their lowest point during wheat harvest and increase in October, November, and December as export capacity tightens in response to an influx of corn and soybeans.

Following the seasonal pattern, U.S. export basis levels have since risen for all U.S. wheat classes. Despite the increase, the average HRS basis for the Gulf and Pacific Northwest sits 15% below the five-year average, while HRW and SRW sit 31% and 27% below the five-year average, respectively. The following examines the underlying factors driving this trend and its impact as we dive into the second half of marketing year 2023/24.

Line chart showing export basis levels from December 2022 to December 2023.

U.S. export basis levels generally follow a seasonal pattern, hitting lows during the wheat harvest and highs during October, November, and December as elevation capacity tightens in response to the corn and soybean harvest. In July 2023, basis levels hovered near record lows as seasonal weakness was coupled with an overall lack of demand. Source: U.S. Wheat Associates Price Report.

Excess Capacity Meets Slow Demand

The most significant factor influencing the below-average basis values is the overall decrease in export volume for grains and oilseeds, particularly for soybeans. According to USDA, for the week ending December 28, 2023, inspections for all grains (wheat, corn, and soybeans) were down 19% from the same period last year and 39% below the three-year average.

U.S. soybean exports are down due primarily to South American competition in the Chinese market. Reflected in the December 2023 World Agricultural Supply and Demand Estimates, forecast for U.S. soybean exports to all destinations came in at 47.6 MMT, down from 54.2 MMT in 2022/23 and 58.6 MMT in 2021/22. Meanwhile, total Brazilian exports are forecast at a record 99.5 MMT, up from 95.5 MMT the year prior and 18% above the five-year average as record quantities of soybeans are exported to China.

U.S. wheat exports face similar competitive headwinds. USDA export data shows that the export pace sits 14% behind last year and 26% below the five-year average.

Line chart shows price changes since 2019 for secondary grain railcar auction market bids to illustrate effect on wheat export basis.

Secondary Railcar Auction Market Bids (a real-time reflection of the supply and demand for rail freight) for October, November, and December sit at $65.12/car on average, down from $836.11/car last year and the five-year average of $262.96/car. The combined impact of excess capacity within the grain handling and logistics system has removed pressure on wheat basis levels and allowed them to drift lower. Source: USDA Rail Transportation Dashboard.

The decrease in overall grain volume has created surplus capacity in the U.S. logistics systems, particularly for the railroads. As a result, Secondary Railcar Auction Market Bids (a real-time reflection of the supply and demand for rail freight) for October, November, and December sit at $65.12/car on average, down from $836.11/car last year, and the five-year average of $262.96/car. The combined impact of excess capacity within the grain handling and logistics system has removed pressure on wheat basis levels and allowed them to drift lower.

Basis Levels Support Competitiveness

As overall grain export volume remains below average, we can expect the depressing impact on the basis to continue. South American competition for soybean exports will continue to influence grain markets, forcing participants to readjust to the changing dynamic.

The combined impact of below-average basis levels and the downward trend in wheat futures prices, driven by competition from the Black Sea, Canada, and other origins, has helped improve U.S. wheat competitiveness throughout 2023/24. Therefore, basis movements will continue to play a key role in maximizing value and capitalizing on opportunities as they arise in the market.

By USW Market Analyst Tyllor Ledford.

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China’s Soft Red Winter Purchases: The Right Wheat at the Right Time

The purchase by China of 1.12 million metric tons (MMT) of U.S. soft red winter (SRW) wheat for delivery in 2023/24 between Dec. 4 and 8 is a significant and, in terms of its volume, somewhat unexpected factor in the current market. The buyers clearly took advantage of a price opportunity, yet there are other influencing factors behind this buying surge to consider.

Already in the Market

China is in a wheat-buying phase driven in part by reported damage to its 2023 crop from rain at harvest. USDA expects China to exceed its WTO-agreed 9.6 MMT tariff rate quota again in 2023/24. By late November, China had already purchased a total of 1.01 MMT of four U.S. wheat classes, including 789,000 MT of SRW in 2023/24.

The U.S. Wheat Associates (USW) Price Report on Nov. 22 estimated SRW FOB export price out of the Gulf at $250 per MT, and on Nov. 30 at $258 per MT, a very competitive price relative to other wheat origins.

After the recent deals through Dec. 8, total 2023/24 SRW commercial sales to China to date now exceed 1.9 MMT. As a result, USDA raised its Dec. 8 estimate of total SRW sales in 2023/24 by about 817,000 MT to 4.76 MMT. If realized, that would be the largest volume of SRW exports since 2013/14.

A Trusted Source

Portrait of USW Regional Vice President Jeff Coey.

Jeff Coey

Why so much SRW? USW Regional Vice President Jeff Coey suggests that China’s buyers and flour millers are very familiar with this soft wheat class grown in the eastern third of the United States.

“It is a story that goes back decades,” said Coey. “First, our SRW is closest to the wheat grown in China. And the investment U.S. wheat growers have made in USW’s trade and technical service over many years has given Chinese buyers the confidence to import SRW, and other classes, when the opportunity arises.”

Coey said maintaining that education process was the goal behind USW’s investment of Agricultural Trade Promotion (ATP) program funds to bring a team of Chinese buyers to the United States in early November 2023. The visit included in-depth time with Federal Grain Inspection Service inspectors at an export elevator in Houston, Tex., as well as time with a SRW farmer and officials at USDA’s Agricultural Research Service (ARS) Soft Wheat Quality Lab (photo above) in Ohio.

“Those visits in particular were instructive,” said Coey. “Understanding the third-party inspection and certification process and the testing demonstrated at the ARS lab gave the buyers a sense of the design behind the quality data we share with them.”

Three people examine cookies at the USDA-ARS Wheat Quality Lab in Wooster, Ohio, in Nov. 2023.

Quality testing at the USDA-ARS Wheat Quality Lab in Wooster, Ohio, includes cookie spread testing, demonstrated during a November visit for a Chinese wheat buying team.

On the Ground Input

Ohio farmer and USW director Ray Van Horn was in the middle of his corn harvest when the Chinese buyers visited his farm.

“Ray and representatives of our member state wheat commission Ohio Corn and Wheat hosted the team on a crisp, clear afternoon in one of Ray’s fields with a beautiful, new stand of soft red winter wheat. It was a perfect place to share information about the wheat production decisions he makes and how that may affect buyers,” Coey said.

Ohio farmer Ray Van Horn talks with Chinese wheat buyers in his field planted with soft red winter wheat.

In a field seeded with a 2024 soft red winter wheat crop, Ohio farmer Ray Van Horn (right) discusses how he makes decisions and manages his crops with members of a Chinese wheat buying trade team sponsored by USW and hosted by Ohio Corn & Wheat in early November.

Adding value to this buying opportunity is the fact that U.S. farmers produced two large SRW crops with excellent quality in 2022 and 2023.

“Together all these factors helped build the confidence that these buyers can select U.S. soft red winter this year and have a deep supply of consistent quality with a ready domestic market,” Coey concluded.

By USW Vice President of Communications Steve Mercer

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