Hard Red Wheat Sep '24 (KEU24)

Description

Wheat is a cereal grass. Wheat was a wild grass before humans started to cultivate it for larger-scale food production. It has been grown in temperate regions and cultivated for food since prehistoric times. Wheat is believed to have originated in southwestern Asia. Archeological research indicates that wheat was grown as a crop in the Nile Valley about 5,000 BC. Wheat is not native to the U.S. and was first grown here in 1602 near the Massachusetts coast. The common types of wheat grown in the U.S. are spring and winter wheat. Wheat planted in the spring for summer or autumn harvest is mostly red wheat. Wheat planted in the fall or winter for spring harvest is mostly white wheat. Winter wheat accounts for nearly three-fourths of total U.S. production. Wheat is used mainly for human consumption and supplies about 20% of the food calories for the world's population. The primary use for wheat is flour, but it is also used for brewing and distilling, and for making oil, gluten, straw for livestock bedding, livestock feed, hay or silage, newsprint, and other products.

Wheat futures and options are traded at the CME Group, ICE Futures US Exchange, the MatbaRofex exchange (Argentina), Sydney Futures Exchange (SFE), Euronext (Paris), Zhengzhou Commodity Exchange, and the South Africa Futures Exchange. The CME's wheat futures contract calls for the delivery of soft red wheat (No. 1 and 2), hard red winter wheat (No. 1 and 2), dark northern spring wheat (No. 1 and 2), No.1 northern spring at 3 cents/bushel premium, or No. 2 northern spring at par.

Prices - CME wheat futures prices (Barchart.com symbol ZW) posted their high for 2023 in February of $7.98 per bushel. Wheat prices then retreated and posted a 3-year low of $5.73 per bushel in May on the outlook for bumper wheat crops in Russia and the EU. Russian wheat exports were estimated to climb to a record 44.4 MMT in 2022/23. Also, an extension of the Black Sea grain export deal in May kept Ukrainian wheat supplies flowing, adding to a supply glut. Ukraine and Russia together account for about one-quarter of the global wheat trade. Wheat prices jumped more than $2 per bushel into July on concerns about disruption to global supplies after Russia pulled out of an agreement that allowed Ukraine to ship grain through the Black Sea. Also, Russian missiles damaged port infrastructure in Ukraine's Odesa region, curbing its ability to export wheat. However, the gains were short-lived as bigger US wheat supplies weighed on prices. In September, the USDA projected that US 2023 all-wheat production would climb to a 3-year high of 1.812 billion bushels. Also, the USDA said that Q3 US wheat stocks of 1.78 million bushels were above market estimates. Wheat prices sank to a 3-1/2 year low in November of $5.28 per bushel. Ramped-up exports of cheaper Russian wheat reduced demand for more expensive US wheat and weighed on wheat prices. In 2023, US wheat exports fell to a 51-year low of 20.647 MMT. Abundant wheat supplies undercut prices as the USDA, in the November WASDE report, projected higher-than-expected 2023/24 US and global wheat ending stocks. Wheat prices recovered slightly into year-end on disruption of wheat supplies with the ongoing Russian-Ukraine war and after Houthi rebels from Yemen began attacking commercial ships transiting the Red Sea, forcing nearly half the container fleet to divert shipments around the southern tip of Africa instead of going through the Red Sea. Wheat prices finished 2023 down sharply by -20.7% yr/yr at $6.28 per bushel.

Supply - World wheat production in the 2023/24 marketing year is forecasted to fall by -0.5% yr/yr to 784.908 million metric tons, below the record high of 789.166 in 2022/23. The world's largest wheat producers in 2023/24 are expected to be China with 17.4% of world production, the European Union with 17.1%, India with 14.1%, Russia with 11.6%, and the US with 6.3%. China's wheat production in 2023/24 is expected to fall by -0.8% yr/yr to a record 136.590 million metric tons. India's wheat production in 2023/24 is expected to rise by +6.3% yr/yr to 110.55 million metric tons. The world land area harvested with wheat in 2023/24 is expected to rise +1.4% yr/yr to 223.0 million hectares (1 hectare equals 10,000 square meters or 2.471 acres). The world wheat yield in 2023/24 is expected to fall by -1.9% yr/yr to 3.52 million metric tons, below the 2022/23 record high of 3.59 million metric tons.

US wheat production in 2023/24 is expected to rise by +5.2% yr/yr to 1.734 billion bushels. The US winter wheat crop in 2023 rose by +11.2% yr/yr to 1.227 billion bushels, which was well below the record winter wheat crop of 2.097 billion bushels seen in 1981. US production of durum wheat in 2023 fell by -10.3% yr/yr to 57.377 million bushels. US production of other spring wheat in 2023 fell by
-6.8% yr/yr to 449.575 million bushels. The US states producing the largest amount of winter wheat in 2023 were Kansas, with 16.9% of US production, Washington with 7.7%, Montana with 6.5%, Colorado with 6.0%, and Texas with 5.7%. US farmers planted 49.808 million acres of wheat in 2023, up by +8.9% yr/yr. The US wheat yield in 2023/24 is expected to be down by -1.5% yr/yr at 45.8 bushels per acre.

Demand - World wheat utilization in 2023/24 is forecasted to rise by +0.7% yr/yr to 796.4 million metric tons. US consumption of wheat in 2023/24 is expected to rise by +3.2% yr/yr to 1.154 billion bushels, below the 2012/13 record high of 1.389 billion bushels. The wheat usage breakdown in 2023/24 is expected to be 84.1% for food, 10.4% for feed and residuals, and 5.5% for seed.

Trade - World trade in wheat in 2023/24 is expected to fall by -4.8% yr/yr to 209.5 million metric tons. US exports of wheat in 2023/24 are expected to fall by -4.5% yr/yr to 725.0 million bushels. US imports of wheat in 2023/24 are expected to rise by +18.9% yr/yr to 145.0 million bushels.

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