2018-2019 Wheat Situation and Outlook: Potential for Greater Exports?

Todd D. Davis, Extension Grain Marketing Specialist

The August World Agricultural Supply and Demand Estimates (WASDE) report released on August 10 provided an update of the U.S. and world wheat supply and use fundamentals. Most of the farm press focused on the report’s estimates for corn and soybeans as the August report has the first production estimates based on in-field measurements and a survey of farmers. Winter wheat, on the other hand, has used in-field measurements and farmer surveys to estimate the 2018 yield since May. The USDA reports reveal the potential for a bullish wheat market based on declining U.S. stocks as well as reduced stocks and production in major exporting countries.

USDA is projecting ending stocks to be reduced by 165 million bushels to 935 million bushels for the 2018-19 marketing-year (Table 1). If realized, this would be a 46-day reduction in stocks and would be the smallest relative ending stocks since the 2014-15 marketing-year. This reduction in ending stocks will support higher farm-level wheat prices with the U.S. farm price projected at $5.10/bushel for the 2018-19 marketing-year (Table 1).

The August report reduced yield by 0.1 bushels/acre from the previous estimate, which resulted in a 4 million bushel reduction in the 2018 wheat crop from the July estimate. Total wheat supply is projected to increase by 33 million bushels from last year due to a smaller carry-in and reduced imports.

Total wheat use is projected to increase by 199 million bushels primarily due to a greater quantity exported. USDA is likely overstating wheat feed use given the apparent abundance of corn. Regardless, the strong use will reduce stocks.

World wheat stocks are also projected to decline in the 2018-19 marketing-year. The August report projects global wheat stocks to be lowered by almost 613 million bushels from last year. The projected change in wheat stocks for the primary wheat producing and exporting countries are shown in Figure 1. The European Union (EU) and the Former Soviet Union (FSU) are projected to trim wheat stocks by 147 and 228 million bushels, respectively. Also, Australia and Canada are projected to have lower stocks. Production problems globally may provide an opportunity for the United States to export more wheat as we serve as the reserve supplier for the rest of the world. Exports may shift to the United in early 2019 once other countries do not have an export able supply available at competitive prices. Further increases in U.S. exports will help reduce domestic stocks and provide fundamental support for higher wheat prices. Again, this may take some time to develop as the rest of the world turns to the residual supplier for wheat.

I have not had the opportunity to say this in quite a while – wheat market fundamentals have become more bullish, and wheat may be an alternative for Kentucky farmers who have not seeded wheat the last few years. Farmers ought to budget potential returns to a wheat/
double-crop soybean enterprise for 2019. Especially if both the corn and soybean markets
remain under pressure due to trade uncertainty and large 2018 corn and soybean crops.