Can U.S. Wheat Producers Keep Pace Growing Demand?
U.S. wheat export demand is steady for the second straight month in a growing world market according to USDA's March World Agricultural Supply and Demand Estimates (WASDE) report. Producers around the world have responded to growing demand by producing record crops recently. As a result, USDA forecasts that global ending stocks for 2009/10 (June-May) will be 196.8 million metric tons (MMT) up 60 percent from a recent low of 123.3 MMT in 2007/08.
Significantly, though, the March WASDE report calls for world wheat demand to grow again this year. Falling wheat prices since the supply-induced shock of 2007/08 are partly responsible, but global demand is growing with population and income in developing countries. Since 1980, in fact, wheat imports by developing countries have grown from 50 MMT to 125 MMT. U.S. Wheat Associates Vice President of Overseas Operations Vince Peterson recently told reporters that at some point only a few years away, demand is likely to exceed production again.
"We know U.S. producers are planting less wheat on average every year," Peterson said, "mainly because crops like corn, soybeans and other oilseeds offer more income." Melvin Brees, economist at the University of Missouri Food and Agriculture Policy Research Institute (FAPRI) told U.S. farm editors this week that FAPRI projected breakeven prices for this year at $5.17 per bushel for winter wheat, $3.02 for corn, and $6.42 for soybeans. Compare those numbers with today's September/August closing futures prices of about $5.17 for U.S. hard red winter, $3.96 for corn, and $9.63 for soybeans.
"The trend down exists everywhere wheat is grown, not just in the United States," Peterson said. Unless technology can drive wheat yields up, he added, supply will fall and prices will rise again. A link to a summary and short video about Peterson's presentation is posted at www.uswheat.org.
For 2009/10, USDA held its U.S. wheat export forecast steady at 825 million bushels (22.5 MMT), which included a 10 million bushel (272,800 MT) increase in hard red winter (HRW) exports offset by the same decrease for white wheat. Commercial U.S. HRW sales for 2009/10 are up 19 percent over 2008/09 to North Asia, up 14 percent to Sub-Saharan Africa, and significantly up in North Africa following recent sales to Morocco. U.S. durum and soft white wheat sales this marketing year are also outpacing 2008/09 (see the USW Price Report. USDA forecasts total U.S. wheat exports to end 2009/10 18.5 percent lower than in 2008/09, reflecting greater exportable world supplies.
There is an old America saying that has become a metaphor for taking advantage of a bargain: "Get 'em while they're hot." With a large supply of very good to excellent quality old crop wheat in storage and winter wheat breaking dormancy in the southern plains, for now at least, U.S. wheat is hot.