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WMR-U.S. Hard Red Spring Supplies Tight

By: Jim Peterson
Posted: Nov 16 2021

The 2021 growing season, and it’s widespread, significant drought produced a hard red spring wheat (HRS) crop of 297 million bushels, the smallest since 1988’s 181 million. The national yield is estimated at 32.6 bushels per acre, the lowest since 2002.  Abandoned, or unharvested acres are estimated at 11%, well above the more typical level of just 2.5 percent.  

Total supplies of HRS are estimated at 587 million bushels, supported by old-crop inventories of 235 million bushels, which were about 10% above the ten year average.  Still supplies look to be the lowest in more than 20 years, and cash prices have elevated to the highest levels since 2007 and 2008.  Similar drought conditions in Canada, have added further support.

Due to the sharply higher price levels, demand rationing is taking place in both the U.S. domestic market, and internationally.  USDA is projecting U.S. mill demand for HRS to drop by 10% to 238 million bushels, compared to an average of 264 million the past two years. In the accompanying table, the 339 domestic use in 2020, included about 20% feed use.  Domestic mills are using more hard red winter in 2021 mill blends.  Not all baked products can be switched, and the question remains whether that can be sustained until the 2022 new crop.  The high protein and excellent overall quality of the HRS crop, along with some shortfalls in quality and protein in HRW, may lead to adjustments in mill blends in early 2022.

In the international market, USDA is projecting U.S. HRS exports at 215 million bushels, 24% lower than last year, and the smallest since 2009.  Current export sales are off by 25% overall, with the Philippines, Japan, and Taiwan ranging from 20% to 31% slower, and markets in South Asia, like Vietnam, Malaysia and Indonesia down by more than 50 percent. High ocean freight, and export elevation costs are adding to buyer constraint on purchases, and ongoing economic challenges, due to COVID, also remain a deterrent to aggressive mill demand. Still, stonger sales are seen in Mexico, Nigeria and a number of markets in Central America.  

Ending stocks of U.S. HRS are projected to fall to 127 million bushels by June 2022, the lowest since June 2008 at 68 million.    As the marketing year progresses, an uptick in overall buying will be needed, to continue to press prices higher.  Limited supplies of Canadian spring wheat, tightening world supplies of wheat, and a break in ocean freight costs, are positive factors which should help propel a stronger export purchase pace for U.S. HRS wheat in early 2022.  

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