AgResource maintains a US all wheat production estimate of 1,720 Mil Bu, down 20 Mil from the USDA’s estimate in August (and Sep), and which is solely a function of revised spring wheat abandonment. As we’ve detailed in recent weeks how spring wheat abandonment will be much higher than normal due to this summer’s drought in the Dakotas. NASS via their own protocol does not adjust abandonment until its Small Grains Summary Final.
Lower US production, along with improved export shipments in the Jun-Aug quarter, will pull quarterly US wheat stocks much below last year. US wheat inventories are still abundant, but very slowly the market has worked to curb ever-rising stocks, and as such long term lows were scored in 2016 – and 2017’s seasonal bottom was found in late August.
Jun-Aug US wheat supply & demand is above. Sep 1 stocks are pegged at 2,165 Mil Bu, down 380 Mil (15%) from last year. Of note, export shipments through the quarter are pegged at 295 Mil, up 28 Mil from a year ago, and total June-Aug wheat disappearance at 777 Mil Bu is the highest since 2013. Overall, quarterly US wheat stocks will be much closer to recent years, and supply looks to have peaked in 2016, and without adding acreage in 2018 the US wheat balance sheet will continue to contract.
Jun-Aug stocks/use is below, and ARC’s estimate features stocks/use at 279%, still high but the lowest since 2014. Wheat lacks a story in the near term, but amid lofty fob price in Europe and Australia, and as Black Sea exports slow seasonally during the winter months, enlarged US export demand is expected beginning in the last half of the crop year.
Longer term, ARC assumes a rise in 2018 US all wheat acres. Then assuming trend yield and trend consumption growth, US end stocks will hold at 850-950 Mil Bu.
The general theme is that carryover stocks (which have provided a buffer against yield loss) are in retreat, but like before, a weather problem is needed if spot Chicago wheat futures are to rise above $5.50. Our bet is that spot wheat futures hold in a range of $4.00-5.50.
