WASHINGTON, D.C. — Weather problems have impacted wheat production in Russia and the European Union (EU), causing the USDA to lower worldwide wheat supplies and production estimates.
The agency reduced 2018-19 global supplies by 1.2 million metric tons (mmts) in its June 12 World Agricultural Supply and Demand Estimates report. Russia’s production is expected to fall by 3.5 mmts and the EU’s, by 1 mmt, USDA stated.
“The declines are not completely offset by higher projected production from India and the United States,” the agency noted. “Russia’s production is lowered on drier-than-normal conditions this spring in winter wheat areas and excessive wetness in spring wheat regions, lowering planting. EU production is reduced on dry conditions this spring for winter wheat in Germany and Poland.”
The USDA raised the production estimate for India by 2 mmts. U.S. winter wheat was increased by 6 million bushels, to 1.2 billion. Total U.S. wheat production is 1.8 billion bushels.
Two-thirds of Russia’s entire wheat crop comes from winter wheat, said Shawn Hackett, president and CEO of Hackett Financial Advisors.
“Wheat there comes out of dormancy in May and June,” he explained. “May was very hot, very dry and the drought has continued. The drought will persist until the end of June and further. We expect USDA to continue to lower their crop numbers.”
Matt Connelly, an analyst with The Hightower Report, said Russia’s wheat crop is suffering. “Conditions there have continued to be dry for winter wheat and for summer wheat, it continues to be cold,” he explained. “They’re struggling with snow. They’re struggling to get the crop in.”
The weather woes will likely mean fewer exports for Russia, the world’s leading wheat exporter. It will sell 35 mmts, a drop of 1.5 mmts, USDA said.
The agency expects U.S. exports to increase for the 2018-19 crop to 950 million bushels, up by 25 million. Ending stocks are projected to be 946 million bushels, down from 955 million last month. Ending stocks for the old crop are estimated at nearly 1.1 billion bushels.
“U.S. wheat is still overpriced,” Connelly said. “But if the spread narrows, you could see U.S. exports pick up on the world stage.”
Global ending stocks are estimated to be about 266 mmts, up from about 264 mmts in May. “(266) is more than analysts had expected, but still lower than a year ago,” said Todd Hultman, a market analyst with DTN. “It’s nothing to cheer about for wheat prices, from this set of numbers.”
Last year, worldwide ending stocks were a record 272.4 mmts.
USDA projects global wheat consumption to fall 3 mmts, citing reduced feed usage in Russia and the EU. “That’s a little surprising,” Connelly stated. “It’s kind of concerning. Why would they think it would be down?”
Hackett was also curious why the USDA lowered the consumption number. “There’s no reason wheat-based foods would be down,” he said. “Everything else is up. Why would wheat demand be down?”
Demand could be impacted by the strength of the U.S. dollar, he added. “We’ve seen the dollar rally quite a bit since late winter. We’ll have to factor that into the equation. That gives our competitors somewhat of a leg up. Should that trend continue, it will have some impact on what happens here.”
The USDA is estimating prices of $4.60-$5.60 a bushel for new-crop U.S. wheat.