Wheat Market Comments

The USDA has forecast the new crop U.S. wheat carryout at 906 million bushels compared to 978 million bushels this season. The USDA’s wheat production forecast seems fair. The winter crop is close to being made, but the spring crop could still vary sharply from USDA’s assumption.

S/D balance as published in the May 2020 WAOB report.

The most important usage category, exports, may be too conservative given the world wheat outlook. The world wheat supply usage balance has a long time to play out so maybe the USDA’s conservative forecast will be justified.

The deficit is defined as production minus domestic consumption.

 The accompanying scatter displays the price of wheat at farm level as a function of the US wheat carryout to usage ratio. The function shifts from time to  time, the last occurrence was in   2007/2008. USDA expects the function to be more or less stable this season. But given the outlook for surplus corn supplies a shift downward can’t be ruled out which is why we left the two earliest years in the study.