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WMR - 2022 U.S. Wheat Situation

By: WMR - Jim Peterson
Posted: Jun 17 2022

WMR - 2022 U.S. Wheat Situation

The June USDA supply and demand projections for U.S. wheat indicate a slight rebound in production compared to 2021, but lower supplies due to sharply reduced beginning stocks, challenging our export competitiveness for a second straight year.  The average projected all wheat producer price is $10.75 per bushel, well above the previous record of $7.77 in 2012, and up from $7.70 this past year.

All wheat production is projected at 1.74 billion bushels, up from 1.65 billion last year, solely due to a higher national yield of 46.9 bushels per acre, up from 44.3 in 2021.  Although planted area for wheat is up by nearly 1 million acres from last year, at 47.4 million, the level of harvested acres is nearly the same, at 37.1 million, due to drought in key hard red winter wheat states.   

The all wheat production estimate is based on official survey estimates for winter wheat, with trend line yields used for spring wheat and durum, and acres are based on the March survey.  Winter wheat production is estimated at 1.18 billion bushels, down 7 percent from last year.  This implies combined spring and durum production of 560 million bushels in 2022, a 52% increase over last year.  The implied spring and durum production may be optimistic at this point, due to the delayed planting season, and ongoing drought in parts of Montana. 

Winter wheat harvest was about 10 percent completed as of June 12th, ahead of the 2021 pace but slightly behind normal.  Yield reports in southern winter wheat areas have been near current USDA estimates, but the current projection for a higher yield in MT, relative to 2021, might be optimistic.  

On the demand side, USDA is projecting domestic use to be 1.1 billion bushels, down just 20 million from last year, due to lower feed use.  Food use is expected to increase slightly. USDA was conservative on the export projection, even with the improved world opportunities due to the Russian invasion of Ukraine.  The current projection of 775 million bushels would be our lowest absolute level in 50 years, but near the 780 million exported in 2015.  The projection seems overly pessimistic, but USDA may not adjust higher until there is actual confirmation of U.S. sales to the Middle East and Africa regions, due to Ukraine shortfalls. 

In 2022, USDA is projecting a 20% gain in Russian exports, largely offsetting the lower projection for the Ukraine.  Clearly, USDA is anticipating that U.S. wheat will remain uncompetitive from a price standpoint, and it will take more dramatic shifts in the current world dynamics to bring more demand to the U.S. in nearby months. There have been some discussions of expanded food aid programs due to world concerns about food shortages, and that it may lead to political unrest in key countries.  Presumably, U.S. wheat exports would be a benefactor of those programs.   

Ending inventories of U.S. wheat are projected to decline, even with the more tempered early demand forecasts.  At 627 million bushels, it would be our lowest levels since June of 2014, and down by 40% from just two years ago.

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