Wheat

Wheat is a cereal grass, but before cultivation it was a wild grass. 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 as a human food 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 on the Mercado a Termino de Buenos Aires (MATBA), Sydney Futures Exchange (SFE), JSE Securities Exchange of South Africa, National Commodity & Derivatives Exchange of India, NYSE-LIFFE exchange in London and Paris, Budapest Stock Exchange (BSE), the Chicago Board of Trade (CBOT), the Kansas City Board of Trade (KCBT), and the Minneapolis Grain Exchange (MGE). The Chicago Board of Trade’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 – CBOT wheat prices on the nearest-futures chart traded sideways to lower during the first half of 2010 and posted a 1-1/2 year low of $4.25 a bushel in May 2010. Wheat prices then exploded higher to a 2-year high of $8.41 a bushel in August 2010 after the worst drought in Russia and Eastern Europe since record keeping began 130 years ago prompted Russia to ban grain exports for the rest of the year. Wheat prices quickly fell $2 a bushel into November 2010, though, after the USDA forecast that 2010/11 global wheat production would fall by only about 1%, which would boost U.S. carry-over to a 23-year high and global 2010/11 carry-over to a 9-year high. Wheat prices rebounded in December and finished 2010 up 47% at $7.94 a bushel. Wheat prices started 2011 on a firm note and posted a 2-1/2 year high of $8.93 a bushel after the United Nations FAO warned that a severe drought in China may cause the world’s largest wheat producer to import large quantities of wheat. Foreign demand for U.S. wheat supplies strengthened toward the end of 2010 due to scant European and Russian supplies and quality issues for Canadian and Australian supplies because of flooding. 2011 U.S. winter-wheat plantings rose 9.8% y/y to 40.99 million acres and the U.S. wheat supply situation remains above average with the U.S. stocks-to-use ratio at 34%, but the global stocks-to-use ratio of 27% is tighter and is near the decade average.

Supply – World wheat production in the 2010-11 marketing year fell -5.5% to 645.408 million metric tons, down from 2008-09 record high. The world’s largest wheat producers were the European Union with 21.2% of world production in 2010-11, China (17.7%), India (12.5%), the U.S. (9.3%), Russia (6.4%), and Australia (3.9%). China’s wheat production in 2010-11 fell -0.5% yr/yr to 114.500 million metric tons, but is still well below its record high of 123.289 million metric tons seen in 1997-98. Australia’s wheat production rose +14.0% yr/yr to 25.000 million metric tons in 2010-11, but still well below its record high of 26.132 million metric tons in 2003-04. The world land area harvested with wheat in 2010-11 fell -2.0% yr/yr to 222.2 million hectares (1 hectare equals 10,000 square meters or 2.471 acres), remaining above the 209.6 million hectares in 2003-04, which was the smallest wheat harvest area since 1970-71. World wheat yield in 2010-11 fell -3.7% to 2.90 metric tons per acre, down from the 2008-09 record high of 3.04 metric tons per hectare.

U.S. wheat production in 2010-11 fell -0.4% yr/yr to 2.208 billion bushels, well below the record U.S. wheat crop of 2.785 billion bushels seen in 1981-82. The U.S. winter wheat crop in 2010 fell -2.6% yr/yr to 1.485 billion bushels, which was well below the record winter wheat crop of 2.097 billion bushels seen in 1981. U.S. production of durum wheat in 2010 fell -1.7% yr/yr to 107.180 million bushels. U.S. production of other spring wheat in 2010 rose +5.4% yr/yr to 615.975 million bushels. The largest U.S. producing states of winter wheat in 2010 were Kansas with 24.2% of U.S. production, Texas with 8.6%, Oklahoma with 8.1%, and Washington with 7.9%. U.S. farmers planted 53.603 million acres of wheat in 2010, which was down -9.4% yr/yr. U.S. wheat yield in 2010-11 was 46.4 bushels per acre, making a new record high. Ending stocks for U.S. wheat for 2010-11 were at 818.0 million bushels, down 16.2% yr/yr.

Demand – World wheat utilization in 2010-11 rose +1.9% yr/yr to a record high of 662,7 million metric tons. U.S. consumption of wheat in 2010-11 rose +3.4% yr/yr to 1.176 billion bushels, which was below the record high of 1.381 billion bushels seen in 1998-99. The consumption breakdown shows that 79.1% of U.S. wheat consumption in 2010-11 went for food, 14.5% for feed and residuals, and 6.5% for seed.

Trade – World trade in wheat in 2010-11 fell -6.7% yr/yr to 125.3 million metric tons, down from 2008-09 record high of 143.2 million metric tons. U.S. exports of wheat in 2010-11 rose +47.6% yr/yr to 1.3 billion bushes, and remained below the record of 1.771 billion bushels of exports seen in 1981-82. U.S. imports of wheat in 2010-11 fell -7.6% to 110.0 million bushels, down from the 2006-07 record high of 121.9 million bushels.

Excerpted from the CRB Commodity Yearbook. For more information on CRB products click here