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Income Potential and Weather Fight Against Winter Wheat Seeding for 2020

By Claire Hutchins, USW Market Analyst

With winter wheat prices remaining at or less than the cost of production and with a very wet planting season, it is no surprise that many U.S. farmers chose to plant slightly less winter wheat for harvest in 2020. USDA’s 2020/21 Winter Wheat Seedings report, released Jan. 10, reported U.S. farmers planted 30.8 million acres (12.5 million hectares) of winter wheat, down slightly from 2019/20 and 7% less than the 5-year average of 33.2 million acres (13.4 million hectares). Decreases for HRW and white winter wheat more than offset an increase in SRW planted area. USDA noted that this is the second smallest number of winter wheat acres on record.

Hard red winter (HRW). USDA assessed HRW planted area at 21.8 million acres (9.35 million hectares), down 1% from 2018. Planted acreage is down year-over-year in several major HRW-producing states with the largest decreases reported in Colorado, Montana and Nebraska. Colorado planted area fell 12% year-over-year to 1.90 million acres due to extreme dryness in the southeast, depressed commodity prices and pest pressure in the northeast. Record low planted area of 900,000 acres (364,000 hectares) in Nebraska can be attributed to weaker marketing conditions and an overly wet, late soybean harvest which prevented fall HRW planting.

“This didn’t just happen overnight,” says Royce Schaneman, executive director of the Nebraska Wheat Board. “State-wide plantings have been trending down for a number of years due to poor marketing conditions.”

HRW planted area in Kansas and Oklahoma is stable year-over-year at 6.90 million acres (2.79 million hectares) and 4.20 million acres (1.7 million hectares), respectively.

Total winter wheat planted area in Texas jumped 9% year-over-year to 4.90 million acres (1.94 million hectares). About 95% of Texas winter wheat is HRW and 5% is SRW.

“Adequate soil moisture in many regions, combined with favorable marketing conditions compared to cotton, allowed producers to maximize HRW acres,” says Darby Campsey, director of communications and producer relations for the Texas Wheat Producers Board.

In South Dakota, North Dakota, Montana and Wyoming, a very wet fall also prevented more HRW seeding, although these states usually plant a relatively small percentage of total U.S. HRW.

Soft red winter (SRW). Total SRW planted area of 5.64 million acres (2.28 million hectares) increased 8% from 2018. Increases in most SRW-producing states more than offset decreases in Delaware, Illinois Indiana, Michigan, Missouri and Wisconsin.

According to Tadd Nicholson, executive director of the Ohio Corn and Wheat Growers Association, the state’s SRW planted area increased 12% over last year to 560,000 acres (227,000 hectares) due to ideal, timely planting conditions following a miserably wet spring which left many corn and soybean acres unplanted.

In Illinois, SRW planted area fell 25% from last year to 490,000 acres (198,000 hectares).

“It was one of the craziest years for weather in Illinois,” says Mike Doherty, interim executive director of the Illinois Wheat Association “It was the third wettest year on record and most of the precipitation fell in the first eight months. Farmers were beside themselves trying to manage other crops through the wet weather. Across the state, corn and soybeans were harvested 30 to 60 days late. You just can’t plant winter wheat if you can’t get the other crops out of the ground.”

There is also SRW grown in areas of Texas and Campsey reports that “strong marketing opportunities and better, dryer planting conditions for SRW compared to last year’s overly wet field conditions led to a significant increase in SRW acreage year-over-year.”

White winter wheat. White winter wheat planted area fell to an estimated 3.37 million acres (1.36 million hectares), down 4% from 2018. White winter wheat planted area in Idaho, Oregon and Washington fell below last year. Idaho farmers reported planting 720,000 acres (291,000 hectares) compared to 730,000 acres (295,000 hectares) in 2018. Planted area in Oregon fell 5% from last year to 700,000 acres (283,000 hectares). Washington planted area fell slightly less than 2018 to 1.70 million acres (688,000 hectares).

Durum. Winter durum planting in the southwestern United States is estimated at 70,000 acres (28,300 hectares), up 9% from 2018 but 41% less than 2017. Arizona and California plant Desert Durum® from December through January for harvest May through July.

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Promoting U.S. Wheat Around the World

As U.S. Wheat Associates (USW) President Vince Peterson often says, at any given hour of the day there is someone, somewhere, talking about the quality, reliability and value of U.S. wheat. Wheat Letter wants to share some of the ways USW was working the past few months to promote all six classes of U.S. wheat in an ever more complex world wheat market.

China

The value of flour made from U.S. wheat shines in quality intensive applications that demand stability and performance. Frozen dough is just such an application. Wheat flour that may pass muster in traditional baked foods can fail when the rigors of freezing, storage, thawing and baking are involved. Moreover, in many Asian markets such as Taiwan and China, the penetration of frozen dough products is still in its early stages, so there is a great interest in discovering solutions to common problems in the production process.

To better understand the current frozen dough market in China and to meet the industry’s demands for frozen dough knowledge, USW/Beijing and USW/Taipei in 2019 invited veteran food production expert Dr. Kirk O’ Donnell of Bakers Growth, LLC, to provide technical services to selected frozen dough manufactures in Mainland China and Taiwan, and to conduct a seminar on freezing technology at the China Grain Products Research and Development Institute (CGPRDI) in Taipei. In addition to providing valuable technical support, USW was able to gain a greater understanding of this growing industry segment.

Dr. Kirk O’Donnell conducts a USW-sponsored frozen dough technology seminar at the CGPRDI.

Mexico

USW/Mexico colleagues and USW farmer directors were invited to the dedication of a newly constructed shuttle train facility located in Villagran, Guanajuato, Mexico. USW was proud to be among more than 300 industry leaders including Mexican wheat buyers, executives from Mexico’s Ferromex railroad, U.S. rail executives and a large contingent from the Mexican grain trade. An average of about 50 percent of roughly 3.0 million metric tons (MMT) of recent annual U.S. wheat exports to Mexico move there by rail. Even before its dedication in September, the new facility had already received nine shuttle trains of U.S. wheat including seven trains of hard red winter (HRW) and two trains of soft red winter (SRW) carrying a total of about 100,000 metric tons.

Ribbon-cutting at the dedication of the new grain shuttle train unloading facility in Mexico.

European Union

USW/Rotterdam Regional Marketing Manager Rutger Koekoek accompanied five European participants to the Northern Crop Institute (NCI) Grain Procurement Management for Importers short course. The focus was on risk management and procurement strategies for U.S. wheat importers. The participants were able to meet representatives of leading grain trading companies and, for the first time ever, were able to board a vessel being loaded with northern durum wheat at the CHS export elevator in the Port of Duluth-Superior (see photo above). Koekoek also organized meetings with NDSU’s Durum Wheat Breeder to discuss the new durum wheat varieties that have recently been released.

Algeria

USW/Casablanca Milling and Baking Technologist Tarik Gahi traveled to Blida, Algeria, to meet with millers and biscuit and cake manufacturers who processed U.S. SRW wheat under a USW Quality Samples Program (QSP) funded by USDA’s Foreign Agricultural Service. The sample was milled in July and the flour was distributed to the processors. Gahi reported back that all the companies were impressed by the SRW flour quality, above all with the low water absorption and the fact that the flour performed very well without adding any chemical enzyme additives. He said the customers noted that more gluten strength would be needed for Maria-type biscuits, which, Gahi explained, can easily be managed by blending with higher protein flour such as from U.S. HRW.

U.S. SRW wheat flour milled from a sample supplied by USW, are a key ingredient in biscuits (above), otherwise known as cookies in the United States.

Brazil

USW President Vince Peterson, USW Chairman Doug Goyings, USW/Santiago Regional Director Miguel Galdos, USW/Santiago Assistant Regional Director Osvaldo Seco and USW/Santiago Technical Specialist Andres Saturno participated in the 26th ABITRIGO Congress, sponsored by the Brazilian Wheat Industry Association, near Sao Paulo, Brazil. Although USW always represents U.S. wheat farmers at this event, this delegation was particularly important given the news that Brazil’s government had agreed to fully open its tariff rate quota (TRQ) for 750,000 MT of wheat imported from outside the Mercosur trade agreement. In a few past years when Brazil opened the TRQ because of limited Mercosur supplies, U.S. wheat represented most of the import volume. At the meeting, the industry was informed that the TRQ would be opened late in 2019, rather than the expected timing of later in 2020.

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Production Update: USDA Confirms High U.S. Wheat Yields Offset Reduced Planted Area

By Claire Hutchins, USW Market Analyst

On Sept. 30, USDA released its Small Grains Summary noting that 2019/20 U.S. wheat production increased to 53.3 million metric tons (MMT), up 4 percent from last year due to significant improvements in yield despite lower planted area. While this is still 2 percent below the 5-year average of 54.2 MMT, the production volume coupled with significant carry-in stocks ensure that the U.S. wheat remains the most reliable supply for 2019/20. Here is a look at 2019/20 U.S. wheat production by class.

USDA’s Small Grains Summary indicates U.S. wheat yields offset a reduced planted area for 2019/20.

Hard Red Winter (HRW). Last fall, U.S. farmers decreased HRW planting in the U.S. Southern and Central Plans due to extremely wet conditions which delayed the soybean harvest and in turn HRW planting. A slight uptick in planted area in Montana and South Dakota partially offset reductions in other states. Total U.S. HRW planted area fell 2 percent year-over-year to 22.7 million acres (9.19 million hectares), 15 percent below the 5-year average of 26.6 million acres (10.8 million hectares). Cool temperatures and favorable moisture during the growing season boosted HRW yields substantially year-over-year in Kansas, Nebraska and Oklahoma. In Kansas, the largest HRW producing state, a higher average yield offset lower planted area and production increased 22 percent over 2018/19 levels to 338 million bushels (9.17 MMT). USDA estimates total 2019/20 HRW production increased 26 percent over last year to 834 million bushels (22.7 MMT).

Hard Red Spring (HRS). Cold soil temperatures and excessive moisture in certain areas delayed HRS planting across much of the Northern Plains. USDA says U.S. farmers planted 12.0 million acres (4.86 million hectares), 6% below last year but slightly higher than the 5-year average of 11.8 million acres (4.78 million hectares). A cool summer boosted HRS yields in Montana and South Dakota. Heavy, persistent rain has severely delayed the 2019 HRS harvest. According to USDA, as of September 30, U.S. spring wheat harvest is only 90 percent complete compared to the 5-year average of 99 percent. USDA estimates 2019 HRS production will total 558 million bushels (15.2 MMT), 5 percent lower than 2018, but 8 percent higher than the 5-year average of 518 million bushels (14.1 MMT).

Soft Red Winter (SRW). Last fall, U.S. farmers planted 5.54 million acres (2.24 million hectares) of SRW, down 6 percent from the year prior and 18 percent from the 5-year average of 6.7 million acres (2.71 million hectares) due to low wheat prices compared to soybeans and delayed planting. Excessive moisture continued through the growing season and slowed harvest progress in many places. USDA reported SRW production totaled 239 million bushels (6.50 MMT), down 16 percent from last year and 31 percent below the 5-year average of 348 million bushels (9.46 MMT).

White Wheat (Soft White, Club and Hard White). U.S. white wheat planted area fell 4 percent below 2018/19 levels to 3.95 million acres (1.60 million hectares). Mild growing conditions and good soil moisture in the Pacific Northwest (PNW) supported above-average winter and spring wheat yields. The average white winter wheat yield in Oregon increased 1.0 bu/acre (.067 MT/hectare) over last year to 68.0 bu/acre (4.57 MT/hectare) in 2019. Slightly lower planted area and above-average yields kept U.S. white wheat production stable year-over-year at 273 million bushels (7.43 MMT) and 8 percent higher than the 5-year average of 252 million bushels (6.87 MMT).

Durum. Anticipating less-than break even prices, farmers planted less durum area this year. In its Small Grains 2019 Summary, USDA estimated 1.34 million acres (542,000 hectares) were planted to durum, down 35 percent from 2018/19 and 32 percent below the 5-year average of 2.0 million acres (664,000 hectares). USDA estimated total 2019/20 U.S. durum production at 57.3 million bushels (1.57 MMT), down 26 percent from last year. Cool, wet weather boosted yields in the U.S. Northern plains. Both Montana and North Dakota durum yield potential reached a record high in 2019. The country’s average durum yield also reached a record high of 44.8 bu/acre (3.01 MT/hectare), up 13 percent from last year. However, as with HRS, a significant portion of the northern durum crop has not yet been harvested. Desert Durum® production fell 46 percent year-over year to 5.67 million bushels (154,000 MT) due to sharply lower planted area in both Arizona and California.

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Too Much Rain on a Smaller Soft Red Winter Crop

Following planting in the fall of 2018, much of the U.S. soft red winter (SRW) growing area received excessive moisture throughout the winter and spring, which also caused lengthy harvest delays in many areas. The excessive moisture adversely affected quality by reducing falling number values and increasing DON values in some areas. At an estimated 7.01 million metric tons (MMT), this is a smaller crop than in 2018 because farmers seeded less and average yield per harvested acre was below last year and the five-year average. Processors should find good qualities in the 2019 SRW crop for cookies and crackers and segments of the crop showed good cake qualities.

That is a summary of results from the U.S. Wheat Associates (USW) 2019 SRW Crop Quality Report, now posted online at https://bit.ly/SRWCQ0919. To complete the report, Great Plains Analytical Laboratory in Kansas City, Mo., collected and analyzed 261 samples from 18 reporting areas in the 11 states that account for about 72% of total 2019 SRW production. Funding for the annual survey come from state wheat commission USW members and the USDA Foreign Agricultural Service.

As always, buyers are encouraged to review their quality specifications to ensure that their purchases meet their expectations.

Wheat and Grade Data. The overall average grade of the samples collected for the 2019 SRW harvest survey is U.S. No. 2. The average test weight is 58.1 lb/bu (76.5 kg/hl), equal to the 5-year average and above the 57.9 lb/bu (76.2 kg/hl) average in 2018. The Gulf Port average of 58.5 lb/bu (76.9 kg/hl) is above both last year and the 5-year average. The East Coast test weight average of 56.9 lb/bu (75.0 kg/hl) is above last year but below the 5-year average of 57.4 lb/bu (75.6 kg/hl).

The East Coast Total Defects average of 2.5% is above last year and the 5-year average, indicating that damaged and shrunken and broken kernels are slightly higher than usual in that portion of the crop. The Gulf Port Total Defects is 1.1%, above 2018 but almost half of the 5-year average. Other Gulf Port grade factors, dockage and moisture are close to or higher than 2018 and 5-year average values.

The Composite average wheat protein content of 9.5% (12% moisture basis) is lower than 2018’s 9.9% and the 5-year average of 9.7%. Both the Gulf Port protein average of 9.4% and East Coast average of 9.7% are below the respective 2018 and 5-year averages. The Composite average falling number of 288 seconds is significantly lower than 2018 and the 5-year average. The Gulf Port average of 289 seconds and the East Coast average of 283 seconds are both significantly below 2018 and the 5-year averages. Approximately 21% of samples had a falling number below 250 seconds in 2019, with 13% below 225. The Composite DON average of 1.3 ppm is above the 2018 average and close to the 5-year average of 1.2 ppm. The East Coast value of 0.5 ppm is below the 5-year average while the Gulf Port value of 1.5 ppm is above the 5-year average. Of the samples tested for DON, 33% of the Gulf Port results and 84% of the East Coast results were less than 1.0 ppm.

Flour and Baking Data. The Composite, East Coast and Gulf Port Buhler laboratory mill flour extraction averages are below 2018 and the 5-year averages. The farinograph peak and absorption values are similar to 5-year averages, but the stability values are all below the 5-year averages. The SRC values generally indicate good quality for cookies. The Composite, East Coast and Gulf Port alveograph L averages of 81 are lower than last year and the 5-year average, indicating lower extensibility. All other alveograph averages are similar to the respective 5-year averages given the variability of alveograph analysis. The Gulf amylograph average of 392 BU and East average of 462 indicate relatively high levels of amylase activity in the crop and are consistent with the low falling numbers.

The Composite, East Coast and Gulf Port cookie spread ratios are all higher than last year and the 5-year averages, indicating good extensibility. Average loaf volumes are all lower than last year and the 5-year averages.

USW will share complete data for all classes of U.S. wheat in future Wheat Letter posts and with hundreds of overseas customers at several upcoming events, including USW’s annual Crop Quality Seminars, and in its annual Crop Quality Report.

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U.S. Wheat Prices Competitive with Corn for Domestic Feed Use

By Claire Hutchins, USW Market Analyst

According to USDA’s June WASDE (World Agricultural Supply and Demand Estimates) report, U.S. feed wheat consumption will increase 64% in marketing year (MY) 2019/20 to 3.81 million metric tons (MMT), compared to 1.36 MMT in MY 2018/19. U.S. Wheat Associates (USW) believes the current price relationship between domestic wheat and corn and the nutritional value of U.S. hard red winter (HRW) wheat and soft red winter (SRW) wheat support USDA’s estimates.

When the cash price gap between U.S. wheat and corn shrinks, wheat becomes an attractive feed ingredient for the cattle, swine and poultry industries. Per bushel, wheat is typically more expensive than corn, making it economically less practical as a staple ingredient in U.S. feedlots. However, recent market conditions are changing wheat and corn feeding ratios across the United States. The spot price gaps between U.S. winter wheat and corn have diminished, and even inverted, over the past several months as the potential for a bountiful wheat harvest offsets the potential for lower corn production due to late spring planting in the Midwest.

HRW can be substituted for corn as cattle feed in the High and Southern Plains where much of the country’s HRW wheat is grown. The cattle industry, predominant in Kansas and Texas, favors wheat as a feed ingredient when HRW is less than $1.00/bu more expensive than corn. Between early May and late June, the average cash price for wheat and corn increased steadily in both states, but the price gap narrowed and eventually inverted by early July.

In early May, the cash price for HRW in Kansas, the third largest cattle-producing state in the country, was $0.49/bu higher than corn. By early June, the price gap dropped to $0.29/bu. On July 1, the average cash price for both commodities settled around $4.06/bu and by July 5, HRW was $.06/bu cheaper than corn at $4.20/bu. According to Aaron Harries, Kansas Wheat Commission Vice President of Research and Operations, Kansas feedlots are already feeding more wheat than usual as managers respond to market incentives. Importantly, the decision to feed more wheat is made based on months of efficient market conditions as the ideal cattle diet consists of at least six months of a consistent ingredient blend.

Source: Reuters Eikon

In Texas, the largest cattle-producing state in the country, the recent spot price relationship between HRW and corn has been much tighter. In the first half of May, the cash prices for HRW and corn were nearly tied around an average of $3.92/bu. By early June, the average cash price for HRW dropped $0.24 below corn’s $4.50/bu. The cash-price relationship between wheat and corn is still inverted as of early July and HRW is, on average, $0.37/bu cheaper than corn.

“We are seeing a trend of feedlots purchasing more wheat directly from producers and elevators,” says Darby Campsey, Texas Wheat Producers Board, Director of Communications and Producer Relations. “Market conditions and wheat quality are increasing the value of wheat compared to corn in some cases.”

Campsey explains that in addition to market conditions, Texas livestock producers make grain purchasing decisions based on nutritional needs and local supplies. When wheat protein is lower than average, producers may be more likely to sell to feedlots, where quality requirements are slightly easier to meet than milling standards.

In the Midwest and South, where much of the country’s SRW is grown, swine producers are willing to pay more for wheat than corn because of wheat’s high nutritional value, according to Joel DeRouchey, Kansas State University professor in swine nutrition and management. Corn is used as a feed ingredient for swine because it is cheaper and a higher source of energy than wheat, but wheat brings a higher concentration of amino acids and phosphorous to the animal’s diet. The same market conditions affecting Kansas and Texas can be seen in Illinois and North Carolina, making wheat an even more attractive feed ingredient for swine producers.

In Illinois, the fourth largest swine-producing state in the country, the average spot price gap between SRW and corn decreased significantly between early May and early July. In early May, SRW was, on average, $.90 more expensive than corn. By July 8, the difference collapsed to $.50 as SRW prices continued their decline to $4.92/bu and corn prices continued their incline to $4.42/bu.

Source: Reuters Eikon

At an elevator in North Carolina, the second largest swine-producing state in the country, the spot price for corn surpassed the spot price for SRW between early June and early July. Between June 24 and July 5, the spot price for SRW sank from $4.82/bu to $4.38/bu while the price of corn hovered around an average $4.81/bu.

Wheat is also used as a corn feed substitute in the poultry industry due to its high protein content. Wheat becomes attractive to broiler producers when the price gap between SRW and corn narrows to $.50/bu. The average cash price for SRW in Kentucky, the seventh largest broiler producer in the country, decreased significantly between June 26 at $5.39/bu and July 5 at $4.91/bu, while the average price of corn increased from $4.36/bu to $4.60/bu. In early June, the average spread between SRW and corn was $.81/bu. As of July 5, the spread narrowed to just $.31/bu.

Source: Reuters Eikon

“I wouldn’t be surprised if more chicken producers are feeding wheat. Corn is preferred for chickens, because of its high energy levels, until corn prices rise too high, and right now cash prices for wheat and corn in Maryland are pretty close,” says Jason Scott, Maryland wheat farmer and USW past chairman. As of July 8, the average SRW spot price in Maryland, a top ten broiler producing state, was only $.10/bu higher than corn.

If the narrow or inverted price gaps between wheat and corn persist across the country, producers could continue to increase the amount of wheat used in feed blends for cattle, swine and poultry, potentially surpassing USDA’s estimate of 3.81 MMT.

Every month, USW publishes a graphic summary of the latest data from USDA’s WASDE report, including global wheat market factors, major country and regional export history and U.S. wheat supply and demand summaries by class. View the monthly summary here.

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U.S. Wheat Exports End Year Close to USDA Estimate

By Claire Hutchins, USW Market Analyst

Despite challenging market factors, U.S. wheat exports for marketing year (MY) 2018/19, which ended May 31, totaled 25.8 million metric tons (MMT) (948 million bushels), in line with USDA’s adjusted export volume estimate. That is 9% ahead of MY 2017/18 and 1% ahead of the 5-year average of 25.5 MMT (937 million bushels). Commercial sales of all classes of wheat in MY 2018/19 exceeded 2017/18 levels due to abundant exportable supplies, excellent harvest qualities, competitive export prices and sustained service from U.S. Wheat Associates (USW) representatives supported by its state commissions and USDA’s Foreign Agricultural Service programs. This offset the bearish factors including a strong U.S. dollar, competitor’s advantages, uncertainty about U.S. trade policies and difficult inland transportation logistics.

Hard Red Winter. USDA reported hard red winter (HRW) 2018/19 sales totaled 9.40 MMT (345 million bushels), 1% above 2017/18 and 1% above the 5-year average of 9.30 MMT (342 million bushels). Customers took advantage of the highest quality HRW crop in several years at attractive export prices compared to 2017/18. Out of the Gulf, between Jan. 1 and May 31, 2019, the average export price of U.S. HRW 12.0 protein (12% moisture basis) cost $227/metric ton (MT) compared to $257/MT over the same period in 2018. Sales to Mexico and Nigeria were up 6% and 36% respectively, while sales to Japan were down 6%. Sales to Mexico totaled 2.15 MMT (79.0 million bushels), 44% above the 5-year average of 1.49 MMT (55.0 million bushels), once again making Mexico the top HRW buyer. Commercial sales to Iraq, now the fourth-largest consumer of U.S. HRW, were in line with 2017/18 levels at 674,000 metric tons (MT) (24.7 million bushels).

Soft Red Winter. 2018/19 soft red winter (SRW) sales increased 33% year-over-year to 3.33 MMT (123 million bushels), still 14% below the 5-year average of 3.92 MMT (144 million bushels) despite difficult inland transportation logistical issues due to major flooding on the Mississippi River and its tributaries. The 2018/19 SRW crop boasted higher protein levels and good extensibility, making it a valuable blending ingredient for cookies and cakes. A steady decline in SRW futures prices between mid-December 2018 and mid-May 2019 encouraged strong commercial sales to top SRW-importing regions. Export sales to three of the top five SRW purchasers increased or remained steady compared to 2017/18. Sales to Mexico, the top importer of U.S. SRW, increased 25% over last year to 917,000 MT (33.6 million bushels) and sales to Peru, the fifth-largest importer of U.S. SRW, increased 13% over last year to 175,000 MT (6.46 million bushels). Export sales to Nigeria held strong at 272,000 MT (9.96 million bushels).

Hard Red Spring. By the end of MY 2018/19, hard red spring (HRS) export sales totaled 7.15 MMT (263 million bushels), 16% ahead of last year’s pace, despite a 94% decrease in commercial sales to China, formerly the fourth-largest importer of U.S. HRS. A 60% year-over-year increase in HRS production, at 16.0 MMT (588 million bushels), higher ending stocks, high protein content and competitive export prices all supported export sales. Gulf exports of HRS 14.0 protein between Jan. 1 and May 31, 2019, cost, on average, $263/MT compared to $305/MT over the same period in 2018. Seven of the country’s top ten HRS-importing partners increased commercial sales year over year. Commercial sales to the Philippines, the top importer of U.S. HRS, jumped to 1.85 MMT (68.0 million bushels) in 2018/19, 39% ahead of last year and 38% ahead of the 5-year average of 1.34 MMT (49.2 million bushels).

White wheat. Total commercial sales of soft white (SW) and hard white (HW) wheat climbed to 5.45 MMT (200 million bushels) in 2018/19, which includes about 165,000 MT of HW sales to Nigeria. That is slightly ahead of last year’s pace and 21% ahead of the 5-year average of 4.51 MMT (166 million bushels) due to increased production, increased exportable supplies and below-average protein levels compared to years prior. Sales to the Philippines and Japan, the top two importers of U.S. SW, respectively, increased 13% and 7% over 2017/18 levels. The Philippines purchased 1.32 MMT (48.9 million bushels) of SW compared to 1.17 MMT (43.0 million bushels) in 2017/18. White wheat sales to Japan increased to 889,000 MT (32.7 million bushels) compared to 829,000 MT (30.4 million bushels) in 2017/18.

Durum. USDA reported 2018/19 durum sales at 504,000 MT (19.8 million bushels), up 24% from the year prior, but 12% below the 5-year average of 573,000 MT (21.0 million bushels). Increased production, high protein content, excellent kernel characteristics and competitive prices throughout the marketing year all supported northern durum export levels. Increased sales to four of the five top markets for U.S. durum boosted export figures. The European Union (EU) purchased 290,000 MT (10.7 million bushels) of U.S. durum in 2018/19, up 71% year-over-year following a drought that cut production in many EU countries.

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Good Quality, Competitive Prices Spark U.S. Winter Wheat Demand

By Claire Hutchins, USW Market Analyst

As marketing year (MY) 2018/19 draws to a close, customers of U.S. winter wheat are taking advantage of excellent buying opportunities on competitive pricing and high-quality, consistent supplies. Since the first week in January, the 2018/19 export sales pace for hard red winter (HRW) and soft red winter (SRW) surpassed last year’s pace for deliveries in the current marketing year (CMY) and the new marketing year (NMY).

According to USDA commercial sales data as of April 4, 2019, HRW sales for 2018/19 delivery total 8.70 million metric tons (MMT). That is down 4% from this time last year but up 4% from the 5-year average of 8.33 MMT. Between February 14 and April 4, weekly sales of HRW for CMY delivery were significantly higher than the same six weeks in 2017/18 on low prices and high crop quality attributes. In the April 12 U.S. Wheat Associates (USW) Price Report, estimated FOB export price for 12% protein HRW (12% moisture basis) out of the Gulf at $222/MT for May 2019 delivery compared to $258/MT for delivery in May 2018. HRW export basis for the same delivery month, at $1.70/bu, is significantly lower than last year’s $1.95/bu. In addition to lower FOB export prices, the 2018/19 HRW crop features excellent milling and baking qualities.

These market factors also support a significant uptick in HRW commercial sales into the NMY compared to NMY sales booked by the same time in 2017/18. HRW export sales for the 2019/20 marketing year total 396,000 metric tons (MT), up 64% from this time last year and 17% from the 5-year average. This represents the highest volume of HRW NMY sales to date since 2014/15. The most recent USW Price Report estimates 12% HRW FOB price for June 2019 delivery at $224/MT, compared to last year’s estimate of $259/MT for delivery in June 2018.

Members of the grain trade expect HRW FOB prices and export basis out of the Gulf to decrease steadily into the new marketing year on somewhat larger ending stocks, reduced inland logistical challenges, and favorable new crop conditions.

Turning to SRW, commercial sales to date for 2018/19 delivery total 3.30 MMT, up 36% year-over-year and 10% more than the 5-year average. This represents the highest volume of SRW commercial sales for CMY delivery since 2014/15. Competitive prices, higher than average protein levels and lower than average DON levels continue to elevate SRW export business through the second half of MY 2018/19. More information about the 2018/19 SRW crop is available at https://bit.ly/2ZdnMwi.

The latest USW Price Report valued the SRW export FOB price out of the Gulf at $204/MT for May 2019 delivery compared to $208/MT last year. SRW export basis for May 2019 delivery out of the Gulf at $0.90/bu is 5 cents less than last year’s estimate for May 2018 delivery.

Grain traders expect SRW FOB export prices and export basis to decline steadily into the first few months of MY 2019/20 despite tightening 2018/19 U.S. SRW ending stocks, which are forecast to fall to 4.57 MMT, 18% below 2017/18 and 7% below the 5-year average.

As with HRW sales, total SRW commercial sales for 2019/20 delivery are significantly higher than NMY sales booked this time last year. SRW commercial sales for NMY delivery total 302,000 MT, up 23% year-over-year and 15% from the 5-year average. This represents the highest volume SRW NMY sales to date since 2014/15 as customers look to lock in high quality supplies at globally competitive prices. The April 12 Price Report estimates SRW FOB price out of the Gulf for June 2019 delivery at $202/MT compared to last year’s estimate of $213/MT for the same delivery month in 2018.

 

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Here Are 5 Things to Know About SRW Supply and Demand

By Steve Mercer, USW Vice President of Communications

Grown in the eastern United States, soft red winter (SRW) wheat is a profitable choice for producing confectionary products like cookies (biscuits), crackers and cakes, and to blend its flour for baguettes and other bread products. U.S. Wheat Associates (USW) wants to share some key points about SRW exportable supply in marketing year 2018/19 and look ahead to its potential for 2019/20.

1. Good Quality. While excessive rain on the 2018/19 SRW crop did slightly lower average test weight and falling number, protein (9.9% on 12% moisture basis, composite) is above average and DON level (0.7 ppm composite) is slightly below average. Processors should find good qualities for crackers and segments of the crop with good cookie and cake qualities. The higher protein and good extensibility in the crop should add value in blending for baking applications. See more information at https://www.uswheat.org/market-and-crop-information/crop-quality/.

2. Least Cost. SRW is the lowest cost milling wheat in the world today, offered at an average FOB export price of US$202 per metric ton* for June delivery from U.S. Gulf ports. The International Grains Commission in its March Grain Market Report estimated SRW FOB price at $211, which is $6 less than French soft wheat. SRW exportable supplies are also available from Lakes ports (Toledo, Ohio), and Atlantic ports (Norfolk, Virginia, and Wilmington, North Carolina). See more information at https://www.uswheat.org/market-and-crop-information/price-reports/.

3. Supply is Down. Ending stocks of SRW have declined from 5.9 MMT in 2016/17 to USDA’s latest estimate of 4.6 MMT for 2018/19 (by comparison, SRW ending stocks in 2013/14 were 3.1 MMT after China imported 3.6 MMT that marketing year). Reduced supply relates to a near 50% decline in total production from 15.4 MMT in 2013/14 to USDA’s current estimate of 7.8 MMT in 2018/19, as well as an upturn in exports (see below). See more information at https://www.uswheat.org/market-and-crop-information/supply-and-demand/.

SRW ending stocks have declined steadily since 2016/17 on less production and more exports. Source: USDA

4. Demand is Up. As of April 4, SRW exports of 3.3 million metric tons (MMT) are 36% more than at the same time in marketing year 2017/18. This represents the most volume SRW sales year to date since 2014/15. Commercial SRW sales to Mexico, Colombia, Peru, Ecuador and Brazil are up significantly, as are imports by Central American and Caribbean countries and Nigeria. See more information at https://www.uswheat.org/market-and-crop-information/commercial-sales/.

U.S. SRW wheat supplies are down; export demand takes an upturn. Source: USDA

5. Planted Area is Down. In February 2018, USDA reported that SRW seeded area for 2019/20 is 5.7 million acres (2.4 million hectares), or down 7% from last marketing year. Most of the states that typically produce the most exportable SRW supplies planted less. This decline is not more significant only because some farmers can harvest SRW and then quickly plant soybeans to get a double crop from the same acre. In general, U.S. crop farmers, who are driven by economic circumstances to minimize their net losses at best this year, are turning away from winter wheat to other crops that offer better returns. Total U.S. winter wheat seeded area for 2019/20 is at its second lowest level on record. See more information at https://www.nass.usda.gov/Publications/Todays_Reports/reports/wtrc0219.pdf.

*Source: USW Price Report, April 12, 2019

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Annual Crop Quality Report and Seminars Will Help Customers Make Purchasing and Milling Decisions

By Erica Oakley, USW Director of Programs

As a key part of its commitment to transparency, each year U.S. Wheat Associates (USW) produces an annual Crop Quality Report that includes grade, flour and baking data for all six U.S. wheat classes. The report is compiled from sample testing and analysis conducted during and after harvest by our partner laboratories. The report provides essential, objective information to help buyers get the wheat they need at the best value possible.

The 2018 USW Crop Quality Report is now available for download in English, Spanish, French and Italian, and will be available in Chinese and Arabic soon. USW also shares more detailed, regional reports for all six U.S. wheat classes on its website, as well as additional information on its sample and collection methods, solvent retention capacity (SRC) recommendations, standard deviation tables and more.

USW’s annual Crop Quality Seminars are already underway and will continue over the next month around the world. USW invites its overseas customers, including buyers, millers and processors, to these seminars led by USW staff, U.S. wheat farmers, state wheat commission staff and educational partner organizations. The seminars dive into grade factors, protein levels, flour extraction rates, dough stability, baking loaf volume, noodle color and texture and more for all six U.S. wheat classes, and are tailored to focus on the needs and trends in each regional market.

In 2018, USW is projected to host 41 seminars in 28 countries.

Customers have previously shared that they use the report throughout the year as a reference manual and to guide them through purchases and future planning. The seminars provide a first look at the overall crop and a deep dive into the data and how to use it. Customers will often use the seminars and report as educational training for new employees.

The reports and seminars have been a traditional part of USW’s strategy since 1959, growing to become its single largest marketing activity.

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USDA Confirms Ample U.S. Wheat Supply in 2018/19, Reassures Customers About Availability

By Stephanie Bryant-Erdmann, USW Market Analyst

On Sept. 28, USDA released its Small Grains Summary noting that 2018/19 U.S. wheat production increased to 51.3 MMT, up 8 percent from last year due to improvements in both average yield and harvested area. While this is still 8 percent below the 5-year average of 55.8 MMT, the 2018/19 production coupled with significant carry-in stocks ensure that the U.S. wheat store will remain open and well-stocked throughout 2018/19. Here is a look at 2018/19 U.S. wheat production by class.

Hard red winter (HRW). Last fall, U.S. farmers increased HRW planting in the U.S. Southern Plains due to favorable moisture conditions. That slight increase was not enough to offset decreased planted area in the U.S. Northern Plains where a long-term drought delayed, and in some cases, prevented winter wheat planting. Planted area in Montana fell 6 percent year over year. USDA reported HRW planted area at 23.2 million acres (9.39 million hectares), down 2 percent from 2017. Unfortunately, most of the Southern Plains received little to no moisture until spring, with some areas going from October to April without measurable precipitation. The poor weather caused Oklahoma wheat farmers to abandon 43 percent of their winter wheat area, up from both the 5-year average and the 2017/18 abandonment rate of 36 percent. The average HRW yield in Kansas and Oklahoma, the top two HRW-producing states, decreased 21 percent and 18 percent from 2017/18, respectively. With the drought causing both harvested area and average yields to fall, USDA estimates total 2018/19 HRW production dropped 12 percent to 662 million bushels (18.0 MMT). Though smaller in volume, 2018 HRW quality i is excellent. Read more here.

Hard red spring (HRS). Wet conditions slowed HRS planting but replenished depleted soil moisture across the drought stressed Northern Plains. USDA says U.S. farmers planted 12.1 million acres (4.90 million hectares) to HRS, up 17 percent from the year prior. The beneficial moisture boosting average HRS yields and harvested area. In North Dakota, the top HRS producing state, the average yield climbed 20 percent year over year to a record high 49.0 bu/acre (3.29 MT per hectare), up 41 percent from 2017/18. Idaho farmers also produced record high HRS yields. USDA now reports HRS production at 587 million bushels (16.0 MMT), up 53 percent from 2017/18.

Soft red winter (SRW). Last fall, U.S. farmers planted 5.85 million acres (2.37 million hectares) of SRW, up 4 percent from the year prior, but still 23 percent below the 5-year average. While planting conditions were generally favorable, depressed prices kept planted area low. In early 2018, several U.S. SRW growing areas received excessive moisture that decreased yield potential and the wet weather continued through harvest. USDA reported SRW production totaled 286 million bushels (7.78 MMT), down 2 percent from 2017/18 and 33 percent below the 5-year average of 429 million bushels (11.7 MMT). Read more here.

White wheat (including soft white, club and hard white). U.S. white wheat planted acres stayed close to the 5-year average at 4.15 million acres (1.68 million hectares) in 2018/19. A wet winter boosted yield potential for both the winter and spring crops. The average spring white wheat yield in Washington increased 20 percent to 54.0 bu/acre (3.63 MT per hectare). The slight increase in harvested area and significant improvement in average yields pushed 2018/19 total white wheat production to 272 million bushels (7.41 MMT), a 5 percent increase year over year, and 8 percent above the 5-year average of 252 million bushels (6.86 MMT).

Durum. Farmers planted less durum area this year in response to lower prices and large carry-out stocks during spring planting. USDA estimates 2.00 million acres (810,000 hectares) were planted to durum, down 13 percent from 2017/18 but still 9 percent above the 5-year average of 1.84 million acres (745,000 hectares). USDA estimated total 2018/19 U.S. durum production at 77.3 million bushels (2.10 MMT), up 41 percent from last year. Generally favorable weather boosted yields in the U.S. Northern Plains, with average durum yields increasing to 39.3 bu/acre (2.64 MT per hectare), up 13.3 bu/acre from last year when drought severely impacted the crop. Desert Durum® production fell 8 percent year over year to 10.5 million bushels (385,000 MT) due to sharply lower planted area in both Arizona and California.

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