1. Wheat Market Outlook in 2015-2016
Daniel O’Brien
Extension Agricultural Economist

2. Wheat Market Realities Key issues over 2005-2015 Period
Transportation Logistics Drive World Exports
Example: Black Sea & Australia exports to the Middle East & Asia
Wheat Substitutes for Coarse Grains in Feed Use
 Issues of “Food” versus “Feed” Quality & adoesption by users
World S/D driven by Production (Acres & Weather)
 Once supplies are set, price discovery processes ration usage

3. Searching for Wheat Market “Rules” Key issues over 2005-2015 Period
“Mean Reversion” LIVES in the Grain Markets!
 Competitive forces tend to undo periods loses or profits
Varying “Price Flexibility / Elasticity” is evident
Flexibility: Varying $ response to “short” vs “abundant” Stocks/Use
Elasticity: Usage affected conversely by “high” vs “low” prices
Exports impacted by Currencies, # Competitors

4. Wheat Market Supply-Demand
Large U.S. & World Stocks of Wheat
A “buyers” market for wheat exports unless/until supplies decline
High value of the U.S. Dollar & ample foreign competition is seriously hurting U.S. wheat exports
U.S. & World Crop Uncertainty in 2016 (El Nino…??)
Impact of World financial problems (EU, China, U.S., )
Are “Commodity price deflation” worries affecting grain markets & the psyche of market participants??? (likely Yes)

5. Shanghai Stock Exchange Index
Weekly, March 2013 – August 12, 2015
Was 1,991 in May 2014
Drop from 5,178 (Mid June) to 3,886 close on 8/12/2015
Dow Jones Europe Index
Weekly, March 2013 – August 12, 2015
Was 352 in June 2014 & 286 in October 2014
Drop from 338 (early May) to 317 close on 8/12/2015

6. U.S. Dollar Index – Cash Settle
Weekly, March 2013 – August 12, 2015
Was 78.9 in March 2014 – climbed to in March ‘15
Dropped to (mid March) to 93.3 (mid June), close of 96.3 on 8/12/2015
U.S. Dow Jones Composite Average Index
Weekly, April 2013 – August 12, 2015
Was 14,551 in June 2013 – climbed to 18,351 in May ‘15
Down to 17,403 close on 8/12/2015

7. Wheat Market Futures Prices Daily CME Kansas HRW SEPT 2015 Futures (since March 2015)
$6.00
SEPT 2015
$4.84 ¼
8/13/2015 am
$5.00
$4.84
≈$4.69

8. Wheat Market Futures Prices Monthly CME Kansas HRW 2015 Futures
SEPT 2015
$4.84 ¼
8/13/2015
≈$6.10
$4.58
≈$4.85
$4.84

9. Kansas HRW Wheat Futures & Cash$ Hutchinson, Kansas Cash, FC & Insurance $’s, August 13, 2015

10. World Wheat Supply, Use & Stocks
“New Crop” MY 2015/16
End Stocks = mmt
End Stks/Use = 31.0% (6 yr high)
Vs. “Benchmark” MY 2007/08
End Stocks = mmt
End Stks/Use = 21.0%

12. World Wheat Exporters

13. World Wheat Importers

14. World Wheat Use & Ending Stocks

15. World Wheat Feed Use

16. World Wheat Ending Stocks & % Stx/Use

17. U.S. Wheat $ vs World %Stx/Use MY 1973/74 – “New Crop” MY 2015/16

18. U.S. Wheat Supply-Demand August 201514 4 14 14 14 14 14

19. U.S. Wheat MY 2015/16 Forecasts 14 4 14 14 14 14 14

20. U.S. Wheat Supplies in 2015/16 Planted Area2015 = 55.5USDA mln acres
vs 56.8 mln ac2014
Harvested Area2015 = 46.7KSU (47.0USDA) mln acres
vs 46.4 mln ac2014
Yield2015 = KSU (45.2USDA) bu/ac
vs 43.7 bu/ac2014
Production2015 = KSU (2.125USDA) bln bu
vs bln bu2014
Total Supply2015 = KSU (3.0USDA) bln bu
vs bln bu2014

21. U.S. Wheat Seeded Acreage
2015 U.S. Wheat acreage  1.3% vs 2014
USDA Est. of All U.S. Wheat Acres in 2015 = mln ac. (743,000 acres)

22. U.S. Wheat Acreage

23. U.S. Wheat Yields
Record High

24. U.S. Wheat Total Supplies
U.S. Total Supply of wheat in MY 2015/16 of bb is up from bb
In MY 2014/15 – lowest since MY 2007/08 (2.620 bb), i.e., in 9 years

25. 2015/16 U.S. Wheat Use Food Use – 967 Million bu. (0.7%)
Driven by population & milling quality
Exports – 925 mln bu. (8%)
Strong World competition,  USD$
Feed+Residual – 195 mb (22%)
 vs 2 yrs ago (223 mb in MY 2013/14)
Total Use – Billion bu. (5%)
2014/15 (2.052 bb), 2013/14 (2.431 bb)

26. U.S. Wheat Use Since MY 2004/05

27. U.S. Wheat Use & End Stocks

28. U.S. Wheat Ending Stocks & % Stx/Use

29. U.S. Wheat Ending Stocks & Prices

30. U.S. Wheat Price vs U.S. Stocks-to-Use

31. Wheat Market Prospects for MY 2015/16
2015 U.S. HRS Wheat Crop?
Quality of HRW (lower protein) & SRW Crops (disease/wet)
Prospects for 2015 U.S. Hard Red Spring wheat crop – Good!!
World Wheat Crops in MY 2015/16 (up 0.1%)
Higher in Kazakhstan, Russia, Turkey, Ukraine, & China
Lower in Argentina, Canada, U.S. & European Union
Financial Markets & Geopolitical Conflicts
Financial  European Union, China, U.S. Dollar, ……
Geopolitical  Black Sea Region, Middle East, …..

32. Questions? Daniel O’Brien – Extension Agricultural Economist Kansas State university KSUGrains on Twitter & Facebook