WHEAT OUTLOOK, WHS-0395. Economic Research Service, USDA ------------------------------------------------------------------------ Approved by the World Agricultural Outlook Board March 13, 1995 ------------------------------------------------------------------------ Recent Developments HIGHLIGHTS -- March forecast of U.S. exports down to 1,275 million bushels. -- U.S. export inspections pace slows. -- March forecast of U.S. ending stocks up to 481 million bushels. -- U.S. average farm price dips to $3.61 in February. A SLOWING EXPORT PACE REDUCES U.S. EXPORT PROSPECTS Commitments for 1994/95 U.S. exports are about 4.5 percent ahead of last year, but actual shipments are slightly behind the pace of the similar week a year ago. Consequently, the U.S. export forecast for 1994/95 was reduced slightly this month to 1,275 million bushels. Despite this small reduction, U.S. 1994/95 exports are still forecast nearly 50 million bushels above a year earlier. And, U.S. market share continues to be projected at 36 percent for 1994/95, 3 percentage points above the 33 percent share in 1993/94. Forecast world 1994/95 exports remained virtually unchanged in March, at about 98 million tons, but still lower than the 99.5 million in 1993/94. In March, large projected export for Eastern Europe and other smaller exporters will largely offset the decline of 500,000 tons each in U.S. and EU export prospects. For 1994/95, expected EU exports decline to 17 million tons from 19.2 million in 1993/94. The drop reflects the slow pace of sales to date and weak global imports. In March the European Commission stated soft wheat and wheat flour exports will fall short of earlier expectations. Gains expected in EU durum and food aid exports will not offset the shortfall in soft wheat and flour. The largest reduction this month in global imports was a 500,000 ton reduction in Russia's imports to 3 million. The drop places Russia's 1994/95 imports 2 million tons below 1993/94. Smaller reductions were made in several other importing countries. Between June and December, U.S. wheat exports (grain, flour, and selected products) totaled 706.9 million bushels, averaging 101 million per month. For June-December 1993, exports totaled 755 million bushels, or an average of 108 million. Between June and December 1994, flour exports totaled 31 million bushels, up 30 percent from a year earlier. U.S. HRW exports for 199495 were reduced in March to 470 million bushels, down 20 million from the previous month, and down 16 million from the previous year. According to "U.S. Export Sales", HRW commitments on March 2, totaled 382 million bushels compared to the grains portion of the export estimate of about 446 million. The HRS export forecast was reduced 10 million bushels to 300 million, with March 2 commitments of 263 million bushels compared to the grain portion of the export forecast of about 290 million. Durum exports were increased 5 million bushels to 40 million because of strong sales and shipments. Total 1994/95 U.S. wheat supplies of 2,979 million bushels and domestic use of 1,223 million bushels are unchanged from the February USDA projections. U.S. wheat imports are still forecast to total 90 million bushels. Wheat imports from June through December (including grain, flour, and products) totaled 58.9 million bushels, compared with 54.4 million a year earlier. In recent months, however, imports have slowed dramatically, and this trend is expected to continue through the marketing year. Durum imports for the first 7 months of 1994/95 fell to 10.7 million, a 37-percent reduction from a year ago. Imports by class have changed, reflecting a slower durum and faster white wheat import pace. Ending stocks for 1994/95 are forecast at 481 million bushels, up 25 million from the February forecast. Ending stocks of both hard red winter and hard red spring wheat are forecast at 187 million bushels. While HRS ending stocks have been lower in recent years, these are the lowest HRW ending stocks since 1973/74. The forecast increase in ending stocks is likely to have little effect on the 1994/95 season average price this late into the year. The 1994/95 season average farm price for all wheat is forecast to range from $3.40 to $3.50 per bushel, unchanged from the February forecast. With less than 3 months remaining in the current marketing year, more than 80 percent of the crop has normally been marketed. Farm prices early in the marketing year were below the forecast range, but they have been offset with higher prices since September. Early reports from Texas, Oklahoma, Kansas, and Missouri indicate the winter wheat crop is in better condition than a year earlier. Texas and Washington crop conditions still reflect poor emergence caused by dry planting conditions. The wheat crop conditions for states reporting in early March are included in Table 8. The "Weekly Weather and Crop Bulletin" will begin reporting crop conditions for major wheat producing States in April. The first indication of producers' spring wheat planting intentions will be published in "Prospective Plantings", released on March 31. **************************************************************************** * Information Contacts: * * Edward W. Allen (senior wheat analyst) (202) 219-0831 * * Bryan Just (domestic) (202) 501-8524 * * Sara Schwartz (international, domestic cross commodity) (202) 501-8514 * * Carolyn Whitton (international) (202) 219-0825 * **************************************************************************** Fundamentals of Wheat Supply and Demand In 1994/95 U.S. SUPPLY FORECAST DOWN 2 PERCENT FROM A YEAR EARLIER Reduced production and imports more than offset increased beginning stocks. Total U.S. wheat supplies are forecast below 3 billion bushels for the third time in 15 years. Although up from a year earlier, beginning stocks of 568 million bushels were the fourth lowest in 15 years. Imports are projected down because the large U.S. corn crop is reducing incentives to ship feed wheat south and a Memorandum of Understanding with Canada sets tariff rate quotas on wheat imports. U.S. production in 1994 was 2.32 billion bushels, down 3 percent from a year earlier but the fifth largest in the last 10 years. Despite a 0 percent ARP for the second year in a row, planted area continued to decline. Wheat prices before and during the early planting of winter wheat (August-September 1993) were much lower than prices affecting the planting of spring wheat (March-April 1994). Moreover, excess moisture and flooding prevented some winter wheat from being planted. Average yields declined 2 percent as below trend HRW yields more than offset record SRW yields. USE FORECAST UP 2 PERCENT U.S. wheat exports are projected at 1.275 billion bushels (34.7 million tons), up 4 percent from 1993/94. The U.S. share of global trade is expected to expand to 36 percent from 33 percent in 1993/94 because of reduced competitor exports. Drought in Australia has greatly lowered that country's supplies, so U.S. wheat exports to Egypt and several Asian and Middle Eastern countries are increasing. Global 1994/95 ending stocks will be the lowest since 1981/82 and the world stocks-to-use ratio will be the lowest since the USDA database began in 1960/61. Exporter supplies are very tight, so export prices are above a year ago. As competition has receded, EEP bonuses have fallen, and now average about $10 per ton. Global trade is being reduced by larger production in some importing countries (especially Morocco and in Eastern Europe), less imports of wheat for feeding, and reduced imports by the former Soviet Union due to lower feed consumption. However, China is forecast to expand its imports more than 150 percent from a year ago to 11 million tons. Domestic use is forecast down 17 million bushels in 1994/95. Feed and residual use is expected to decline more than food and seed use increase. Food use is forecast up 1 percent in 1994/95, less than growth during the last 2 years and about the same as population growth. Feed and residual use is forecast down, although it was up in the first half of 1994/95. Because ending stocks are forecast to be the lowest in the last 20 years, a negative residual is expected in the second half of 1994/95. U.S. PRICES RESPOND TO TIGHTER WORLD FUNDAMENTALS The changes in the U.S. supply and demand support increased U.S. prices. Reduced foreign production and tight competing exporters' supplies supported U.S. and world prices. The season average farm price is heavily weighted by marketings early in the market year. Table 1 -- Wheat: U.S. market year supply and disappearance Item |1989/90 1990/91 1991/92 1992/93 1993/94E 1994/95P -------------------|------------------------------------------------------ Area (mil. ac.) | ARP (%) | 10.0 5.0 15.0 5.0 0.0 0.0 Nat'l total base | 91.1 90.8 89.6 89.6 89.6 88.9 Effective base | 82.3 80.5 79.2 78.9 78.4 78.1 CRP | 8.8 10.3 10.4 10.6 10.8 10.8 0,50/92/85 | 3.5 5.3 5.8 4.0 5.7 5.2 Planted | 76.6 77.0 69.9 72.2 72.2 70.4 Harvested | 62.2 69.1 57.8 62.8 62.7 61.8 Yield (bu/ac) | 32.7 39.5 34.3 39.3 38.2 37.6 | Supply (mil. bu.) | Beg. stocks | 702 536 868 475 531 568 Production | 2,037 2,730 1,980 2,467 2,396 2,321 Imports 1/ | 22 36 41 70 109 90 TOTAL | 2,761 3,303 2,889 3,012 3,036 2,979 | Use | Food | 749 790 789 834 869 875 Seed | 105 93 98 99 96 98 Feed & residual | 139 482 244 194 274 250 Exports 1/ | 1,232 1,069 1,282 1,354 1,228 1,275 TOTAL | 2,224 2,435 2,414 2,481 2,467 2,523 | Ending stocks | 536 868 475 531 568 481 Farmer-owned | reserve | 144 14 50 28 6 0 CCC inventory 2/ | 117 163 152 150 150 142 Free stocks | 275 691 273 353 412 314 | Stocks-to-use | 24.1 35.7 19.7 21.4 23.0 18.1 | Prices ($/bu.) | Season average | 3.72 2.61 3.00 3.24 3.26 3.40-3.50 Target price | 4.10 4.00 4.00 4.00 4.00 4.00 Loan rate | 2.06 1.95 2.04 2.21 2.45 2.58 Deficiency | payment rate | 0.32 1.28 1.35 0.81 1.03 0.61 | Deficiency pmts. | (mil. dollars) | 571 2,420 2,246 1,371 1,904 | Market value | of production | (mil. dollars) | 7,542 7,184 5,957 7,984 7,812 -------------------------------------------------------------------------- Totals may not add due to rounding. E--Estimated, P--Projected. 1/ Imports and exports include flour and selected products expressed in wheat equivalent. 2/ From 1981/82 on, includes Food Security Reserve. Table 2 -- Wheat supply and disappearance by class 1/ 1993/94E |HRW HRS SRW White Durum All Wheat ------------------|-------------------------------------------------- | Area: (mil. ac.) | Planted | 36.3 17.5 10.7 5.4 2.2 72.2 Harvested | 30.1 16.0 9.3 5.2 2.1 62.7 Yield (bu/ac) | 35.4 31.9 43.1 67.3 33.6 38.2 | | Supply: (mil. bu.)| Production | 1,066 512 401 347 70 2,396 Beg. stocks | 204 171 43 64 49 531 Imports | 4 66 0 9 31 109 TOTAL | 1,273 749 444 420 150 3,036 | Use: | Food | 381 195 147 65 81 869 Seed | 39 27 19 7 5 96 Feed & residual | 140 60 60 32 (17) 274 Total domestic | 560 282 226 104 68 1,240 Exports 1/ | 486 266 173 249 54 1,228 TOTAL | 1,046 548 399 353 122 2,467 | Ending stocks | 227 201 45 67 28 568 1994/95P |HRW HRS SRW White Durum All Wheat ------------------|-------------------------------------------------- | Area: (mil. ac.) | Planted | 35.0 17.5 9.8 5.2 2.9 70.4 Harvested | 28.7 16.9 8.4 5.0 2.7 61.8 Yield (bu/ac) | 33.9 30.4 51.3 61.0 35.5 37.6 | | Supply: (mil. bu.)| Production | 971 515 433 303 97 2,321 Beg. stocks | 227 201 45 67 28 568 Imports | 2 53 0 15 20 90 TOTAL | 1,200 769 479 386 145 2,979 | Use: | Total domestic | 544 282 221 99 78 1,223 Exports | 470 300 225 240 40 1,275 TOTAL | 1,014 582 446 339 118 2,498 | Ending stocks | 187 187 33 47 27 481 --------------------------------------------------------------------- Totals may not add due to rounding. E--Estimated, P--Projected. 1/ ERS estimates of area, yield, and domestic use. Table 3 -- Wheat: Quarterly supply and disappearance (1,000 bu.) ----------|---------------------------------------------------------------- Market |Produc- Ending Year | tion Imports Supply Food Seed Feed Exports stocks | 1/ 1/ ----------|---------------------------------------------------------------- | 1992/93: | Jun-Aug | 2,467 20 2,962 212 1 345 283 2,121 Sep-Nov | 0 16 2,137 219 63 (82) 345 1,592 Dec-Feb | 0 17 1,609 197 3 5 356 1,048 Mar-May | 0 16 1,064 207 32 (74) 370 531 Mkt. year| 2,467 70 3,012 834 99 194 1,354 531 | 1993/94E | Jun-Aug | 2,396 15 2,942 211 1 296 301 2,133 Sep-Nov | 0 30 2,163 225 61 (38) 329 1,586 Dec-Feb | 0 27 1,613 210 2 40 332 1,028 Mar-May | 0 37 1,065 223 32 (23) 266 568 Mkt. year| 2,396 109 3,036 869 96 274 1,228 568 | 1994/95P | Jun-Aug | 2,321 31 2,920 212 2 377 260 2,069 Sep-Nov 3/| 0 21 2,091 228 62 (33) 338 1,495 Dec to | May | 0 38 434 34 (94) 677 Mkt. year| 2,321 90 2,979 875 98 250 1,275 481 --------------------------------------------------------------------------- Totals may not add due to rounding. E--Estimated, P--Projected. 1/ Imports and exports include flour and selected products expressed in wheat equivalent. Table 4 -- Wheat: Food disappearance (1,000 bu.) Jun-Dec Jun-Dec 1994 | Oct Nov Dec Jan 1994/95 1993/94 --------------|------------------------------------------------------------ Mill grind +| 77,479 75,450 70,718 69,535 516,487 515,586 Food exports -| 3,105 4,721 4,734 -- 31,349 24,434 Food imports +| 1,671 1,867 1,935 -- 11,941 9,119 Non-flour | food use +| 1,900 1,900 1,900 1,950 13,300 12,600 Food use | 77,945 74,496 69,819 -- 510,379 512,871 --------------------------------------------------------------------------- Source: Department of Commerce, Bureau of Census. Wheat flour and products converted to wheat grain equivalent. Non-flour food use is ERS estimate. Table 5 -- Wheat: Farm prices and prices at selected markets ($/bu.) --------------------- Farm prices ---------------------- All wheat Winter wheat Durum Other spring Month | 93/94 94/95 93/94 94/95 93/94 94/95 93/94 94/95 ------|----------------------------------------------------------------- Jun | 2.84 3.21 | 2.72 3.09 | 3.18 4.57 | 3.21 3.53 Jul | 2.85 3.04 | 2.76 2.99 | 3.26 4.50 | 3.50 3.26 Aug | 2.96 3.24 | 2.83 3.23 | 3.43 4.40 | 3.51 3.20 Sep | 3.10 3.56 | 2.88 3.56 | 3.92 4.60 | 3.37 3.39 Oct | 3.25 3.77 | 3.00 3.78 | 4.23 4.92 | 3.50 3.51 Nov | 3.47 3.76 | 3.21 3.75 | 4.91 4.86 | 3.67 3.51 Dec | 3.63 3.73 | 3.43 3.75 | 4.92 4.67 | 3.75 3.56 Jan | 3.58 3.69 | 3.38 3.67 | 4.97 4.58 | 3.69 3.51 Feb 1/| 3.61 3.61 | 3.34 3.59 | 5.36 4.54 | 3.68 3.41 Mar | 3.69 | 3.26 | 5.71 | 3.64 Apr | 3.56 | 3.25 | 5.70 | 3.68 May | 3.41 | 3.18 | 4.93 | 3.63 ------------------------------------------------------------------------ KC HRW #1 KC HRW #1 St. Louis Portland ordinary 13% prot. #2 SRW #1 soft white Month | 93/94 94/95 93/94 94/95 93/94 94/95 93/94 94/95 ------|----------------------------------------------------------------- Jun | 3.33 3.60 | 3.60 3.85 | 2.83 3.22 | 3.46 3.64 Jul | 3.38 3.48 | 3.89 3.63 | 2.94 3.11 | 3.57 3.52 Aug | 3.34 3.70 | 3.88 3.78 | 2.98 3.31 | 3.44 3.71 Sep | 3.37 4.05 | 4.23 4.12 | 2.75 3.69 | 3.42 4.32 Oct | 3.52 4.31 | 4.58 4.37 | 2.93 3.89 | 3.42 4.61 Nov | 3.39 4.24 | 4.98 4.31 | 3.33 3.84 | 3.47 4.54 Dec | 4.15 4.27 | 5.11 4.32 | 3.62 4.00 | 3.61 4.49 Jan | 4.00 4.06 | 4.69 4.07 | 3.83 3.83 | 3.63 4.33 Feb | 3.80 | 4.54 | 3.61 | 3.52 Mar | 3.64 | 4.39 | 3.36 | 3.46 Apr | 3.63 | 4.42 | 3.29 | 3.58 May | 3.65 | 4.46 | 3.24 | 3.74 ------------------------------------------------------------------------ Minn. Minn. FOB Gulf Average EEP DNS 14% durum $/ton (HRW) bonus $/ton 2/ Month | 93/94 94/95 93/94 94/95 93/94 94/95 93/94 94/95 ------|----------------------------------------------------------------- Jun | 3.96 4.20 | 3.84 5.76 | 122 139 | 20.11 43.28 Jul | 4.80 4.14 | 4.05 5.19 | 129 138 | 42.44 42.18 Aug | 4.88 4.00 | 4.41 5.30 | 131 148 | 41.98 36.39 Sep | 4.90 4.27 | 5.06 6.16 | 132 159 | 50.36 37.61 Oct | 5.17 4.40 | 5.73 6.64 | 137 167 | 52.65 26.82 Nov | 5.50 4.41 | 6.38 6.61 | 147 162 | 53.61 22.44 Dec | 5.45 4.37 | 6.57 5.99 | 159 165 | 52.19 18.65 Jan | 5.32 4.21 | 6.56 6.23 | 155 156 | 59.65 15.26 Feb | 5.29 | 6.78 | 147 154 | 40.72 9.91 Mar | 4.94 | 7.06 | 141 | 52.30 Apr | 4.99 | 6.45 | 141 | 46.49 May | 5.05 | 6.17 | 140 | 47.40 ------------------------------------------------------------------------ Source: NASS & AMS, USDA. 1/ Mid-month. 2/ Weighted avg., all classes. Table 6 -- Wheat: Exports and imports U.S. wheat exports, 1994/95: (1,000 bu.) Jun-Dec Jun-Dec | Sep Oct Nov Dec 1994/95 1993/94 --------------|------------------------------------------------------------ Wheat grain | 117,555 101,450 107,549 104,139 674,310 730,134 Wheat flour | 3,407 3,105 4,721 4,734 31,349 24,079 Products | 130 145 141 147 1,210 877 Total | 121,091 104,699 112,411 109,020 706,869 755,090 U.S. wheat imports, 1994/95: (1,000 bu.) Jun-Dec Jun-Dec | Sep Oct Nov Dec 1994/95 1993/94 --------------|------------------------------------------------------------ Wheat grain | 5,253 5,801 5462 4,327 46,455 45,268 Wheat flour | 599 650 700 697 4,332 3,014 Products | 769 1,022 1,168 1,685 8,067 6,110 Total | 6,621 7,473 7,329 6,709 58,855 54,392 --------------------------------------------------------------------------- Source: Department of Commerce, Bureau of Census. Wheat flour and products converted to wheat grain equivalent. Table 7 -- Wheat: U.S. exports (1,000 metric tons) 1/ ------------------------------------------------------------------------------- | 1993/94 | 1994/95 -----------|---------------------------------|--------------------------------- | as of | | as of | | 1/5/95 | | 1/5/95 | | Out- Total |1993/94 | Out- Total | |Ship- stdng commit- | Census |Ship- stdng commit- |USDA Country |ments sales ments 2/| total |ments sales ments 2/|forecast -----------|---------------------------------|------------------------|-------- | | | Algeria | 631 380 1,011 | 1,301 | 498 18 516 | China | 1,093 815 1,908 | 1,887 | 1,211 2,112 3,323 | Egypt | 1,380 1,165 2,545 | 2,975 | 3,682 741 4,423 | FSU | 1,057 416 1,473 | 2,659 | 661 68 729 | Japan | 1,912 753 2,665 | 3,266 | 2,181 590 2,771 | S. Korea | 945 274 1,219 | 1,544 | 888 375 1,263 | Morocco | 975 151 1,126 | 1,348 | 84 0 84 | Nigeria | 836 161 997 | 1,076 | 350 127 477 | Pakistan | 852 270 1,122 | 1,834 | 805 225 1,030 | Philippines| 979 939 1,918 | 1,883 | 1,191 380 1,571 | | | | | Total grain| 17,799 7,230 25,029 | 32,038 | 17,648 7,176 24,824 | | | | | Total (incl| | | | products)3/| 18,142 7,961 26,103 | 33,414 | 18,118 7,274 25,392 | 34,700 ------------------------------------------------------------------------------- 1/ June - May. 2/ U.S. Export Sales Report. 3/ Grain equivalent basis. Table 8: Winter wheat crop conditions, beginning of March, 1994 and 1995 Week ending March 4, 1995 Very Poor Poor Fair Good Excellent ------------------------------------------------------------- Percent Arkansas mostly good Indiana mostly good Kansas 2 21 65 12 Louisiana 7 45 48 Missouri 2 55 42 1 Montana 50 25 25 Nebraska 33 67 New Mexico (irrigated) 4 19 31 42 4 (dryland) 42 33 17 8 North Carolina 9 38 44 9 North Dakota 7 29 61 3 Ohio fair to good Oklahoma 16 73 11 South Dakota 36 63 1 Texas 68 percent of normal Washington (irrigated) 8 61 31 (dryland) 2 7 60 31 Wyoming fair to good Week ending March 5, 1994 Very Poor Poor Fair Good Excellent ------------------------------------------------------------- Percent Arkansas mostly fair Indiana poor to fair Kansas 52 48 % good to excel Louisiana 9 77 14 Missouri 29 56 11 Montana Nebraska New Mexico (irrigated) 20 55 25 (dryland) 60 30 10 North Carolina 4 44 51 1 North Dakota 13 80 7 Ohio Oklahoma 7 51 42 South Dakota 25 66 9 Texas 57 percent of normal Washington (irrigated) 6 90 4 (dryland) 5 50 44 1 Wyoming mostly good ------------------------------------------------------------- Source: Weekly Weather and Crop Bulletin.