WHEAT OUTLOOK August 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-0896. ----------------------------------------------------------------------------- HIGHLIGHTS -- U.S. 1996 wheat production forecast revised down slightly in August. -- Forecasts for U.S. 1996/97 use left unchanged, so ending stocks decline. -- U.S. farm price forecast increased 15 cents per bushel. -- Projected 1996/97 world wheat production declines in August. U.S. 1996 WHEAT PRODUCTION FORECAST DOWN LESS THAN 1 PERCENT IN AUGUST U.S. wheat production is forecast at 2,249 million bushels, down 14 million from last month. Increased hard red winter (HRW) production was more than offset by reductions in the other wheat classes. Yields were better than previously forecast in Kansas, Nebraska, and Texas, boosting HRW production 19 million bushels or 3 percent. However, dryness dropped yield prospects in Montana, causing hard red spring (HRS) production to drop 18 million bushels or 3 percent. Soft red winter (SRW) production is down from last month by almost 10 million bushels or 2 percent as yields in Ohio, Indiana, and Michigan declined mostly because of disease problems. Also, forecast yields declined for Illinois. The white wheat production forecast nearly matches last month's because increased yields in Washington mostly offset scab damage declines in Michigan. The durum yield forecast in North Dakota declined, reducing forecast U.S. durum production 3 percent. Generally, favorable conditions have aided the winter wheat harvest, particularly in the Plains, and on August 11, 92 percent of winter wheat was harvested, equal to the 5-year average. Dry conditions in Montana have pushed the winter wheat harvest ahead of normal, while in the Pacific Northwest, the harvest is modestly behind. The spring wheat harvest as of August 11, was slightly behind normal because much of the crop was planted late. U.S. wheat imports in 1996/97 are projected to reach 70 million bushels, down 5 million from last month. Production problems in Ontario are expected to cut supplies of good quality white wheat in Canada, so forecast U.S. white wheat imports dropped. U.S. ENDING STOCKS DOWN The production and import declines are modest, reducing forecast 1996/97 U.S. wheat supplies by 19 million bushels, less than 1 percent. However, the reduced supplies do make a difference in the supply/demand balance, because forecast demand was left unchanged. Despite cancellations by China, export commitments are large for this early in the season, and the U.S. export projection was unchanged for all wheat. However, 15 million bushels of exports were shifted from HRS to HRW because of the larger supplies of HRW and smaller supplies of HRS. The ending stocks forecast dropped to 409 million bushels, now up less than 10 percent from the very low beginning stocks. U.S. FARM PRICE FORECAST UP 15 CENTS The weighted average producer price projection for wheat in 1996/97 was increased by 15 cents on both the high and the low end of the price range, now $4.35-4.95 per bushel. Although prices are not expected to reach the record monthly highs posted at the end of 1995/96, wheat prices during the early months of 1996/97 (June and July) are sharply higher than a year ago. In 1996/97 beginning stocks were much lower than a year earlier, and although production increased some, total supplies are forecast lower than in 1995/96. Feed and residual use in 1996/97 is expected to increase sharply, mostly in the summer of 1996. With increased use expected in the June-August quarter, U.S. wheat stocks on September 1, 1996, are expected to be significantly lower than a year earlier. Tight U.S. wheat supplies are likely to support prices, even as export demand for U.S. wheat weakens later in 1996/97. Tighter feed grain supplies forecast in August, and higher corn prices should help support wheat prices. While the wheat price projection increased 15 cents per bushel in August, the forecast 1996/97 corn price increased 25 cents. WORLD WHEAT PRODUCTION PROJECTION REDUCED AGAIN IN AUGUST Projected 1996/97 world wheat production was again reduced in August to 571 million tons. Nevertheless, the projection remains over 35 million tons greater than last year. Projected wheat production for 1996/97 declined this month for Ukraine, India, Kazakstan, the European Union (EU), and Eastern Europe. Forecast Ukraine wheat production was lowered 4 million tons, as reported harvest progress indicates lower than expected yields. Because of continued dryness, the wheat production forecast was also reduced by 1 million tons this month for Kazakstan. Conversely, 1996/97 wheat production projections were raised for China and Canada , 3 million and 1 million tons, respectively. China's production is now projected at 107 million tons, a record amount, exceeding the 106.4 million tons recorded in 1993/94. The increase was partially driven by China's State Statistical Bureau, which reported summer grain output increasing this year by 3.5 million tons. China's summer grain output is historically a good indicator of its winter wheat production, as winter wheat is 86 to 88 percent of summer grains. China's spring wheat, although not counted under summer grains, is also projected to increase in 1996 because ample rainfall has improved yields after last year's drought. Canada's 1996 wheat production was also increased this month, as preliminary crop yield estimates in the Prairie Provinces of Alberta and Saskatchewan indicate above-average yields. Abundant precipitation has been received throughout the growing season. The world wheat trade projection for 1996/97 declined in August to 90.1 million tons, the lowest since 1985/86. This is mainly because the import projection for China was reduced to 8 million tons because of increased wheat production in 1996. China's imports are now projected to be 33 percent less than the 12 million tons forecast for 1995/96. All of the major exporting countries, except the United States, are projected to have larger supplies in 1996/97. Argentina, Australia, Canada, and the EU are each projected to have greater production than in the past three crop years. Thus, the United States will face increased competition as these countries market their 1996 crops. **************************************************************************** * Information Contacts: * * Edward W. Allen (senior wheat analyst) (202) 219-0831 * * Mark Simone (international) (202) 219-0823 * * James N. Barnes (domestict) (202) 501-7162 * * Electronic copies available at: * * World Wide Web Site www.econ.ag.gov * * ERS Autofax system (202) 219-1107 * * Document Number 12105 * **************************************************************************** Table 1 -- Wheat: U.S. market year supply and disappearance Item |1991/92 1992/93 1993/94 1994/95 1995/96E 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 75.6 Harvested | 57.8 62.8 62.7 61.8 61.0 63.1 Yield (bu/ac) | 34.3 39.3 38.2 37.6 35.8 35.6 | Supply (mil. bu.) | Beg. Stocks | 868.1 475.0 530.7 568.5 506.6 374.8 Production | 1,980.1 2,466.8 2,396.4 2,321.0 2,185.5 2,249.4 Imports 1/ | 40.7 70.0 108.8 91.9 67.9 70.0 TOTAL | 2,889.0 3,011.8 3,035.9 2,981.4 2,760.1 2,694.2 | Use | Food | 789.5 834.8 871.7 852.9 883.8 900.0 Seed | 97.7 99.1 96.3 89.3 104.1 110.0 Feed & Residual | 244.5 193.6 271.7 344.3 156.2 300.0 Exports 1/ | 1,282.3 1,353.6 1,227.8 1,188.3 1,241.1 975.0 TOTAL | 2,413.9 2,481.2 2,467.4 2,474.8 2,385.2 2,285.0 | Ending stocks | 475.0 530.7 568.5 506.6 374.8 409.2 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 87.0 Free stocks | 273.0 352.7 412.5 364.6 256.8 322.2 Stocks-to-use | 19.7 21.4 23.0 20.5 15.7 17.9 | Prices ($/bu.) | Season average | 3.00 3.24 3.26 3.45 4.55 4.35-4.95 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 9,944 10,460 -------------------------------------------------------------------------- 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/ 1995/96E |HRW HRS SRW White Durum All Wheat ------------------|-------------------------------------------------- Area: (mil. ac.) | Planted | 33.8 16.1 10.5 5.213 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 30 0 19 19 68 TOTAL | 1,019 699 486 410 147 2,760 Use: | Total domestic | 481 263 201 117 83 1,144 Food | 347 231 150 77 79 884 Seed | 40 27 22 8 7 104 Feed and residual| 94 4 29 32 -3 156 Exports 2/ | 384 330 250 238 39 1,241 TOTAL | 865 593 451 355 122 2,385 | Ending stocks | 154 106 35 55 25 375 1996/97P | HRW HRS SRW White Durum All Wheat ------------------|-------------------------------------------------- Area: (mil. ac.) | Planted | 35.9 19.0 11.6 5.5 3.6 75.6 Harvested | 26.1 18.6 9.7 5.3 3.5 63.1 Yield (bu/ac) | 28.6 31.6 45.0 69.2 35.7 35.6 Supply: (mil. bu.)| Production | 766 571 427 366 120 2,249 Beg. stocks | 154 106 35 55 25 375 Imports | 1 41 0 10 18 70 TOTAL | 921 718 462 431 162 2,694 | Use: | Total domestic | 476 327 272 138 96 1,310 Exports 2/ | 275 265 160 240 35 975 TOTAL | 751 592 432 378 132 2,285 | Ending stocks | 170 126 30 53 31 409 --------------------------------------------------------------------- Totals may not add due to rounding. E--Estimated, P--Projected. 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/ ----------|---------------------------------------------------------------- 1993/94 | 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 | 1994/95 | 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 | 1995/96E | 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 13 294 823 Mar-May | 0 17 841 220 28 (66) 283 375 Mkt. year| 2,186 68 2,760 883 104 156 1,241 375 --------------------------------------------------------------------------- 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.) 1996 |January February March April May June --------------|---------------------------------------------------------- Mill grind +| 70,347 72,607 72,147 69,601 72,830 67,554 Food exports -| 972 2,641 1,390 2,535 1,931 0 Food imports +| 1,394 1,447 1,546 1,970 1,802 0 Non-flour | food use +| 2,000 2,000 2,000 2,000 2,000 2,000 Food use | 72,769 73,413 74,303 71,037 74,701 69,554 ------------------------------------------------------------------------- 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 | 95/96 96/97 95/96 96/97 95/96 96/97 95/96 96/97 ------|----------------------------------------------------------------- Jun | 3.84 5.26 | 3.77 5.14 | 5.20 5.58 | 3.78 5.48 Jul 1/| 4.10 4.87 | 4.05 4.84 | 5.29 5.25 | 4.26 5.07 Aug | 4.26 | 4.22 | 5.33 | 4.19 Sep | 4.53 | 4.47 | 5.87 | 4.27 Oct | 4.72 | 4.70 | 5.80 | 4.45 Nov | 4.81 | 4.78 | 5.78 | 4.61 Dec | 4.88 | 4.88 | 5.75 | 4.72 Jan | 4.83 | 4.80 | 5.66 | 4.66 Feb | 4.98 | 5.01 | 5.72 | 4.81 Mar | 5.07 | 5.06 | 5.73 | 4.88 Apr | 5.32 | 5.39 | 5.63 | 5.21 May | 5.73 | 5.81 | 5.62 | 5.67 ------------------------------------------------------------------------ KC HRW #1 KC HRW #1 St. Louis Portland ordinary 13% prot. #2 SRW #1 soft white Month | 95/96 96/97 95/96 96/97 95/96 96/97 95/96 96/97 ------|----------------------------------------------------------------- Jun | 4.72 6.12 | 4.90 6.20 | 3.90 4.84 | 4.65 5.55 Jul | 4.98 5.34 | 5.24 5.35 | 4.35 4.72 | 4.94 4.96 Aug | 4.76 | 5.01 | 4.13 | 4.65 Sep | 5.00 | 5.26 | 4.56 | 4.96 Oct | 5.28 | 5.59 | 4.92 | 5.17 Nov | 5.34 | 5.60 | 5.07 | 5.35 Dec | 5.51 | 5.71 | 5.14 | 5.50 Jan | 5.40 | 5.62 | 4.84 | 5.44 Feb | 5.67 | 5.81 | 4.83 | 5.59 Mar | 5.63 | 5.67 | 4.79 | 5.38 Apr | 6.60 | 6.71 | 5.65 | 5.66 May | 7.02 | 7.16 | 5.61 | 6.00 ------------------------------------------------------------------------ Minn. Minn. FOB Gulf Average EEP DNS 14% durum $/ton (HRW) bonus $/ton 2/ Month | 95/96 96/97 95/96 96/97 95/96 96/97 95/96 96/97 ------|----------------------------------------------------------------- Jun | 4.89 6.73 | 7.16 6.57 | 170 227 | 12.71 0.00 Jul | 5.52 6.04 | 7.49 6.18 | 190 203 | 4.35 0.00 Aug | 5.06 | 6.35 | 185 | 0.00 Sep | 5.27 | 7.26 | 194 | 0.00 Oct | 5.52 | 6.76 | 204 | 0.00 Nov | 5.63 | 7.23 | 203 | 0.00 Dec | 5.80 | 7.11 | 209 | 0.00 Jan | 5.62 | 6.95 | 207 | 0.00 Feb | 5.82 | 6.86 | 219 | 0.00 Mar | 5.81 | 6.97 | 216 | 0.00 Apr | 6.53 | 7.01 | 250 | 0.00 May | 7.14 | 7.22 | 262 | 0.00 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.) May 1996 | January February March April May 1995 --------------|----------------------------------------------------------- Wheat grain | 96,085 91,876 108,800 90,373 78,303 75,006 Wheat flour | 808 2,537 1,230 2,415 1,830 6,004 Products | 200 165 160 130 127 109 Total | 97,093 94,578 110,189 92,919 80,260 81,119 U.S. wheat imports, 1995/96: (1,000 bu.) 1996 | January February March April May --------------|------------------------------------------------------------ Wheat grain | 2,333 1,825 3,869 4,312 3,692 Wheat flour | 525 473 459 535 616 Products | 870 975 1,088 1,438 1,190 Total | 3,728 3,273 5,415 6,284 5,498 ---------------------------------------------------------------------------- Source: Department of Commerce, Bureau of Census. Wheat flour and products converted to wheat grain equivalent. able 7 -- Wheat: U.S. exports (1,000 metric tons) 1/ --------------------------------------------------------------------------- |1994/95 1994/95 |1995/96 1995/96 | 1996/97 -----------|---------------------------------|----------------------------- | Export | Export | as of 8/01/96 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 | 522 547 | N.A. 452 | 86 18 104 | China | 3,061 3,347 | N.A. 2,979 | 757 68 824 | Egypt | 5,432 5,427 | N.A. 5,072 | 598 1,285 1,883 | FSU | 1,284 928 | N.A. 651 | 0 0 0 | Japan | 3,053 3,544 | N.A. 3,468 | 388 698 1,086 | S. Korea | 1,578 1,557 | N.A. 1,406 | 244 434 677 | Morocco | 137 116 | N.A. 693 | 129 134 262 | Nigeria | 563 631 | N.A. 880 | 141 154 295 | Pakistan | 1,416 1,414 | N.A. 1,672 | 0 270 270 | Philippines| 1,752 1,852 | N.A. 2,059 | 347 171 483 | | | | | Total grain| 30,597 30,027 | N.A. 32,778 | 5,090 7,275 12,365 | | | | | Total (incl| | | | products)3/| 33,067 30,817 | N.A. 33,055 | 5,367 7,281 12,649 |26,535 ----------------------------------------------------------------------------- 1/ June - May. 2/ U.S. Export Sales Report. 3/ Grain equivalent basis. END_OF_FILE