By Stephanie Bryant-Erdmann, USW Market Analyst

Sharply lower U.S. wheat production pushed futures prices to 2-and 3-year highs earlier this summer. However, bearish factors have recently pushed prices down. And when wheat futures are under pressure, wheat importers have the opportunity to lock in competitive prices and maybe even find some bargains.

Chicago Board of Trade (CBOT) soft red winter (SRW) wheat futures and export basis are both under pressure from a growing 2017/18 (June to May) supply, which USDA estimated at 14.2 million metric tons (MMT). The year-to-date average SRW Gulf FOB value of $196 per metric ton (MT) is $50 below the 5-year average, and this is a very good quality new crop (for more information on 2017/18 SRW quality, read “Millers and Processors Should Like the 2017/18 Soft Red Winter Crop” below).

Though U.S. hard red winter (HRW) production is forecast to shrink 30 percent in 2017/18, year-to-date Kansas City Board of Trade (KCBT) HRW wheat futures average $58 per MT below the 5-year average. This is due mainly to KCBT contract specifications and lower average protein levels in the 2016/17 and 2017/18 crops. While HRW futures trickle lower, protein premiums continue to widen. Historically, Gulf HRW protein premiums ranged between $1.50 to $4.40 per MT for each additional 0.5 percent of protein. Pacific Northwest (PNW) HRW protein premiums normally average $2.95 to $7.35 per MT. In 2017/18, that range is now $11 to $32 per MT for the Gulf and $8 to $18 per MT for the PNW.

The widening protein premiums represent the tightening global supply of higher protein wheat. Yet FOB prices for 12 percent Gulf and PNW HRW are $40 and $41 per MT below the 5-year averages, respectively (all U.S. wheat protein is based on 12% moisture). Customers who can use lower protein HRW can take advantage of FOB prices for ordinary/unspecified protein HRW, which are $73 per MT below historic levels at the Gulf and $57 per MT below the 5-year average in the PNW.  Preliminary data shows 2017/18 HRW average protein is 11.5 percent, slightly above last year’s final of 11.2 percent, but below the 5-year average of 12.6 percent.

The Minneapolis Grain Exchange (MGEX) hard red spring (HRS) wheat futures have retreated from the 3-year highs reached earlier this summer. However, U.S. and Canadian spring wheat production estimates are supportive of current price levels. StatsCan expects Canadian wheat production (excluding durum) to fall 7 percent to 22.3 MMT. MGEX HRS futures are hovering near the August 5-year average of $6.79 per bushel ($249 per MT), but HRS export basis levels are $15 to $25 per MT below normal at both PNW and Gulf export locations. With harvest still underway in the U.S. Northern Plains and Canada, customers can mitigate some of their risk by locking in these competitive basis levels.

Export pricing for soft white (SW) wheat is not tied to a wheat futures market, but as noted in the July 27 Wheat Letter, protein premiums are shrinking for SW due to the excellent quality and more normal protein distributions in recent crops. PNW FOB export prices for 10.5 max protein SW are $62 per MT below the 5-year average, while FOB prices for 9.5 max protein SW are $70 per MT lower.

Well-informed customers can take advantage of these buying opportunities and lock in lower prices for high-quality U.S. wheat in the next few weeks. Your local USW representative is ready to help answer any questions about U.S. wheat pricing or the U.S. wheat marketing system. To track U.S. wheat nearby prices, review and/or subscribe to the USW Price Report here.

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Because no two crops are alike, the world’s flour millers, bakers and wheat food processors must have some assurance that the wheat they buy will meet their needs. That is why U.S. Wheat Associates (USW) and its partner organizations collect and analyze samples of all six classes of U.S. wheat, compile results and share that data around the world every year.

Legacy organizations to USW first identified the need to quickly gather and share new crop data more than 55 years ago. Now, wheat farmer checkoff dollars and Market Access Program (MAP) funding are invested to publish a complete picture of each year’s harvest. This commitment to transparency offers confidence in the data that, together with the trade service and technical support also funded by USDA Foreign Agricultural Service programs, helps differentiate U.S. wheat exportable supplies.

USW works with several wheat quality organizations to collect, grade and analyze thousands of wheat samples from local elevators and sub-lot samples from export elevators. Sampling begins with early winter wheat harvest and continues until the U.S. hard red spring (HRS) and northern durum harvests are complete, usually by early October, although if warm, dry conditions continue, that end may come early this year. The data is compiled by class and by production region with the soft red winter (SRW) class report coming first, followed by other individual class reports and a complete USW Crop Quality Report by late October. All reports are published on www.uswheat.org. The Crop Quality Report is also printed as a booklet in English, Spanish, French, Arabic and Mandarin.

USW then sends teams of its colleagues, farmers and wheat quality experts out to present that year’s data to its buyers. By mid-December, USW has presented the latest characteristics for all six U.S. wheat classes to hundreds of buyers, millers and processors in more than 25 countries. Buying decisions are made because of this effort; some are acted upon quickly. For example, with information they learned at USW’s 2015 Crop Quality Seminar, millers in Portugal imported HRS for the first time in three years.

U.S. wheat crop quality data extend what our farmers produce into competitive business information customers need. Without funding from farmers through their state wheat commissions, the MAP, and the support of federally-funded inspection and quality analysis labs, this essential service to overseas customers would not be possible.

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By Stephanie Bryant-Erdmann, USW Market Analyst

USDA increased its estimates for world wheat production, consumption and trade in its August World Agricultural Supply and Demand Estimates (WASDE) report released today. USDA forecast global wheat production at 743 million metric tons (MMT), 3 percent above the 5-year average but still 2 percent below last year’s record. The global wheat consumption estimate increased to 737 MMT in 2017/18, up 4 percent from the 5-year average but down slightly from the 2016/17 record. USDA projects 2017/18 world wheat trade at 180 MMT, down 1 percent from last year but still 10 percent above the 5-year average, which would be the second highest on record. USDA also lowered its U.S. and Canada spring wheat supply estimates.

USDA forecasted U.S. wheat production to fall 25 percent year over year to 47.3 MMT. The drop is due to lower yields for spring wheat and durum as a result of the drought across the U.S. Northern Plains, but does not reflect abandoned acre data. USDA pegged U.S. spring wheat production at 9.91 MMT, down 26 percent from 2016/17 and 30 percent below the 5-year average, if realized.

Total 2017/18 U.S. spring wheat supply, which USDA pegged at 16.3 MMT, is down 22 percent from 2016/17 and results in a U.S. spring wheat stocks-to-use ratio of 24 percent. The ratio was 44 percent in the August 2016 WASDE and 51 percent in the August 2015 report. The current low stocks-to-use ratio seems supportive for U.S. spring wheat prices. Many in the industry believe supply will decrease further when abandoned acres are determined.  The North Dakota Wheat Commission noted in Assessing the Wheat Quality Council Tour 2017 Yield Estimate (below), …abandoned acres will certainly have a significant impact on final production for both spring and durum, but may not be fully reconciled until USDA releases its final harvested acreage report for the 2017 crops.”

The drought that is impacting the United States is also decreasing yield potential in Canada. USDA now estimates 2017/18 Canadian wheat production will total 26.5 MMT, down 16 percent from the prior year. The United States and Canada normally account for 60 percent of global high protein wheat exports.

Favorable spring wheat growing conditions in Russia and Kazakhstan may partially offset lower North American spring wheat production. Time will tell what quality and quantity of spring wheat is available for export, and at what value. Customers should remain abreast of current crop conditions, harvest conditions and U.S. prices and contact their local USW representative for any questions concerning the 2017/18 U.S. wheat crop.

Harvest Report

Reprinted with Permission from “Agweek,” August 2, 2017

[Editor’s Note: The original source for this article is the North Dakota Wheat Commission.]

The annual Wheat Quality Council (WQC) tour of the spring and durum wheat region took place the week of July 24, with the final yield result sparking questions and sharp criticism, especially in social media circles. The North Dakota Wheat Commission (NDWC) would like to acknowledge these concerns from producers, assess the crop tour yield estimate, and clarify some misinformation.

The wheat tour is organized by the WQC, based in Kansas City, not the NDWC. The tours are just a small part of the overall mission of the Council. Its primary focus is being a collaboration point and organization to test and evaluate new wheat varieties for end-use quality, and to ensure U.S. wheat production is meeting the quality needs of the wheat industry. It also serves to expand communication and education between wheat producers, wheat breeders, millers, bakers and other end-users.

The tour calculated an average yield of 38.1 bushels per acre for hard red spring wheat. While this is the lowest yield in about ten years for the tour, it was higher than expected by many producers, considering the severe drought conditions gripping nearly all western North Dakota. The NDWC agrees that this overall yield was higher than we anticipated based on weekly crop ratings and producer reports, and the WQC average yield needs to be looked at in its full context.

Why was the tour estimate higher than expected? Most routes covered central and eastern parts of the state, and higher yielding areas of Minnesota, with a lower than normal percent of field counts in western areas. This was not done intentionally; the tour has never taken routes into the far west portion of the state or into eastern Montana (also in severe drought). In more normal years when crop conditions are more balanced across the region, this has not been as big of an issue. However, in a drought year like this with high abandonment, it led to a lower than normal percent of field counts from western areas. The yield estimates given at the end of each day and at the end of the tour are simple averages. They are not weighted by production and there are no county yield estimates released. For durum, the average yield came in at 39.7 bushels per acre, which is well above the July USDA estimate of 27 bushels per acre for North Dakota. The tour routes did not cover the main durum producing counties in the state, which are facing the most intense drought conditions.

Accounting for abandoned acres is difficult, since yield reports are based on actual acres harvested for grain, not planted acres. It is well known that large portions of the crop are being abandoned due to the drought conditions in western growing regions, including South Dakota and Montana. Participants on the tour noted that on some routes, anywhere from 30 to 50 percent of the fields had been abandoned.

These abandoned acres will certainly have a significant impact on final production for both hard red spring and durum, but may not be fully reconciled until USDA releases its final harvested acreage report for the 2017 crops. Normal abandonment rates in the spring wheat region are 2 to 3 percent. The eastern acres will likely see normal abandonment, but portions of the western drought areas could be as high a 40 percent. In 2002, North Dakota abandoned 13 percent of its wheat plantings, and the rate was 23 percent in the 1988 drought. The question of abandonment is a concern in the market and once fully understood, it will have a big impact on final production; it is something buyers, producers and all involved in the wheat industry will need to focus on.

USDA’s July production report projected an average spring wheat yield of 38 bushels for North Dakota, 61 bushels for Minnesota, 26 for Montana, and 34 for South Dakota. All the USDA data is based directly on producer surveys with no objective yield surveys taken in fields. The upcoming August and September USDA estimates will follow the same pattern for yield, but it is uncertain when major adjustments for abandoned acres will be included. In its July estimate, USDA pegged planted acres of spring wheat in Montana, South Dakota and North Dakota at 8.55 million, and harvested at 8.22 million, reflecting a 4 percent abandonment level. For durum in Montana and North Dakota, it pegged planted acres at 1.75 million, with expected harvested acres at 1.7 million, just 3 percent abandoned. If final harvested area ratios fall to levels seen in 2002 across the region, there is another 1 million acres that need to be taken out from final production equations. This is a significant number, and some producers say it will be even higher.

Emotions are high this growing season, especially for producers in the heart of the severe drought conditions. The unexpected higher yield estimate and decline in prices since the beginning of July due to several factors has intensified these emotions. The wheat tour result is just one piece of information the markets react to. Two of the three days of the tour, the market moved higher, with analysts citing other factors as well, such as technical sell points, corn and soybean weather forecasts, and the start of spring wheat harvest impacting trends. The final harvest and yield report from producers themselves, as well as a full recognition of abandoned acres, and both domestic and international demand factors, will be the final driving forces in establishing the value of the 2017 crop.

When the full extent of the drought-impacted production areas is considered, it certainly appears the tour overestimated both spring wheat and durum yield potential in 2017. For durum, it is significant since likely two-thirds of the main region was not part of the survey routes. For spring wheat, it may not be as significant because there is strong yield potential in the eastern third of [North Dakota and] into Minnesota that will offset some, but not all, of the reduction in harvested acres in the west … Tour organizers have noted the strong negative reaction from producers from the final tour yield results. And also heard from the NDWC and producers during the tour about concerns over the lack of accounting for abandoned acres and lack of field counts in western areas. It will lead to some reevaluation of routes in future tours, or recognition of the need to weight yield counts to better account for significant crop condition difference between regions.

The tour has been conducted for more than 20 years, and has provided a great opportunity to build connections between producers in this region and some of its most important customers. This year may have added some challenges, but it also provides an opportunity to expand communication along all segments of the industry. Milers and other end-users of wheat grown in our region need to have producers be successful, for them to be successful.

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By Erica Oakley, USW Director of Programs

This week, the Wheat Quality Council hosted its annual hard red spring (HRS) and durum crop tour. Participants spent three days in North Dakota surveying this year’s crop and estimating yield. The tour, which surveyed a total of 496 fields, estimated weighted average HRS yield at 38.1 bushels per acre (bu/a), significantly lower than last year’s HRS average of 45.7 bu/a because of ongoing drought conditions in western areas. The durum weighted average yield was 39.7 bu/a, down from 45.4 bu/a in 2016. Results from six HRW fields showed a weighted average of 46.6 bu/a.

Participants on the tour always represent a wide range of the wheat industry, including millers, traders, media, farmers, researchers and government officials. There were 76 participants on this tour, who traveled along eight distinct routes covering most of the state’s wheat production. I joined my USW colleague Assistant Director of Policy Elizabeth Westendorf on the tour.

It was insightful to see the conditions on the ground after reading reports about the drought. It was also interesting to see the difference in field conditions along each of the routes over all three days.

On the first day, participants drove between Fargo and Bismarck, with two routes going farther into the western part of the state, and others covering western Minnesota and northern South Dakota. Conditions on the eastern side looked good, though there was evidence of drought stress. Reports from the west included evidence of much more severe conditions. The Day 1 weighted average yield was 38.8 bu/a, down from 42.9 bu/a in 2016. For HRS specifically, the yield was 37.9 bu/a, down from 43.1 bu/a in 2016. The scouts surveyed 207 fields on Day 1, of which 194 were HRS, 10 durum and three HRW.

On Day 2, the tour surveyed 225 fields, 188 of which were HRS; along with 34 durum and 3 HRW. The group moved from Bismarck to Devils Lake. The more western routes reported drought stress, though not as severe as the scouts saw in southwestern North Dakota on Day 1. Overall average for Day 2 was 35.7 bu/a, down from 46.5 in 2016. For HRS, the yield was 35.8 bu/a, down from 46.9.

The third day of the tour included a half day of crop surveying. The participants then all returned to North Dakota State University’s Northern Crops Institute in Fargo to compile the overall crop report. On Day 3, participants surveyed at total of 61 HRS fields and three durum fields. The Day 3 weighted average yield for HRS was 46.2 bu/a, down from 51.9 bu/a in 2016. The weighted average durum yield from just three fields was 46.2 bu/a, down from 52.1 bu/a in 2016.

The results reflect a snapshot of yield potential observed by the participants in the fields they scouted.

“There is still a question of abandonment because of the dryness,” said Dave Green, executive vice president of the Wheat Quality Council. “We do not yet know how much of the crop has been hayed — how much of it has been plowed under.”

View highlights and photos from the tour by searching #wheattour17 on Facebook and Twitter. For more information and for results from previous tours, visit the Wheat Quality Council’s website at www.wheatqualitycouncil.org.

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By Stephanie Bryant-Erdmann, USW Market Analyst

Four consecutive years of drought, which shrunk soft white (SW) production and increased average protein levels, had the market rationing demand through low protein premiums. Now, after two years of more normal weather patterns, low protein premiums are quickly disappearing providing an excellent buying opportunity for U.S. wheat customers.

In marketing year 2016/17 (June to May), the protein premium for 10.5 percent maximum protein SW shrunk to an average 60 cents per metric ton (MT), compared to the 5-year average of $10 per MT (U.S. protein is calculated on a 12 percent moisture basis). The protein premium for 9.5 maximum protein SW fell to $14 per MT. So far in 2017/18, the 10.5 maximum protein premium has increased slightly to 71 cents per MT due to the uncertainty of harvest; however, the 9.5 maximum protein premium has continued to shrink to an average $6 per MT due to expectations of “normal” protein distributions and an ample supply of SW.

According to USW Crop Quality data, the 5-year average protein for SW is 10.4 percent, which includes two higher protein years (2014/15 and 2015/16). Prior to 2014/15, the 5-year average was 9.9 percent. The expectation of “normal” protein distributions is a direct result of more normal growing conditions. Idaho, Oregon and Washington received timely and ample moisture throughout the growing season, resulting in good stands and grain-fill.

In USDA’s latest winter wheat condition report for 2017/18, winter wheat conditions across the three states averaged 78 percent good to excellent. On July 24, spring wheat conditions in Idaho and Washington were rated 63 percent and 40 percent good to excellent, respectively. Roughly 87 percent of SW is winter wheat and 13 percent is spring wheat.

In addition to good crop conditions, USDA also expects average yield to reach 65.9 bushels per acre (4.43 MT per hectare) or 3 percent above the 5-year average. If realized, that would still be 7 percent below 2016/17 yields. USDA expects large 2017/18 SW beginning stocks to offset an anticipated 11 percent decline in production. Total 2017/18 SW supply is projected to remain stable year over year at 9.77 million metric tons (MMT).

It is important to note that the decline in low protein premiums are currently being driven not by actual data, but by the expectation of normal protein distributions and decent yields at this point because the 2017 SW harvest is only just underway. As always, nothing is guaranteed until the wheat is safely in the bins, but customers can take advantage of the decline in low protein premiums to secure high quality, low-protein SW at reasonable prices.

Customers are encouraged to keep abreast of harvest conditions and to contact their local USW representative with any questions about U.S. wheat supplies and production.

To read the latest USW Weekly Harvest Report, click here.

To subscribe to USW Reports, click here.

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USDA forecast U.S. 2017/18 wheat production at 47.9 million metric tons (MMT), down 24 percent year over year and 18 percent below the 5-year average. The reason: an anticipated 12 percent decline in average yield and the lowest planted acres since USDA records began in 1919. However, USDA expects 2017/18 U.S. beginning stocks to total 32.2 MMT, up 21 percent year over year and the most since 1988/89. As a result, total 2017/18 U.S. wheat supply is forecast at 80.1 MMT, down 10 percent from 2016/17 but still 1 percent above the 5-year average of 79.3 MMT. USDA expects average yield to be 46.2 bu/acre (3.10 MT/ha), which is close to the 5-year average of 46.6 bu/acre (3.13 MT/ha).

On June 30, USDA estimated total planted wheat area would fall 9 percent year over year to 45.7 million acres (18.5 million hectares). If realized, that would be 17 percent lower than the 5-year average. USDA expects 2017/18 harvested area to drop 13 percent from last year and 18 percent below the 5-year average to 38.1 million acres (15.4 million hectares).

USDA forecast 2017/18 hard red winter (HRW) production to total 20.6 MMT, down 30 percent from 2016/17 and 14 percent below the 5-year average. A smaller planted area and sharply lower harvested area led to the decline. U.S. farmers planted 23.8 million acres (9.63 million hectares) of HRW for 2017/18, down 10 percent from 2016. Due to weather and wheat streak mosaic virus, harvested area in top HRW-producers Texas, Oklahoma and Kansas is projected to fall 16 percent year over year. USDA forecast 2017/18 HRW beginning stocks at 16.1 MMT, up 33 percent year over year and 81 percent above the 5-year average. Total 2017/18 HRW supply is expected to total 36.8 MMT, down 12 percent from 2016/17.

Soft red winter (SRW) production is also expected to decline 11 percent to 8.33 MMT in 2017/18 due to fewer planted acres. USDA estimated total 2017/18 SRW area at 5.61 million acres (2.27 million hectares), 15 percent lower than 2016/17 and 30 percent below the 5-year average. In contrast to recent years, SRW harvest in the U.S. Southern Plains is progressing rapidly with good harvest conditions. On July 7, the USW Weekly Harvest report showed the average grade on 199 samples was U.S. #2 in a generally sound crop with DON levels that are significantly below the 5-year average. USDA estimates that SRW 2017/18 beginning stocks totaled 5.85 MMT, up 37 percent from 2016/17 and 47 percent above the 5-year average. The larger beginning stocks will offset reduced production, and total 2017/18 SRW supply is expected to increase by 500,000 MT year over year to 14.2 MMT.

USDA reported white wheat production will decrease 11 percent from 2016/17 to 6.91 MMT, but still 1 percent above the 5-year average, if realized. The decline is due to 3 percent fewer planted acres and slightly lower forecast yields. Idaho, Oregon and Washington have received ample moisture and winter wheat conditions there average 78 percent good to excellent. USDA estimates soft white (SW) beginning stocks increased 42 percent year over year to 2.86 MMT. The larger beginning stocks are expected to offset the lower production, leaving the 2017/18 SW supply unchanged year over year at 9.77 MMT.

Hard red spring (HRS) production is expected to plummet in 2017/18 to 10.5 MMT, down 22 percent from the prior year and the lowest since 2002/03, if realized. The average spring wheat yield is forecast at 40.3 bu/acre (2.73 MT/ha), down 15 percent from 2016/17. USDA also estimates farmers planted 10.3 million acres (4.17 million hectares) to HRS, 10 percent below 2016/17 levels. As of July 11, 55 percent of North Dakota is in a severe or extreme drought and the remainder of the state is abnormally dry or in a moderate drought. Similarly, 72 percent of South Dakota and 45 percent of Montana are in a moderate to extreme drought. As of July 10, just 35 percent of the spring crop was rated good or excellent and 39 percent was poor or very poor. In North Dakota, the largest HRS producing state, 36 percent of the crop is in good or excellent condition. USDA anticipates 2017/18 HRS beginning stocks of 6.39 MMT are 14 percent less than last year. Estimated 2017/18 HRS supply will total 16.9 MMT, down 19 percent year over year. USDA expects the HRS stocks-to-use ratio to fall to 22 percent in 2017/18, compared to 41 percent one year prior.

Smaller planted area and 30 percent lower yields are expected to reduce durum production to 1.55 MMT in 2017/18, down an estimated 45 percent from 2016/17 and 26 percent below the 5-year average. USDA expects average durum yields to sink to 30.9 bu/acre (2.08 MT/ha), compared to 44.0 bu/acre (2.96 bu/acre) in 2016/17. Durum planted area decreased this year as farmers responded to lower prices and large carry-out stocks. Spring-planted northern durum is grown primarily in North Dakota and Montana, and the Desert Durum® harvest in Arizona and California is nearly complete. USDA estimates 2017/18 durum beginning stocks at 980,000 MT, up 29 percent from the prior year and 45 percent greater than the 5-year average. Increased beginning stocks will not offset the drastically reduced 2017/18 production so USDA expects the U.S. durum supply will fall to 2.53 MMT, 29 percent below 2016/17 levels and 9 percent below the 5-year average. The U.S. durum stocks-to-use ratio will fall to 24 percent, on par with the 5-year average.

Even with reduced production for 2017/18, U.S. farmers stored significant amounts of grain last year, ensuring that customers can continue purchasing reliable, high-quality wheat. Customers are encouraged to contact their local USW representative to discuss purchasing strategies in this volatile global wheat market.

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By Stephanie Bryant-Erdmann, USW Market Analyst

With wheat harvest underway in the Northern Hemisphere and wheat planting underway or complete in the Southern Hemisphere, wheat buyers are beginning to see a downward trend in production numbers. As discussed in the June 15 Wheat Letter, the high quality, high protein wheat supply is shrinking and supporting prices. USDA expects global output to decrease for the first time in five years to 739 million metric tons (MMT) (27.2 billion bushels), down 14.6 MMT (535 million bushels) from the 2016/17 record of 754 MMT (27.7 billion bushels). If realized, production would be 3 percent above the five-year average. In this issue, we summarize current expectations and conditions in the world’s major wheat exporting countries, which account for 90 percent of all world wheat exports.

Argentina. In June, Bolsa de Cereales, the Buenos Aires Grain Exchange, reported Argentine farmers will plant 17 percent more wheat acres in 2017/18 as wheat production continues to expand under President Macri’s favorable policies. Bolsa estimated wheat planted area at 13.6 million acres (5.5 million hectares). On June 22, 53 percent was planted, up from 37 percent the prior week. USDA’s July estimate for 2017/18 Argentinian wheat production was 17.5 MMT (643 million bushels), up 3 percent from 2016/17 and 41 percent greater than the five-year average.

Australia. In its June report, the Australian Bureau of Agricultural and Resource Economics and Science (ABARES) forecasted 2017/18 production at 24.2 MMT (889 million bushels). That is 31 percent below 2016/17, due to an expected 25 percent reduction in average yield and a slight decline in planted area from 2016 to 31.4 million acres (12.7 million hectares). Autumn rainfall was below normal in Western Australia and variable across South Australia, states that account for roughly half of Australia’s winter crop planted acres and production. The Australian Bureau of Meteorology expects drier than average conditions across wheat producing regions during the next three months.

Black Sea. Winter wheat harvest is underway and USDA projects combined 2017/18 output from Russia, Ukraine and Kazakhstan will decrease 6 percent to 107 MMT (3.93 billion bushels) based on an expected return to trendline yields. If realized, the combined harvest would still be greater than the five-year average. Russian consultancy SovEcon pegged Russian planted wheat area at 68.9 million acres (27.9 million hectares), down slightly from 2016/17 due to a 4 percent decrease in spring wheat area. Russian wheat production is expected to decline to 70.4 MMT (2.59 billion bushels), down 3 percent from 2016/17 due to the smaller planted area and anticipated lower yields. SovEcon forecast Russian winter wheat yields at 52.1 bu/acre (3.50 MT/ha), down from 55.5 bu/acre (3.73 MT/ha) in 2016/17. Spring wheat yields are expected to fall 7 percent year over year to 21.1 bu/acre (1.42 MT/ha). UkrAgroConsult reported Ukrainian wheat planted area decreased slightly year over year to 15.6 million acres (6.30 million hectares), and expects yields to fall 7 percent year over year to 58.2 bu/acre (3.91 MT/ha). 2017/18 Ukrainian wheat production is forecast at 24.5 MMT (900 million bushels), compared to 26.1 MMT (959 million bushels) in 2016/17. UkrAgroConsult noted yield declines and a 3 percent smaller planted area will lower Kazakhstan wheat production to 13.7 MMT (503 million bushels), down 9 percent from 2016/17, if realized.

Canada. Agriculture and Agri-Food Canada (AAFC) expects wheat production of 29.5 MMT (1.08 billion bushels) in 2017/18. That is down 7 percent year over year because average yield is expected to decline to 47.6 bu/acre (3.20 MT/ha) in 2017/18. Slightly higher planted area will partially offset expected yield declines. StatsCan put planted area at 22.4 million acres (9.07 million hectares) of wheat in 2017/18. Spring wheat planted area rose 2 percent to 15.8 million acres (6.39 million hectares) due to low carry-in stocks and increased price competitiveness with alternative crops. Durum planted area decreased 16 percent year over year to 5.2 million acres (2.11 million hectares) due to high carry-in stocks and lower prices. Canada’s winter wheat seeding decreased 16 percent year over year from a shift to spring wheat. Crop conditions this year are variable with excessive moisture in northern areas while southern areas remain dry. As of June 23, topsoil moisture in Saskatchewan was rated 18 percent short or very short compared to 40 percent short or very short last week. In Alberta, 84 percent of spring wheat is rated in good to excellent condition compared to 83 percent last year. Surface soil moisture is rated 79 percent good to excellent; 14 percent of surface soil moisture is rated excessive. Saskatchewan and Alberta account for roughly 82 percent of 2017/18 planted wheat acres.

European Union. After a challenging 2016/17, Strategie Grains expects EU common wheat production will rebound 4 percent to 142 MMT (5.20 billion bushels) in 2017/18 with a 5 percent increase in yield expected to offset a 1 percent decrease in planted area. French production is expected to increase 7.66 MMT (281 million bushels) year over year to 35.6 MMT (1.31 billion bushels) — a 33 percent improvement in yields. Precipitation across France is 25 percent below normal since March, however. The French crop bureau FranceAgriMer rated 68 percent of French soft wheat in good or excellent condition, down from 74 good to excellent percent the prior week. Dry conditions are also threatening yield potential in Austria, Germany, Italy and Poland. In Spain, drought conditions are expected to cut wheat production by 32 percent year over year to 4.72 MMT (173 million bushels). Additionally, the EU’s crop monitoring service MARS reduced its forecasts for wheat yields to 87.2 bu/acre (5.86 MT/ha), from 87.9 bu/acre (5.91 MT/ha) in May, but greater than the five-year average of 86.7 bu/acre (5.84 MT/ha). Weather forecasts for early July provide little relief for EU farmers, which could further threaten yield potential.

United States. USDA forecast U.S. 2017/18 wheat production at 49.6 MMT (1.82 billion bushels), down 21 percent year over year and 15 percent below the five-year average due to an anticipated 10 percent decline in average yield and the lowest number of planted acres since USDA records began in 1919. USDA expects the average yield to be (3.18 MT/ha) compared to the five-year average of (3.14 MT/ha). In the March 31 Prospective Plantings report, USDA reported U.S. farmers intended to plant 46.1 million acres (18.7 million hectares) of wheat for 2017/18.

USDA will update planted area estimates June 30. The first U.S. by-class estimates will be released in the July 12 World Agricultural Supply and Demand Estimates (WASDE) report.

Follow #wheatharvest17 on Twitter for the latest harvest photos and conditions.

Subscribe to USW Weekly Harvest Reports. To read the latest report, click here.

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By Stephanie Bryant-Erdmann, USW Market Analyst

Much needed rain across the U.S. Northern Plains this week gave emerging hard red spring (HRS) and durum crops a drink, but the rain was bookended by hot, windy conditions and likely did little to alleviate drought conditions.

Total rainfall for the region ran 60 to 75 percent below average for three months before this week’s storms, with Minot, ND — in the heart of the HRS growing area — recording just 1.23 inches (3 cm of rain) since March. The June 13 U.S. Drought Monitor showed 83 percent of North Dakota is in a moderate or severe drought and the remainder of the state is abnormally dry. Similarly, 79 percent of South Dakota and the eastern third of Montana are abnormally dry or in a moderate to severe drought.

The lack of rain and above normal temperatures is taking an early toll on crop conditions. On June 13, USDA reported 45 percent of spring wheat was in good to excellent condition, down 10 percentage points from the prior week and the lowest rating on record for that week. USDA noted 20 percent of the spring wheat crop was in poor or very poor condition, up from 11 percent the prior week and just 2 percent at the same time last year. Markets will be closely watching next week’s USDA crop condition report, and further deterioration of crop conditions will support Minneapolis Grain Exchange (MGEX) HRS wheat futures.

In the past two weeks, the nearby MGEX HRS wheat futures contract rallied 8 percent or 49 cents to $6.28 per bushel, the highest level since December 2014. Concern about the HRS crop and early harvest reports of low protein hard red winter (HRW) also support widening HRW protein premiums. Last June, the protein premium for 12.0 percent protein HRW (on a 12 percent moisture basis) averaged 12 cents per bushel ($4.59 per metric ton) over 11.0 percent protein HRW. This year, the same premium is 60 cents per bushel ($22 per metric ton).

With 60 percent of high protein wheat exports (13 percent protein on a 12 percent moisture basis or higher) originating from the United States and Canada, protein premiums are also widening due to Canadian crop and soil moisture conditions. In Saskatchewan, where Canadian farmers are wrapping up spring planting, topsoil moisture is rated 40 percent short or very short compared to 8 percent short or very short last year.

Farmers in northern Alberta and Saskatchewan are having the opposite problem — too much moisture. On June 6, the Alberta crop report rated topsoil moisture at 29 percent excessive in the Northeast and 40 percent excessive in the Northwest. Wet fields and harvesting 1.16 million acres (2.86 million hectares) of overwintered crops delayed spring planting progress in the province. Spring wheat planting was 95 percent complete on June 6, up from 84 percent the prior week but behind the 5-year average of 98 percent complete. Agriculture and Agri-Food Canada estimated total Canadian wheat production for 2017/18 will be 29.5 million metric tons (MMT), down 7 percent year over year due to a slight decline in planted area and a return to trendline yields.

“Conditions are variable right now with too much water in many northern areas, too little in the southern areas and probably very good conditions in between the two,” noted Robin Speer Executive Director of Western Canadian Wheat Growers Association. “We think the next two weeks become very important for this crop.”

Though HRS planted area is expected to be 7 percent smaller this year and yield potential for this year’s HRS crop is still unknown, U.S. farmers will continue to have the high quality, high protein wheat the world needs. In its June World Agricultural Supply and Demand Estimate, USDA pegged 2016/17 HRS ending stocks at 5.86 MMT, slightly more than the 5-year average of 5.28 MMT. The larger than normal ending stocks ensure the U.S. wheat store will always be open; the only unknown is how much customers will need to pay.

To read the latest USW Weekly Harvest report, click here.

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The 2017 wheat harvest is underway on the U.S. Plains and the High Plains Journal is spending another year following the custom harvesters. The “All Aboard Wheat Harvest” blog, sponsored by John Deere, enlists five correspondents to cover the harvest as the harvesters make their way from Texas to the Dakotas.

Keep up with the blog at https://allaboardharvest.com/ or sign up for daily emails from the crew on the site’s homepage. The correspondents will also be busy on social media:

Twitter: @AllAboardTour

Facebook: https://www.facebook.com/allaboardharvest

YouTube: https://www.youtube.com/user/AllAboardTour

Flickr: https://www.flickr.com/photos/allaboardtour

You can also follow the progress of the 2017/18 crop through the USW Harvest Report every Friday afternoon at https://www.uswheat.org/harvest.