WHEAT OUTLOOK June 13, 1996 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- WHEAT OUTLOOK is published monthly by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. WHS-0696. ----------------------------------------------------------------------------- Recent Developments HIGHLIGHTS -- U.S. winter wheat production up slightly in 1996 -- Increased domestic use projected to keep ending stocks low in 1996/97 -- World trade projection declines for 1996/97 -- U.S. 1995/96 export forecast down 50 million bushels -- Domestic use: lower 1995/96 seed use mostly offsets increased food use. -- Forecast for June 1, 1996 U.S. wheat stocks up 15 percent from last month U.S. WINTER WHEAT 1996 PRODUCTION FORECAST UP SLIGHTLY The June 1996 wheat production forecasts are little changed from May. Increased winter wheat production in Washington and a few other States was partly offset by reductions in California, Michigan, and Ohio. Total winter wheat is forecast at 1.37 billion bushels, up 6 million. Early harvest is progressing faster than last year, or the 5-year average. The spring wheat production estimate was left unchanged. On June 28, acreage will be reported, and on July 12, the first survey-based forecast of spring wheat will be released. U.S. 1996/97 DOMESTIC USE PROJECTED UP, MOSTLY OFFSETTING INCREASED SUPPLIES The wheat price has dropped compared to corn, especially in soft red winter (SRW) producing regions, and given tight feed grain supplies, this is expected to increase the use of wheat for feed during the summer of 1996. Projected 1996/97 feed and residual use of wheat was increased 25 million bushels to 200 million, a 14-percent increase. Food use in 1996/97 was increased to 895 million bushels, maintaining 2 percent growth from the revised 1995/96 forecast. The 35 million bushel increase in forecast domestic use offset much of the 53 million increase in 1996/97 supply, leaving ending stocks up only 11 million. Projected ending stocks of 340 million are lower than forecast beginning stocks, indicating that the U.S. wheat market will be tight through 1996/97. The 1996/97 projected average farm price was left unchanged in June, despite the market price declines in late May. WORLD WHEAT TRADE PROJECTION DECLINES FOR 1996/97 Based on greater wheat area sown in many countries, along with generally favorable growing conditions, world wheat trade for 1996/97 is projected to decline to 92.2 million tons. This is over 2 million less than the current 1995/96 trade estimate. China's wheat imports are projected to fall to 10 million tons from the 1995/96 estimate of 12 million tons because of a projected increase in 1996 wheat production resulting from larger area and generally good conditions to date. Morocco's wheat imports are projected to fall to 1 million tons from the 1995/96 estimate of 2.6 million tons. It has received substantial and consistent precipitation since last fall. Morocco's 1996 wheat production is projected to rise to 5.6 million tons as the crop is currently being harvested. Russia's wheat imports are projected to decline to 2.5 million tons as improved moisture conditions at planting last fall for winter wheat in Russia, and less winterkill than in 1995, have contributed to nearly a 9-million ton projected increase in Russian wheat production for 1996. Turkey's 1996 wheat production is projected to increase to 16 million tons, a result of adequate precipitation to date and extensive spraying activity to prevent sunni bug infestation. Despite the projected import reductions for the aforementioned countries in 1996, there are projected increases in 1996/97 for some countries as well, most notably Iraq and South Korea. Iraq's projected wheat imports were increased to 2 million tons because of the recent UN agreement, allowing Iraq to make limited sales of oil with much of the proceeds to be used to purchase food and medicine. South Korea's wheat imports are projected to rise in 1996/97 as more feed wheat is expected to become available on world markets relative to 1995/96. Projected 1996/97 world wheat production was reduced in June, primarily a result of Canada and Romania wheat being lowered by 1 million tons. Both countries were hampered by adverse weather conditions. In Canada, cool temperatures and excessive rains have caused seeding delays for spring crop planting, especially in Manitoba. To avoid potential frost damage in these regions, farmers are expected to switch from spring wheat and durum to shorter season crops. In addition to the Prairie Provinces, Canadas projected wheat production was also reduced because of the winter wheat crop in Ontario being reportedly affected by winterkill. Despite the drop in projected production, Canada's projected exports were unchanged from last month as projected ending stocks are ample. Romania's 1996 wheat crop was reduced because of poor conditions at planting and a severe winter. The 1995/96 trade estimate was also lowered this month to 94.5 million tons as the U.S. export estimate was reduced by 1.5 million tons. U.S. export sales for 1995/96 have been stagnant the past month, and several countries are now deferring shipments until the upcoming 1996/97 marketing year. On the import side, Iran's imports were reduced by 500,000 tons because of a slow sales pace from Australia, while Morocco and Tunisia both were lowered 150,000 tons due to a slow import pace. Finally, the 1995/96 wheat production estimate was revised upward to 536.6 million tons as China's production was raised to 102 million tons with the publication of China's State Statistical Bureau 1995 official crop estimates. PRELIMINARY TRADE DATA LOWERS THE 1995/96 U.S. EXPORT FORECAST The forecast for 1995/96 U.S. wheat exports was reduced 50 million bushels to 1.25 billion, a 4-percent decline. USDA exports are based on data from the Bureau of the Census and as of early June, data was available through March. Other sources for wheat grain exports, grain inspections, and the shipments reported in Export Sales are published weekly, covering April and May. Wheat exports were less than expected for 1995/96 (June/May). These sources indicate the pace of exports slowed dramatically in May, as some importers were apparently willing to wait for new crop shipments. A sharp decline in wheat prices in the last half of May gave some importers an incentive to renegotiate contracts. Moreover, Census wheat grain export data has been running less than inspections data, with no sign of catching up. The USDA wheat trade data include the wheat equivalent of flour and selected products (mostly pasta). U.S. flour exports are down sharply during the first 10 months of 1995/96. U.S. 1995/96 FOOD USE UP, SEED USE DOWN U.S. food use is forecast at 880 million bushels, up 10 million from last month based on a stronger than expected recent pace of mill grind, annual revisions to the mill grind data, and the slow pace of flour exports. The 1995/96 forecast is up 3 percent from the previous year, but only 1 percent higher than 1993/94, confirming growth in U.S. food use a bit faster than population growth. U.S. seed use was revised down 7 million bushels to 100 million because of delayed spring wheat planting. As of June 2, 15 percent of the spring wheat in the 5 major States had not been planted. In addition, 20 percent of North Dakota durum area was unplanted. The seed planted after June 1, 1996 is part of 1996/97 seed use instead of 1995/96, even though the area planted will be harvested in 1996. JUNE 1, 1996 WHEAT STOCKS FORECAST UP 47 MILLION BUSHELS Smaller than expected export shipments late in 1995/96 is forecast to keep ending stocks from getting as low as earlier forecast. Demand is not as intense as earlier forecast, stocks are not expected to be as low, and market prices dropped sharply in late May. However, 1995/96 ending stocks of 352 million bushels are very small by historical standards, the lowest since 1973/74. With 118 million bushels owned by the Government, private stocks are less than in 1973/74. Forecast total ending stocks are only 14.6 percent of use, the lowest since 1947/48. The actual June 1, 1996 wheat stocks will be published on June 28. **************************************************************************** * Information Contacts: * * Edward W. Allen (senior wheat analyst) (202) 219-0831 * * Mark Simone (international) (202) 219-0823 * **************************************************************************** Table 1 -- Wheat: U.S. market year supply and disappearance Item |1991/92 1992/93 1993/94 1994/95 1995/96P 1996/97P -------------------|------------------------------------------------------ Area (mil. ac.) | ARP (%) | 15.0 5.0 0.0 0.0 0.0 N.A. Nat'l total base | 89.6 89.6 89.6 88.9 88.5 88.0 CRP base retired | 10.4 10.6 10.8 10.8 10.8 10.6 Effective base | 79.2 78.9 78.4 78.1 77.7 77.4 0,50/92/85 | 5.8 4.0 5.7 5.2 6.1 N.A. Planted | 69.9 72.2 72.2 70.3 69.2 73.1 Harvested | 57.8 62.8 62.7 61.8 61.0 58.2 Yield (bu/ac) | 34.3 39.3 38.2 37.6 35.8 35.7 | Supply (mil. bu.) | Beg. Stocks | 868.1 475.0 530.7 568.5 506.6 352.1 Production | 1,980.1 2,466.8 2,396.4 2,321.0 2,185.5 2,079.9 Imports 1/ | 40.7 70.0 108.8 91.9 65.0 85.0 TOTAL | 2,889.0 3,011.8 3,035.9 2,981.4 2,757.1 2,517.0 | Use | Food | 789.5 834.8 871.7 852.9 880.0 895.0 Seed | 97.7 99.1 96.3 89.2 100.0 107.0 Feed & Residual | 244.5 193.6 271.7 344.4 175.0 200.0 Exports 1/ | 1,282.3 1,353.6 1,227.8 1,188.3 1,250.0 975.0 TOTAL | 2,413.9 2,481.2 2,467.4 2,474.8 2,405.0 2,177.0 | Ending stocks | 475.0 530.7 568.5 506.6 352.1 340.0 Farmer-owned | reserve | 50.0 28.0 6.0 0.0 0.0 N.A. CCC inventory 2/ | 152.0 150.0 150.0 142.0 118.0 Free stocks | 273.0 352.7 412.5 364.6 234.1 Stocks-to-use | 19.7 21.4 23.0 20.5 14.6 15.6 | Prices ($/bu.) | Season average | 3.00 3.24 3.26 3.45 4.50 4.70-5.30 Target price | 4.00 4.00 4.00 4.00 4.00 N.A. Loan rate | 2.04 2.21 2.45 2.58 2.58 2.58 deficiency | payment rate | 1.35 0.81 1.03 0.61 3/ 0 N.A. | Deficiency pmts. | (mil. dollars) | 2,246 1,371 1,904 1,146 100 1,971 | Market value | of production | (mil. dollars) | 5,957 7,984 7,812 8,007 9,835 10,399 -------------------------------------------------------------------------- Totals may not add due to rounding. E--Estimated, P--Projected, N.A.--not applicable. 1/ Imports and exports include flour and other products expressed in wheat equivalent. 2/ From 1981 on, includes Food Security Reserve. 3/ Based on 5-month price + 10 cents. Table 2 -- Wheat supply and disappearance by class 1/ 1994/95E |HRW HRS SRW White Durum All Wheat ------------------|-------------------------------------------------- Area: (mil. ac.) | Planted | 35.0 17.5 9.8 5.2 2.8 70.3 Harvested | 28.7 16.9 8.4 5.0 2.7 61.8 Yield (bu/ac) | 33.9 30.4 51.4 61.0 35.6 37.6 Supply: (mil. bu.)| Production | 971 515 434 304 97 2,321 Beg. stocks | 227 201 45 67 28 568 Imports 2/ | 3 51 0 15 22 92 TOTAL | 1,202 767 480 386 147 2,981 | Use: | Food | 358 200 150 67 78 853 Seed | 38 20 20 7 4 89 Residual | 191 62 61 32 -2 344 Total domestic | 586 282 231 107 81 1,287 Exports 2/ | 422 292 212 222 40 1,188 TOTAL | 1,008 574 443 329 121 2,475 | Ending stocks | 194 193 37 57 26 507 1995/96P |HRW HRS SRW White Durum All Wheat ------------------|-------------------------------------------------- Area: (mil. ac.) | Planted | 33.8 16.1 10.5 5.3 3.4 69.2 Harvested | 27.7 15.7 9.2 5.0 3.4 61.0 Yield (bu/ac) | 29.8 30.2 48.9 66.6 30.5 35.8 Supply: (mil. bu.)| Production | 824 475 450 334 102 2,186 Beg. stocks | 194 193 37 57 26 507 Imports 2/ | 0 29 0 18 18 65 TOTAL | 1,018 698 486 409 146 2,757 | Use: | Total domestic | 481 263 203 123 86 1,155 Exports 2/ | 383 330 255 245 37 1,250 TOTAL | 864 593 458 368 123 2,405 | Ending stocks | 154 104 29 41 24 352 1996/97P | HRW HRS SRW White Durum All Wheat ------------------|-------------------------------------------------- Area: (mil. ac.) | Planted | 35.7 16.6 11.7 5.5 3.6 73.1 Harvested | 24.5 8.9 5.3* 58.2 --------------------------------------------------------------------- Totals may not add due to rounding. E--Estimated, P--Projected, *--includes an ERS projection of white spring. 1/ ERS estimates of area, yield, and domestic use. 2/ Imports and exports include flour and other products expressed in wheat equivalent. Table 3 -- Wheat: Quarterly supply and disappearance (1,000 bu.) ----------|---------------------------------------------------------------- Market |Produc- Year | tion Imports Supply Food Seed Feed Exports E.stocks | 1/ 1/ ----------|---------------------------------------------------------------- 1992/93: | Jun-Aug | 2,467 20 2,962 211 1 346 283 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 1,064 208 32 (75) 370 531 Mkt. year| 2,467 70 3,012 835 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 1,613 211 2 39 332 1,028 Mar-May | 0 37 1,065 224 32 (25) 266 568 Mkt. year| 2,396 109 3,036 872 96 272 1,228 568 | 1994/95E | Jun-Aug | 2,321 31 2,920 213 2 376 260 2,069 Sep-Nov | 0 21 2,091 229 61 (29) 338 1,491 Dec-Feb | 0 18 1,509 202 2 25 310 969 Mar-May | 0 22 991 209 24 (29) 280 507 Mkt. year| 2,321 92 2,981 853 89 344 1,188 507 | 1995/96P | Jun-Aug | 2,186 23 2,715 215 8 308 303 1,881 Sep-Nov | 0 16 1,897 232 65 (99) 361 1,338 Dec-Feb | 0 12 1,350 216 3 11 294 826 Mar-May 2/| 0 14 840 217 24 (45) 292 352 Mkt. year| 2,186 65 2,757 880 100 175 1,250 352 --------------------------------------------------------------------------- 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/ implied by the annual forecasts. Table 4 -- Wheat: Food disappearance (1,000 bu.) January 1995 | November December 1996 February March April --------------|---------------------------------------------------------- Mill grind +| 74,750 70,014 70,347 72,607 72,147 69,611 Food exports -| 1,389 3,575 972 2,641 1,390 Food imports +| 1,775 1,697 1,394 1,447 1,546 Non-flour | food use +| 2,000 2,000 2,000 2,000 2,000 2,000 Food use | 77,136 70,136 72,769 73,413 74,303 ------------------------------------------------------------------------- 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 | 94/95 95/96 94/95 95/96 94/95 95/96 94/95 95/96 ------|----------------------------------------------------------------- Jun | 3.21 3.84 | 3.09 3.77 | 4.59 5.20 | 3.51 3.78 Jul | 3.04 4.10 | 2.99 4.05 | 4.32 5.29 | 3.28 4.26 Aug | 3.25 4.26 | 3.23 4.22 | 4.30 5.33 | 3.19 4.19 Sep | 3.57 4.53 | 3.57 4.47 | 4.51 5.87 | 3.38 4.27 Oct | 3.76 4.72 | 3.79 4.70 | 4.89 5.80 | 3.52 4.45 Nov | 3.75 4.81 | 3.76 4.78 | 4.88 5.78 | 3.51 4.61 Dec | 3.74 4.88 | 3.75 4.88 | 4.67 5.75 | 3.56 4.72 Jan | 3.69 4.83 | 3.67 4.80 | 4.61 5.66 | 3.50 4.66 Feb | 3.61 4.99 | 3.62 5.01 | 4.68 5.72 | 3.39 4.81 Mar | 3.52 5.06 | 3.47 5.06 | 4.59 5.73 | 3.38 4.88 Apr | 3.48 5.32 | 3.45 5.39 | 4.51 5.63 | 3.35 5.21 May 1/| 3.67 5.81 | 3.65 5.89 | 4.76 5.69 | 3.54 5.76 ------------------------------------------------------------------------ KC HRW #1 KC HRW #1 St. Louis Portland ordinary 13% prot. #2 SRW #1 soft white Month | 94/95 95/96 94/95 95/96 94/95 95/96 94/95 95/96 ------|----------------------------------------------------------------- Jun | 3.60 4.72 | 3.85 4.90 | 3.22 3.90 | 3.64 4.65 Jul | 3.48 4.98 | 3.63 5.24 | 3.11 4.35 | 3.52 4.94 Aug | 3.70 4.76 | 3.78 5.01 | 3.31 4.13 | 3.71 4.65 Sep | 4.05 5.00 | 4.12 5.26 | 3.69 4.56 | 4.32 4.96 Oct | 4.31 5.28 | 4.37 5.59 | 3.89 4.92 | 4.61 5.17 Nov | 4.24 5.34 | 4.31 5.60 | 3.84 5.07 | 4.54 5.35 Dec | 4.27 5.51 | 4.32 5.71 | 4.00 5.14 | 4.49 5.50 Jan | 4.06 5.40 | 4.07 5.62 | 3.83 4.84 | 4.33 5.44 Feb | 3.98 5.67 | 4.01 5.81 | 3.74 4.83 | 4.23 5.59 Mar | 3.87 5.63 | 3.91 5.67 | 3.59 4.79 | 3.98 5.38 Apr | 3.86 6.60 | 3.95 6.71 | 3.55 5.65 | 4.08 5.66 May | 4.22 | 4.35 | 3.62 | 4.45 ------------------------------------------------------------------------ Minn. Minn. FOB Gulf Average EEP DNS 14% durum $/ton (HRW) bonus $/ton 2/ Month | 94/95 95/96 94/95 95/96 94/95 95/96 94/95 95/96 ------|----------------------------------------------------------------- Jun | 4.20 4.89 | 5.76 7.16 | 139 170 | 43.28 12.71 Jul | 4.14 5.52 | 5.19 7.49 | 138 190 | 42.18 4.35 Aug | 4.00 5.06 | 5.30 6.35 | 148 185 | 36.39 0.00 Sep | 4.27 5.27 | 6.16 7.26 | 159 194 | 37.61 0.00 Oct | 4.40 5.52 | 6.64 6.76 | 167 204 | 26.82 0.00 Nov | 4.41 5.63 | 6.61 7.23 | 162 203 | 22.44 0.00 Dec | 4.37 5.80 | 5.99 7.11 | 165 209 | 18.65 0.00 Jan | 4.21 5.62 | 6.23 6.95 | 156 207 | 15.26 0.00 Feb | 4.09 5.82 | 5.91 6.86 | 154 219 | 9.91 0.00 Mar | 4.11 5.81 | 5.87 6.97 | 150 216 | 15.20 0.00 Apr | 4.30 6.53 | 5.64 7.01 | 149 250 | 20.52 0.00 May | 4.61 | 6.47 | 159 262 | 23.95 Source: NASS & AMS, USDA. 1/ Mid-month. 2/ Weighted avg., all classes. Table 6 -- Wheat: Exports and Imports U.S. wheat exports, 1995/96: (1,000 bu.) January March 1995 | November December 1996 February March 1995 --------------|----------------------------------------------------------- Wheat grain | 105,535 99,175 96,085 91,876 108,800 98,876 Wheat flour | 1,221 3,458 808 2,537 1,230 7,617 Products | 193 174 200 165 160 137 Total | 106,948 102,806 97,093 94,578 110,189 106,631 U.S. wheat imports, 1995/96: (1,000 bu.) January March 1995 | November December 1996 February March 1995 --------------|------------------------------------------------------------ Wheat grain | 3,339 3,058 2,333 1,825 3,869 4,487 Wheat flour | 559 497 525 473 459 920 Products | 1,226 1,202 870 975 1,088 1,124 Total | 5,124 4,757 3,728 3,273 5,415 6,531 ---------------------------------------------------------------------------- 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 1993/94 |1994/95 1994/95 | 1995/96 -----------|---------------------------------|----------------------------- | Export | Export | as of 5/30/96 2/ | | Sales2/| Sales 2/| ------------------- | | Final Final | Final Final | Out- Total |USDA |Census Ship- |Census Ship- |Ship- standing commit-|fore- Country | total ments | total ments |ments sales ments |cast -----------|---------------------------------|------------------------|---- | | | Algeria | 1,301 1,323 | 522 547 | 452 25 477 | China | 1,887 1,933 | 3,061 3,347 | 2,979 401 3,381 | Egypt | 2,975 2,787 | 5,432 5,427 | 5,072 35 5,107 | FSU | 2,659 1,394 | 1,284 928 | 651 0 651 | Japan | 3,266 3,014 | 3,053 3,544 | 3,468 216 3,684 | S. Korea | 1,544 1,459 | 1,578 1,557 | 1,406 85 1,491 | Morocco | 1,348 1,304 | 137 116 | 693 0 693 | Nigeria | 1,076 1,050 | 563 631 | 880 51 931 | Pakistan | 1,834 1,447 | 1,416 1,414 | 1,672 0 1,672 | Philippines| 1,883 1,739 | 1,752 1,852 | 2,059 100 2,159 | | | | | Total grain| 32,038 27,561 | 30,597 30,027 | 32,778 1,498 34,276 | | | | | Total (incl| | | | products)3/| 33,414 28,268 | 33,067 30,817 | 33,055 1,505 34,560 |34,019 ----------------------------------------------------------------------------- 1/ June - May. 2/ U.S. Export Sales Report. 3/ Grain equivalent basis. Table 8. -- Winter Wheat: Production, Change in Production, Yield, Change in Yield, by State, Forecast as of May 1, and June 1, 1996 ------------------------------------------------------------ State: Production Change: Yield: Change : 5/1 : 6/1 5/1 : 6/1 ------------------------------------------------------------ -1,000 Bushels- --%-- -Bushels- --%-- ------------------------------------------------------------ : CA : 48,000 45,000 -6.3 80.0 75.0 -6.3 CO : 71,300 69,000 -3.2 31.0 30.0 -3.2 KY : 21,600 22,500 +4.2 48.0 50.0 +4.2 MI : 33,000 28,380 -14.0 50.0 43.0 -14.0 OH : 64,770 63,500 -2.0 51.0 50.0 -2.0 WA :145,700 155,100 +6.5 62.0 66.0 +6.5 ------------------------------------------------------------- END-END-END