Wheat

wheat

Overview

Wheat is the third-largest field crop produced in the United States following corn and soybeans. In 2018, the United States produced 1.9 billion bushels of wheat. U.S. peak production of 2.5 billion bushels occurred in 1998 and again in 2008. The largest wheat producing states by volume in 2016 were:  Kansas (467 million bushels), North Dakota (333 million bushels), Montana (213 million bushels), Washington (157 million bushels) and Oklahoma (136 million bushels).

Production

U.S. wheat production is classified into five major classes: hard red winter, hard red spring, soft red winter, white and durum.  Each class has different end-uses, and production tends to be region-specific (Table 1). Hard red winter and hard red spring wheat account for 60% percent of production. These classes are primarily used to produce bread flour.  Soft red winter represents 23% of wheat production and is used in the production of cakes, crackers, and cookies. White wheat accounts for 15% of production and is used in noodles, crackers and cereal products. White wheat is a relatively broad category that includes both soft and hard varieties, as well as spring and winter varieties. Durum wheat is used to produce pasta.

Table 1. U.S. Wheat Classes.
Class 2018 Production,
 in Bushels
Location Produced Uses
Hard Red Winter 661 million Great Plains (TX to MT) Bread flour
Hard Red Spring 583 million Northern Plains (ND, MT, MN, SD) High-protein blending
Soft Red Winter 292 million Eastern States Cakes, cookies, crackers
White 267 million WA, OR, ID, MI, NY Flour for noodles, crackers, cereals
Durum 73 million ND, MT Pasta

Winter wheat is sown in the fall and harvested the following summer.  The crop emerges shortly after seeding and then enters dormancy over the winter months.  Winter wheat resumes growth in the spring.  Winter wheat is often planted to take advantage of fall moisture which ameliorates problems of limited spring and early summer moisture.  It also matures earlier than spring wheat, so it is less subject to extreme summer heat in southern climates.  Spring wheat is planted where cold winter weather often harms winter wheat and in regions where there is usually adequate spring and summer moisture.  Spring wheat is sown in the spring and harvested in the late summer or fall. Approximately 63% of U.S. wheat production is winter wheat.

Prices and Demand

The price received by farmers for all wheat in 2017 averaged $4.60/bushel. Per capita wheat consumption has been declining for more than a century.  In 1879, wheat flour consumption was 225 pounds/capita.  Per capita consumption reached a low of 110 pounds in 1972.  Consumption rebounded to 146 pounds by 2000, as flour-based foods such as pizza became more popular and because of the advent of bread machines.  Over the past several years, however, per capita consumption of wheat flour has been decreasing as fad diets are encouraging an increasing percentage of the population to remove starches from their diet. In 2015 the average wheat flour consumption in the United States was 133.0 pounds per capita.

Value Added Opportunities

Wheat is generally marketed as a commodity, but a variety of value-added, niche markets exist.  Organic food grains are increasingly important to some consumers.  In addition, specialty wheat varieties (such as Khorasan) can be more palatable to those who have moderate allergies to wheat gluten.  Finally, protein levels in both winter and spring wheat are important for food processors.  In some years, high protein levels (especially in spring wheat) are often rewarded by substantial price premiums.  Hence, higher protein varieties of spring wheat provide another value-added opportunity.

Competitive Analyses

U.S. wheat acreage continues to be pressured by a variety of factors.  Increased demand for corn, resulting from expanding ethanol production, has caused some wheat acreage in the Upper Midwest to be shifted to corn production.  On the other hand, world wheat prices are historically about 125% of the price of corn because wheat is used for livestock feed in many countries.  Hence, increases in prices caused by higher corn prices and reduced wheat acreages are a positive factor for future U.S. wheat production.  Nonetheless, these small acreage changes in the United States have little impact on world prices given that U.S. wheat production is only 8% of the world total and less than 20% of world trade.  In addition, it appears that Eastern Europe is developing infrastructure that could make it a larger competitor in world wheat markets.  Whether institutions and property rights can also be developed commensurate with infrastructure improvements will likely be the deciding factor for growth in this regions.

As wheat acreage has declined, exporters and export customers are increasingly concerned about securing future supplies.   Hence, three new unit train loading facilities are currently being constructed in north central Montana.  Coupled with the recent deregulation of the Canadian wheat marketing sector, it is likely that more Canadian wheat will be imported into the U.S. to take advantage of elevation and transportation logistics.

Finally, feed grain and soybean yields continue to increase because of new technologies – especially those related to genetic modification with respect to insects, disease, and weed control.  Such genetic engineering has not occurred to date in the wheat sector.  Of course, the primary factor for this resistance has been consumer concerns.  Nonetheless, if yield increases and cost reductions within the U.S. wheat sector do not keep pace with production alternatives, the U.S wheat industry will likely contract in the future.
 

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SaveLinks checked September 2018.