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WMR-U.S. Wheat in 2023

By: Jim Peterson
Posted: Jun 19 2023

The most recent supply and demand projections by USDA for overall U.S. wheat in 2023 points to tighter supplies and tempered demand.  Production is estimated at 1.665 billion bushels, up just 1% from last year.  Despite a sharp increase in planted acres of winter wheat in the fall of 2022, widespread and severe drought conditions in HRW regions will sharply reduce harvested acres, as well as yields for a second straight year.  Higher production in soft red winter areas, and stable to higher production expectations in white wheat and hard red spring regions, if realized, will mitigate most of the decline in HRW production. 

Supplies are projected to be down 3%, as beginning stocks were near historic lows, and will only be partially offset by expected higher imports.  Traditionally, imports are HRS and durum from Canada, as well as pasta products from Italy and other countries, but in the current marketing year, mills in the eastern U.S. have also brought in European wheat for food use, prompting USDA to raise their import projections early. Hopefully U.S. railroads will become more competitive on rail rates into the eastern U.S. mills from U.S. production regions, and mills realize the quality shortfall in European wheat.  High basis levels in drought impacted HRW regions are pushing to keep supplies local however, and even drawing soft red winter wheat into the region for feed use.

Demand for U.S. wheat in the coming year will again be paced by domestic food use at 977 mb, up marginally from the previous year.  Wheat product demand remains strong in the U.S. after the resurgence in use during the COVID shutdowns.  Feed use is pegged at 70 mb, or just 6% of total domestic use.  Feed use of soft red winter wheat could move higher, depending on the trend in U.S. corn prices during the summer months, and harvest quality of the 2023 crop.

Export demand is currently projected at 725 mb, down 6% from a year ago, and the lowest level in a number of years.  World dynamics are similar to a year ago, when U.S. wheat exports were also challenged.  U.S. prices are sharply elevated over world values, and a strong U.S. dollar adds to the cost challenge of U.S. wheat in a number of economically sensitive markets.  As the accompanying chart illustrates, U.S. values have declined from the previous year, but world values have fallen even further, as shown by Chicago prices.  World values are deflated due to favorable production in many regions, and the push by many leading world countries to continue the  Black Sea Grain Initiative.    

Ending stocks of U.S. wheat are projected to decline for a seventh straight year to 526 mb, the lowest since 2008 when just 306 mb remained at the end of the marketing year.  This should be supportive of prices as the marketing year progresses, but the current wide spread with world values needs to narrow for an appreciable impact.  USDA’s initial projection for the average farm price for wheat nationally is $7.70 per bushel, down from $8.85 in 2002, but up marginally from $7.63 in 2021.

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