American wheat growers are aiming for their smallest crop in a decade at the same time the U.S. stockpile is mushrooming and world wheat supplies are at record levels. USDA is scheduled to release one of its most important crop reports of the year today and for the first time since 1988, it may call for a price-depressing wheat carry-over of more than 1 billion bushels.
The U.S. surplus ballooned due to a collapse in exports. The strong dollar puts U.S. grain at a disadvantage on the world market, where demand is weak following a record-setting global wheat harvest in 2015.
Analysts surveyed by Bloomberg and Reuters expect, on average, that slightly more than 980 million bushels of wheat will be in U.S. grain bins on June 1, considered the starting point for harvest of this year’s wheat crop. The stockpile will stand at 1.013 billion bushels next June 1 according to the Bloomberg survey while the analysts surveyed by Reuters put it at 997 million bushels.
In either case, it would be the largest U.S. wheat stocks since 1.26 billion bushels in June 1988. At 1 billion bushels, the stockpile would equal a six-month supply. Only a year ago, the carry-over was 752 million bushels.
Farm-gate prices for wheat are forecast by USDA to drop for the fourth year in a row, meaning continued financial stress on growers. Wheat prices hit a record season-average price of $7.77 a bushel following the 2012 drought. The 2016 crop may sell for an average $4.20, according to USDA.
Today’s crop report, to be released at noon ET, will make the first estimate of the winter wheat crop, which provides the lion’s share of U.S. wheat output. In the companion WASDE report, USDA also will make its firsts projections of the fall harvest based on its survey of farmers’ planting intentions. They point to a corn crop of 14.1-14.2 billion bushels and a soybean crop of 3.75-3.8 billion bushels, according to surveys of traders by Dow Jones, Reuters and Bloomberg. The corn crop would be the second-largest and soybeans the third-largest ever.
With the May crop report, attention turns to the prospects for the growing season around the world and away from the dominant question of the past few months, which was consumption of the 2015 crops. The connecting link between them is the carry-over, the unconsumed remainder of the old crop which is entered on the balance sheet as beginning stocks for the new crop year.