Wheat surplus may drop, boosting prices in 2017

Wheat futures are edging higher in early 2017, and the crop has generated some market talk.

The gist is that wheat prices have been in the doghouse for so long that they might be due for an improvement.

There is some reason for this hope, but the crystal ball view is clouded by a lot of conflicting data.

Dry weather in the U.S. southern Plains, where hard red wheat is grown, has wheat condition reports for Kansas and Oklahoma well below where they were last year.

Cold temperatures have pushed south into the U.S. southern Plains and into Eastern Europe, raising the potential for crop damage in areas where there is no protective snow cover.

However, wheat is resilient, and a good spring could offset any current problems.

U.S. winter wheat acreage is likely down. The U.S. Department of Agriculture today issues the results of its first farmer survey of seeded acreage.

U.S. winter wheat yields in 2016 were spectacular, up 30 percent from 2015, making up for the nine percent decline in seeded area.

This year analysts expect another cut in seeded area, down about eight percent to around 33 million acres.


Given an acreage decline, and if yields fell back to the recent average, there should be a significant decline in U.S. wheat production.

That would support wheat futures prices, but although wheat traders focus a lot on developments in the United States, they don’t ignore what is happening worldwide.

The cut in U.S. wheat acreage will likely be offset by an increase in winter wheat seeded area in Russia and North Africa, according to the International Grains Council.

So it is really hard to forecast what global wheat production will look like.

Also, the global wheat carry-in to the 2017-18 crop year will be record high at 252 million tonnes, according to the USDA.

Global wheat demand is almost 740 million, so the stocks-to-use ratio is forecast at about 34 percent, well up from 26 percent five years ago.

That would appear to be a negative for prices, but if you dig into the numbers, you see that almost all the increase in global wheat stocks in recent years has occurred in China, although rising U.S. stocks have also been a factor.

China’s stocks of 112 million tonnes are more than double what they were in 2012-13.


China does not traditionally export wheat, so unless they change that policy, their stocks are almost irrelevant to the actual wheat market.

If you remove China from the global stocks-to-use calculation, you find that the ratio has been little changed during the past five years, ranging from a low of about 22 percent to a high of 24 percent.

The ratio for this year, excluding China, is 22.6 percent.

That is still a comfortable supply, but not the disastrous burden implied by the global number that includes China.

I mentioned that wheat stocks in the U.S. have also been an issue. Looking exclusively at the U.S., its stocks-to use-ratio has risen to about 50 percent. Its strong dollar has discouraged exports, causing stocks to climb.

If American growers reduce production as expected, that ratio would likely drop under 40 percent, which is a much less burdensome number.

There is nothing in this data to support a rip-roaring rally, but the 2017 wheat market might be a little more upbeat than 2016.


  • John Wayne

    Lots of calls from buyers last week for my No 1 high protein wheat. Nice to see the price higher now than the first time I received No 1 high protein price for wheat back in 1983/84 CWB crop year, I received $6.83 a bushel . Seems to be lots of demand for good quality wheat. We sure need the CWB back to extract a premium for this new found demand.

    • Stephen Daniels

      Just never gonna let that go are you?

      • John Wayne

        Stephen, just letting farmers know there is great demand for high quality wheat. Just about five years of history without the CWB have proven that so far I am right, Grain companies refuse to pay for quality and protein. From 2002 – 2012 I grew 8 out of 10 years No. 1 high protein wheat, it has hit me hard financially as I lost the protein premiums.
        You can say in a way that I have gotten over it. I did not grow any wheat in 2016 and will refuse to grow any in 2017 due to the overall glut of wheat in the world.
        I hope that the majority of Western Canadian farmers don’t get sucked in and grow more wheat this year! If farmers were smart they would grow 25% less acres of wheat this year.

        • Bruce

          Yes, John you are surely correct. The world is awash in wheat. It has been decades now since the first ad hoc payments to western Canadian prairie grain farmers were paid. It is too bad but the taxpayers of Canada were left making tax payments of billions of dollars all because of overproduction of wheat in exporting countries of the world.

          • ed

            Summer fallow, right?

          • Bruce

            Yes, summer fallow would work ed. But also leaving stubble standing without a crop would work too. With the price of wheat today fertilizer is probably the biggest reason for the poor price of wheat.

          • Harold

            If we got out of the “casino business” and sold country-direct in a real trade agreement, where would the casino and all of the games go? Place your bets folks.

  • ed

    We know that having too much food produce does lower prices and that if there is none at all and the planet all starved to death that it would have no need to go up, so it is hard to know what would get the price of grain above the cost of production. Farmers (bless their souls) should probably not produce any more unwanted product until a few of these blanks are filled in.

    • Harold

      Here is a little “ditty” I obtained from the fed Agri disclosure reports verbatim.

      [ Negotiations, Sector Competitiveness, and Assurance Systems of $36.1 million, primarily comprised of the Canadian Wheat Board Transition Costs Program, which increased by $27.0 million in 2015–16 ]

      Not that this alone means anything, but it does demonstrate that there has been no “free lunch” at $6.83 a bushel. Thought you may be interested.

      • ed

        Thanks Harold….Wheat as a general bulk commodity is being touted as in a glut position in the world. There is no real way of knowing that, now without the farmers having their price positive Canadian Wheat Board single desk marketing agency, (Cartel if you will) / like OPEC sort of thing. When Western Canadian farmers did have the CWB they received between 89-93% of the Vancouver Port price at their farm gates. Since the killing off of the board they have constantly received between 40-60% of the Vancouver port price at their farm gate and many in the world are either going hungry or starving to death as the logistics of getting the wheat out to port and loaded on to ships has gone sideways, some unintentionally and much of it intentionally with a lot of spin to support the theft. Those lost sales and lives “may” be contributing to the glut, but why would the grain companies care as they make money on the flip and they have increased that value at least 4 fold, maybe 6 fold at times. For most of the years since Aug. 1st, 2012 this value has amounted to about $4 Billion in lost income to prairie farmer in wheat alone according to high ranking economist and is very evident in big grain companies bottom lines, increased wage outlays, and investment in inland and port terminal infrastructure to dump a small portion of the extra windfall to make their lives easier. This blended with the massive increase in farm debt highlight the situation quite clearly. Borrowing against increasing land prices and firing that money out the farm gate in the form of beans, corn, sunflowers, canola, peas, oats, barley or even wheat at below the COP, (cost of production) in many cases while retaining that ever increasing debt only to do it again in subsequent years is great for those reporting gross sales increases, but is really proof of mostly things that farmers would rather not talk about or would contain adjective descripters that many of them would rather not be subjected to.

        • Harold

          I agree. “Feeding the world”, as you have pointed out, comes solely from the makers and the masters of the fake News. Canada agriculture is merely a land and resource acquisition of the multi-nationals, as you have also pointed out.

          With the demise of the World British Sterling, OPEC/New York, was the exchange of an world American dollar backed by gold for, a American dollar now backed by OIL/OPEC.

          Canadian’s to my knowledge have never asked the Finance Minister to prove the existence of our gold backed currency.
          If there is no gold, then our dollar is labor backed.(fiat money)
          Further we have never asked the finance minister to prove to Canadians that Canadians actually do own the Bank of Canada. (given away during Pierre Elliot Trudeau era)

          The $4 billion you speak of is a loss to the Canadian currency circulation with-in Canada. Debt leads one to be a consumer of taxes and a consumer of loans and further sustaining the profits of the multi-nationalists. (COP)
          The way out is forbidden knowledge, and the thought absurd..

          • ed

            Thanks for the support….

          • Harold

            Rather than support, I would call it seeing eye to eye.

  • Welderone

    A few years ago China was the number one buyer of Canadian wheat. When they are now stockpiling billions of bushels of wheat, this hardly supports Canadian wheat prices. But even when wheat moves up a dollar a bushel. Rich farmers and not so rich farmers want wheat in their crop rotations. Then the ample supply again would just move wheat back down to today’s wheat prices.