U.S. Wheat Crop and Market Update1. 2016/17 global wheat production to reach new record of 738 MMT – Global supplies estimate to reach new record of 983 MMT; up 3% from the 2015/16

U.S. Wheat Crop and

Market Update

IAOM Central and Wheat State

District Meeting

Justin Gilpin

KS Wheat Commission

Manhattan, KS

[email protected]

Overview

• US growing areas and trade flows

• 2015 HRW Crop quality review

• 2016 Winter wheat crop early yield and quality

– Southern plains; Kansas; Northern plains; California

– Quality data maps

• Market conditions

– World wheat situation and US fall crops

• Current events with Wheat (no slides)

US HRW Production Region

Hard Red Winter

Hard Red Spring

Durum Hard

White Soft

White Soft Red

Winter Source – US Wheat Associates 2

Wheat is not just wheat…

2016 HRW Harvest Activity:

2016 HRW crop conditions • Crop conditions April/May continued to improve

– Unprecedented moisture and cool temperatures in the HRW growing regions

– Record moisture and below average temps Western Ks and Central KS

– No temps above 100 degrees until June!

• Stripe rust led to increased management; farmers farmed for bushels

– Fungicide applications

– Genetic yield potential.

• Once harvest began it rolled at a rapid pace

– Late May early June rains delayed harvest.

– Then TX, OK, KS all were going.

– Out west, the crop kept coming in…

• Overall, a production year to remember…a marketing year to forget…

2016 Southern Plains • TX harvest

– 95 million bushels down slightly from 106 million bushels

– Test weights good; proteins lower

• Oklahoma harvest, much improved

– 132 million bushels up from 98 million bushels

– Proteins variable, but lower; Test weights above average

– Elevators worked to segregate some at harvest time

• Overall, big difference from 2016 crop was production and lower protein.

Colorado, Nebraska, Dakotas,

Wyoming and Montana HRW • Colorado harvest benefited from good filling weather.

– Average yield per acre of 45 bu.

– 95 mi bu vs. last year of 79 mi bu.

• Harvest themes stayed consistent as it moved north

– Nebraska; lowest planted acreage, ever. 1.2 million acres. Production increased 60 mi bu; Proteins were an issue.

– South Dakota was better at 57.7 million bushels.

– Montana expecting average crop, to slightly better production than last year at 99 million bushels. Some stress in pockets should produce protein.

California 2016 • Increased production up slightly

– 12.2 million bushels

• Red and White wheat varieties

– Less white varieties

– Test weights coming in above average

– Proteins good

• Overall, very good milling crop, but only about 1/6th of milling capacity. Will need to get protein from the plains.

• Water issues are concerning.

Kansas early 2016 data • Kansas record production!

– Per acre yield, at 56 bushels per acre.

– To produce 454 million bushels vs. 321 last year.

– Good moisture and cool temperatures for kernel filling.

• Western 3rd of Kansas best in a long time.

– 60 – 80 bushel dryland yields

– Great test weights early, and TKWs

– Proteins highly variable; lower

• State averages..

– State average 56 bu/ac

– Lower avg. proteins with wide ranges…

• 9% to 13%...

• Kansas to average 10.8 – 11.2% protein

• Bake evaluations just beginning but look to be a protein quantity problem not a protein quality.

– Grain yield and protein are inversely proportional.

• Trifecta of Good genetics, good weather and good management.

www.plainsgrains.org

• Interactive Maps

– Protein

– Test Weight

– TKW

– Moisture

– Dockage

• Harvest updates posted on US Wheat Associates website uswheat.org

Source – US Wheat Associates

US HRW Production Region

2015 Gulf Tributary HRW

Grade Distribution* *Partial

*Partial

2016 Gulf Tributary HRW

Grade Distribution* *Partial

*Partial

2015 Gulf HRW Evaluation based on individual protein samples*

*Partial

Low Protein –

Medium Protein –

High Protein -

Represents all samples less than 11.5%

protein*.

(11%)

Represents all samples between 11.5%

and 12.5% protein*.

(43%)

Represents all samples greater than 12.5% protein*. (46%) *12% Moisture Basis

2016 Gulf HRW Evaluation based on individual protein samples*

*Partial

Low Protein –

Medium Protein –

High Protein -

Represents all samples less than 11.5%

protein*.

(62%)

Represents all samples between 11.5%

and 12.5% protein*.

(33%)

Represents all samples greater than 12.5% protein*. (5%) *12% Moisture Basis

2016*

Gulf HRW – Wheat Grade Data *Partial

Low Med High 2016 2015 5-Year

Test Weight (lb/bu) 60.6 60.6 60.1 60.6 58.7

(kg/hl) 79.7 79.7 79.1 79.7 77.3

Damaged Kernels (%) 0.3 0.2 0.4 0.3 0.6

Foreign Material (%) 0.2 0.2 0.3 0.2 0.1

Shrunken & Broken (%) 0.7 0.8 0.9 0.8 1.3

Total Defects (%) 1.2 1.2 1.5 1.2 1.9

2016*/2015/2014/2013/2012/2011/2010

Gulf HRW – Test Weight Dist. (lb/bu) *Partial

0 2

22

53

22

1 1 1

21

60

17

0 0

4

20

57

19

0 0

9

45

41

5

0 0

8

40 39

13

0

13

20

38

25

4

0 0

6

35 37

22

0 0

10

20

30

40

50

60

70Chart Title 2010 Average 61.0 (lb/bu)

2011 Average 60.8 (lb/bu)2012 Average 60.9 (lb/bu)2013 Average 59.7 (lb/bu)2014 Average 60.3 (lb/bu)2015 Average 58.7 (lb/bu)2016 Average 60.6 (lb/bu)

<56 56-57.9 58-59.9 60-61.9 62-63.9 64+

Perc

en

t of

Sam

ple

s

Test Weight (lb/bu)

2016*/2015/2014/2013/2012/2011/2010

Gulf HRW – TKW Distribution *Partial

2016*

Gulf HRW – Wheat Non-Grade Data *Partial

Low Med High 2016 2015 5-Year

Dockage (%) 0.5 0.5 1.1 0.5 0.8

Moisture (%) 11.6 11.4 11.2 11.5 11.7

Protein (12% mb) 10.6 11.9 13.3 11.2 12.5

(0% mb) 12.0 13.5 15.1 12.7 14.2

Ash (14% mb) 1.46 1.46 1.55 1.47 1.61

(0% mb) 1.70 1.70 1.81 1.71 1.87

2016*/2015/2014/2013/2012/2011/2010

Gulf HRW – Protein Distribution *Partial

2010 Average 11.9%

2011 Average 12.6%

2012 Average 12.2%

2013 Average 13.6%

2014 Average 13.8%

2015 Average 12.5%

2016 Average 11.2%

12’s

2016 PARTIAL

Gulf HRW – Wheat Non-Grade Data

Low Med High 2016 2015 5-Year

Thousand Kernel Wt. (g) 32.4 31.8 31.5 32.1 29.3

Kernel Diameter (mm) 2.69 2.66 2.64 2.68 2.58

Sedimentation (cc) 49.2

Falling Number (sec) 388 405 433 397 400

Mixograph for Compsoited Samples 1-9 TX & OK…Samples 10-15 KS

Indicates Protein Dilution and Protein Quality

Dockage (%) By Grainshed

25 Wayne Moore Consulting, Tampa, Fl

26

Test Weight (lbs/bu) By Grainshed

Wayne Moore Consulting, Tampa, Fl

27

Moisture (%) By Grainshed

Wayne Moore Consulting, Tampa, Fl

28

Damaged Kernels (%) By Grainshed

Wayne Moore Consulting, Tampa, Fl

29

Shrunken & Broken (%) By Grainshed

Wayne Moore Consulting, Tampa, Fl

30

Total Defects (%) By Grainshed

Wayne Moore Consulting, Tampa, Fl

31

Protein (%) By Grainshed

Wayne Moore Consulting, Tampa, Fl

32

Kernel Size, Large (%) By Grainshed

Wayne Moore Consulting, Tampa, Fl

33

Kernel Diameter (mm) By Grainshed

Wayne Moore Consulting, Tampa, Fl

34

Kernel Hardness (SKCS) By Grainshed

Wayne Moore Consulting, Tampa, Fl

35

Thousand Kernel Weight (g) By Grainshed

Wayne Moore Consulting, Tampa, Fl

36

Falling Number (sec) By Grainshed

Wayne Moore Consulting, Tampa, Fl

Wheat Ash (12% mb, %) By Grainshed

37 Wayne Moore Consulting, Tampa, Fl

2016 HRW WHEAT

QUALITY SURVEY

The data contained in this presentation were collected, tested

and analyzed by PLAINS GRAINS, INC., an organization of

the HRW States of Texas, Oklahoma, Colorado, Kansas,

Nebraska, Wyoming, South Dakota, Montana, Washington,

Oregon, Idaho and North Dakota in cooperation with USDA-

ARS Hard Winter Wheat Quality Laboratory, Manhattan,

Kansas. For more detailed information about the 2013 HRW

crop go to:

www.plainsgrains.org

2016 Spring Wheat outlook • North Dakota about 1-3 weeks out.

• South Dakota expecting decent proteins and yields.

• Spring wheat tour just concluded in ND.

– Expecting smaller crop than last year; yields off about 4 bu per acre at 45.7 bu/ac.

• Recent storms and rains hurt the crop as it was too late to benefit from moisture.

• Little disease noted.

• Early expectations are for mid pro springs to displace mid to high pro winters in grinds.

2016 Soft Wheat outlook

• Slightly larger year on year

– SRW 370 vs. 359 mi bu

• Concerns on quality and recent rains. Missouri early on looked good on quality.

• Soft red overall, test weights good, eye on vom and some falling numbers.

• White wheat just getting under way in OR, ID and MI; production about average out west.

• HRW priced cheaper than SRW right now…

So what does it all mean? • Record production in HRW country.

– Kansas 6th largest production year. Highest yld per acre.

– Proteins are the issue. Much lower proteins.

– TW not bad but TKWs look really good...

– Milling extractions should be improved.

– Overall, a more consistent new crop milling characteristics.

• Historically speaking, this is an important year for logistics (buyers and operations) to be on the same page…

– LOW PRICES have created a buyers market.

– -130 basis in country and large carries in the future market, tell buyers to fill up space..

– Elevator operators, be prepared for some head aches. Storage and blending will be issue for US millers to deal with.

– Operations and Quality and Sourcing communications will be important.

• HRW vs. SRW vs. HRS….going to be interesting for domestic use…

• Plantings will be interesting this fall…

Wheat Market Update and World

Situation

A few highlights

1. 2016/17 global wheat production to reach new record of 738 MMT – Global supplies estimate to reach new record of 983 MMT; up 3% from the 2015/16 record

– Wheat production for Russia estimated at 65 MMT, 22% higher than the 5-year average

– US wheat production estimated at 61.5 MMT, 10% above the prior year

2. Consumption forecast at 725 MMT, the fifth consecutive record

high – Feed wheat usage expected to grow in the China to 15.0 MMT, up 43% from last year

– US consumption expected to rise 15% year over year to 36.2 MMT

3. World wheat trade projected at 168 MMT, down slightly from

2015/16 record of 169 MMT – EU exports to grow to 34.0MMT, up 3% from 2015/16 and 21% over the 5-year average

– Russian exports to reach a record 25.5 MMT, up 2% from 2015/16

– US exports to reach 25.2 MMT up 19% from 2015/16

A few highlights 4. World beginning stocks estimated at record 244 MMT, up 12% year over

year

– US beginning stocks climbed to 26.7 MMT, 34% above the 5-year

average

– Beginning stocks in Argentina estimated at 1.23 MMT in 2016/17, down

75% from 2015/16

– Canadian beginning stocks fell to an estimated 4.56 MMT, 35% below

2015/16 levels

5. Global ending stocks projected at record 254 MMT, 4% higher than

2015/16, if realized

– Estimated Chinese ending stocks of 112 MMT account for 44% of global

ending stocks, 16% greater than 2015/16

– US ending stocks to grow 13% year over year to 30.1 MMT

6. U.S. farm gate average price forecast 5% lower in 2016/17

– Projected average range: $3.40 to $4.20/bushel ($125-$154/MT)*

*Average U.S. farm gate price, marketing year weighted average

World Production and Use World usage up 100 mmt in 10 years…but…

73

4

73

1

708 716

500

550

600

650

700

750

MM

T

Production Use

World Ending Stocks China stocks watched…

Historical Five Major Exporters include U.S., Canada, Australia, Argentina and EU-27.

Black Sea includes Russia, Ukraine, and Kazakhstan.

50 56 58

20 19 20

76 96

118

70

71

61

0

50

100

150

200

250

300

06/07 08/09 10/11 12/13 14/15 16/17

MM

T

Historical 5 Majors Black Sea China Other

50 56 58

20 19 20

76 96

118

70

71

61

0

50

100

150

200

250

300

06/07 08/09 10/11 12/13 14/15 16/17

MM

T

Historical 5 Majors Black Sea China Other

World Ending Stocks

Historical Five Major Exporters include U.S., Canada, Australia, Argentina and EU-27.

Black Sea includes Russia, Ukraine and Kazakhstan.

257

216

243

Ending stocks MINUS China & India

36% S/U

23% S/U

45

U.S. Wheat Balance Sheet

15/16 16/17 15/16 16/17 15/16 16/17

Beginning Stocks 8.0 12.1 5.8 7.6 4.2 4.3

Production 22.5 28.1 15.4 13.9 9.8 10.1

Imports 0.2 0.1 1.4 1.2 0.5 0.7

Supply Total 30.7 40.4 22.5 22.7 14.5 15.0

Domestic Use 12.4 15.8 8.0 8.0 6.9 7.5

Exports 6.2 8.8 6.9 7.8 3.3 3.4

Use Total 18.5 24.7 14.9 15.8 10.2 10.9

Ending Stocks 12.1 15.7 7.6 6.9 4.3 4.1

Stocks-to-Use 65% 64% 51% 44% 42% 38%

HRW HRS SRW

MMT

U.S. Wheat Balance Sheet

15/16 16/17 15/16 16/17 15/16 16/17

Beginning Stocks 1.8 2.0 0.7 0.8 20.5 26.8

Production 6.0 7.2 2.2 2.3 55.9 61.5

Imports 0.2 0.2 0.9 1.0 3.1 3.2

Supply Total 7.9 9.4 3.9 4.0 79.5 91.5

Domestic Use 2.0 2.8 2.3 2.1 31.6 36.3

Exports 4.0 4.2 0.8 1.0 21.1 25.2

Use Total 6.0 7.0 3.1 3.1 52.7 61.4

Ending Stocks 2.0 2.4 0.8 0.9 26.7 30.1

Stocks-to-Use 34% 35% 25% 29% 51% 49%

MMT

White Durum Total

US Corn and Bean crop

• Corn and Beans conditions:

– Corn ratings look promising.

– Decent rains and cooler weather favorable. Concerns of heat stress.

– Beans will be very critical for August.

• Wheat will continue to compete for feed channels

– Wheat cash price in western Kansas $2.85. Corn cash price posted at $3.10...

Summary

• Wheat is cheap.

• Market is a “carry market.”

– Telling buyers and users to fill up with as much as possible.

• Expect good milling extractions on HRW. One of the better year’s…

– Northern crop will determine protein premiums and blends.

– Could be a great year for hard white wheat to be used interchangeably with HRW. Better protein, good milling characteristics.

• Proteins are an issue.

• As for milling quality…

– Well, you guys are good at what you do…this will be a good year for you to prove it…

Kansas Wheat Innovation Center

"Wheat farmers investing in their future."