U.S. Wheat Crop to Be Smallest Since 1913, USDA Report May Show

By Jeff Wilson and Megan Durisin

Bloomberg) -- Booming grain inventories and a dwindling winter wheat crop -- there will be plenty to look for when the U.S. Department of Agriculture releases a batch of key reports on Thursday.

The agency is due to publish its World Agricultural Supply and Demand Estimates (or WASDE) report at noon in Washington, a monthly fixture of the farming world that gives the latest balance-sheet estimates for the major crops in the U.S. and around the world.

But Thursday will also see the USDA’s first report of the season on the planted acreage of winter wheat. That will show U.S. farmers sowing the smallest area since 1913, when Woodrow Wilson held the presidency, according to a Bloomberg survey of analysts.

Additionally, the USDA will release a closely scrutinized quarterly report on grain inventories. As of Dec. 1, U.S. stockpiles of corn, soybeans and wheat -- the three biggest annual crops -- were probably 10 percent higher than a year earlier, according to another survey, after timely rain and moderate temperatures boosted U.S. yields to records.  “We are swimming in supplies,” Diana Klemme, vice president at Atlanta-based researcher and broker Grain Service Corp., said in a telephone interview Jan. 6. “Rallies will likely fail unless weather curbs global production. Prices will find support from rising demand as world and U.S. economic growth improves.”

* Corn inventories at the start of Dec. 1 were probably up 9.7 percent at 12.323 billion bushels, the survey showed.
* The USDA may also say soybean inventories rose 8.8 percent and wheat reserves jumped 18 percent.
* World inventories prior to the next Northern Hemisphere harvest as measured in days of usage are seen rising to their highest since 2002. That may keep pressure on farm income for a fourth year and curb demand for seeds, fertilizer, tractors and farmland.

Piles of corn and wheat can be seen all around the Midwest.  Cornerstone Ag LLC, a Colby, Kansas-based merchandiser, has more supplies still sitting in ground storage even after adding 2.1 million bushels of new capacity four years ago, and it’s loading more trains than ever before. Farmers are holding onto more inventory than usual, waiting to sell on price rallies.  “Demand is steady but it just can’t keep up with the record crop production,” said Eric Sperber, Cornerstone’s CEO and general manager.

There’s so much wheat that prices are have slumped for four straight years. U.S. farmers have increasingly turned to corn and soybeans in recent decades as genetically modified varieties offer higher yields, while biotech wheat hasn’t been approved for commercial sale.

“The world still needs a lot of wheat, they just don’t need it from us,” Bill Lapp, president of Advanced Economic Solutions, a commodity consulting firm in Omaha, Nebraska, said in a telephone interview. “There’s plenty of places to grow hard wheat and soft wheat around the world. ”

Indeed, the U.S. has been losing its foothold in the world wheat market for decades, and the trend may only be exacerbated with this year’s acreage drop. The surge in the dollar since 2014 has also made domestic supplies less competitive abroad. Before the next harvest, domestic grain bins will hold enough of the commodity to account for 50 percent of annual consumption and exports, the most in 30 years.

Prices for many agricultural commodities -- except soybeans-- were lower in the fourth quarter than a year earlier, despite strong export volumes.

“If production of crops and livestock continues to expand at the current pace, agricultural producers in the U.S. likely will become increasingly reliant on international demand and exports to support domestic prices and farm incomes,” Cortney Cowley and Matt Clark, economists at the Kansas City Federal Reserve, said Jan. 5 in a report.

To contact the reporters on this story:
Jeff Wilson in Chicago at jwilson29@bloomberg.net;
Megan Durisin in Chicago at mdurisin1@bloomberg.net
To contact the editors responsible for this story:
Simon Casey at scasey4@bloomberg.net
Patrick McKiernan