WHEAT OUTLOOK September 12, 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-0996. Note: Tables in this report will not be properly formatted unless printed or displayed with both a fixed-pitch font, such as Courier, and an 80-character line width. ----------------------------------------------------------------------------- Recent Developments HIGHLIGHTS -- Hard red spring wheat production forecast revised up 10 percent. -- 1996/97 world production increased 9 million tons from last month. -- U.S. wheat export prospects drop as foreign competition intensifies. -- U.S. ending stocks revised up 24 percent in September. -- U.S. farm price forecast dropped 25 cents per bushel. U.S. WHEAT PRODUCTION FORECAST BOOSTED TO 2,296 MILLION BUSHELS On September 12, only spring wheat production forecasts were revised by NASS. The revisions to spring wheat were large enough to increase total U.S. wheat production 2 percent from last month. The increase was in hard red spring (HRS), with modest declines in durum and white spring wheat. Other spring wheat (excludes durum) production increased dramatically with the Minnesota yield up 9 bushels per acre, South Dakota up 4, and North Dakota up 3, while the Montana yield declined 1 bushel per acre. Despite late plantings, harvest progress was ahead of normal in North Dakota. In North Dakota and Minnesota weather conditions have kept head scab problems less severe than in the previous 3 years. The 10-percent increase in forecast production was enough to raise HRS 1996/97 supplies 8 percent from the previous month's forecast. Durum production declined 5 percent as a concentration of scab problems in North Dakota durum areas dropped the state durum yield 2 bushels per acre. The decline in North Dakota overwhelmed increases in Minnesota and South Dakota. White spring wheat production declined slightly because of lower yields forecast in Idaho. 1996/97 WORLD WHEAT PRODUCTION PROJECTED TO BE HIGHEST SINCE 1990/91 RECORD Projected 1996/97 world wheat production was raised in September to 579.5 million tons, 8 percent, or nearly 44 million tons higher than 1995/96. The current projection now has surpassed the initial USDA 1996/97 projection made in May of 578.5 million tons. If this projection holds, world production in 1996/97 would be the highest since the 1990/91 record. More than half of the projected increase for 1996/97, is expected to come from the major foreign exporters: the 15-member European Union (EU), Canada, Australia, and Argentina. And since the initial May projections, increases have occurred for all these countries as the crop year has progressed. This month, the projections for Australia, Canada, and the EU were increased. Australia has received abundant rainfall in all of its states, causing average to above-average yields to be projected. This and a 1.5-million- hectare area increase from last year, puts the projection at 19.5 million tons, second only to the 22 million tons of 1983/84. Canada's wheat area and yields were raised in line with the Statistics Canada crop survey. Above-average yields are expected in some areas of western Canada. The current projection of 29.8 million tons for Canada would be the highest output since 1992/93. The EU wheat production forecast was raised because of higher yields in France and the United Kingdom. The production projections for Algeria, Morocco, and Tunisia were also raised in September as wheat harvests in North Africa indicate higher yields. Because of the production increase this month in North Africa and the absence of import activity from China, primarily a result of an expected record wheat harvest, the world wheat trade projection for 1996/97 declined in September to 88.6 million tons, the lowest since 1985/86. The trade projection was also lowered due to a reduction in projected 1996/97 imports by Iraq because of uncertainity about when the United Nations agreement allowing Iraq to sell oil to purchase food and medical supplies would be implemented. Because of greater wheat supplies from all of the major foreign exporters, export competition will be heightened during the remainder of 1996/97. This is already becoming apparent since the EU approved a small subsidy in August to sell of 20,000 tons of wheat to the African, Caribbean, or Pacific (ACP) countries. This is the first EU subsidized wheat sale in 15 months. U.S. WHEAT EXPORT FORECAST DROPS AS COMPETITION HEATS UP The forecast for 1996/97 U.S. exports was reduced this month by 50 million bushels, down to 925 million. The reduction occurred despite strong early season sales and shipments, because competition from foreign exporters is expected to increase dramatically as their increased new-crop production moves into position to be exported. Argentina and Australia are pricing wheat aggressively for later delivery. U.S. 1996/97 ENDING STOCKS FORECAST OVER 500 MILLION BUSHELS Increased production and reduced export prospects swelled the September forecast for 1996/97 ending wheat stocks nearly 100 million bushels from the previous month's forecast. Forecast HRS ending stocks increased over 50 percent. The larger forecast stocks indicate a significantly less tight relationship between U.S. wheat supply and demand. This month the stocks-to-use ratio is forecast at 22.6 percent, higher than in 4 of the last 5 years. Last month the forecast 1996/97 stocks-to-use ratio was 17.9 percent, the tightest in more than two decades, except for last year. U.S. FARM PRICE FORECAST REDUCED SHARPLY The U.S. season average farm price for wheat in 1996/97 is forecast at $4.10 to $4.70 per bushel. Although the price reached $5.26 in June and $4.73 in July, the marketings were reportedly smaller than usual as farmers did not sell aggressively during winter wheat harvest. While early season prices have been well above a year ago, from September onwards, monthly average farm prices are expected to be lower than a year earlier. Although the 1996/97 forecast farm price is down 25 cents from last month, it is still expected to be at least the second highest on record. **************************************************************************** * Information Contacts: * * Edward W. Allen (Senior wheat analyst) (202) 219-0831 * * Mark Simone (International) (202) 219-0823 * * James N. Barnes (Domestic) (202) 219-0711 * * 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 87.9 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 77.3 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 36.4 | 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 2,295.7 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 2,740.5 | 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 1,241.1 925.0 TOTAL | 2,413.9 2,481.2 2,467.4 2,474.8 2,385.2 2,235.0 | Ending stocks | 475.0 530.7 568.5 506.6 374.8 505.5 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 | 273.0 352.7 412.5 364.6 256.8 418.5 Stocks-to-use | 19.7 21.4 23.0 20.5 15.7 22.6 | Prices ($/bu.) | Season average | 3.00 3.24 3.26 3.45 4.55 4.10-4.70 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 1,976 | Market value | of production | (mil. dollars) | 5,957 7,984 7,812 8,007 9,944 10,101 -------------------------------------------------------------------------- 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 18 68 TOTAL | 1,018 699 486 410 147 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 | 766 625 427 364 114 2,296 Beg. stocks | 154 106 35 55 25 375 Imports | 1 41 0 10 18 70 TOTAL | 921 772 462 429 157 2,741 | Use: | Total domestic | 476 327 273 138 97 1,310 Exports 2/ | 265 255 160 215 30 925 TOTAL | 741 582 433 353 127 2,235 | Ending stocks | 180 190 30 76 30 506 --------------------------------------------------------------------- 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/ ----------|---------------------------------------------------------------- 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 1,491s 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 2,760 884 104 156 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 |February March April May June July --------------|---------------------------------------------------------- Mill grind +| 72,607 72,147 69,601 72,830 67,936 73,925 Food exports -| 2,641 1,390 2,535 1,931 2,114 0 Food imports +| 1,447 1,546 1,970 1,802 1,603 0 Non-flour | food use +| 2,000 2,000 2,000 2,000 2,000 2,000 Food use | 73,413 74,303 71,037 74,701 69,425 75,925 ------------------------------------------------------------------------- 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 | 4.10 4.73 | 4.05 4.67 | 5.29 5.13 | 4.26 5.30 Aug 1/| 4.26 4.51 | 4.22 4.44 | 5.33 4.82 | 4.19 4.70 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 | 185 192 | 0.00 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.) Year ------------------ 1966 ---------------------- --1995-- Month | February March April May June June --------------|----------------------------------------------------------- Wheat grain | 91,876 108,800 90,373 78,303 73,715 78,354 Wheat flour | 2,537 1,230 2,415 1,830 2,005 2,822 Products | 165 160 130 127 133 113 Total | 94,578 110,189 92,919 80,260 75,854 81,290 U.S. wheat imports, 1995/96: (1,000 bu.) 1995 1996 | February March April May June June --------------|----------------------------------------------------------- Wheat grain | 1,825 3,869 4,312 3,692 3,527 6,626 Wheat flour | 473 459 535 616 574 649 Products | 975 1,088 1,438 1,190 1,031 1,160 Total | 3,273 5,415 6,284 5,498 5,134 8,436 -------------------------------------------------------------------------- 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/ --------------------------------------------------------------------------- |1994/95 1994/95 |1995/96 1995/96 | 1996/97 -----------|---------------------------------|----------------------------- | Export | Export | as of 9/05/96 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 | 948 16 964 | Egypt | 5,432 5,427 | N.A. 5,072 | 1,493 1,033 2,526 | FSU | 1,284 928 | N.A. 651 | 26 0 26 | Japan | 3,053 3,544 | N.A. 3,468 | 769 617 1,386 | S. Korea | 1,578 1,557 | N.A. 1,406 | 510 509 1,019 | Morocco | 137 116 | N.A. 693 | 354 20 374 | Nigeria | 563 631 | N.A. 880 | 265 117 382 | Pakistan | 1,416 1,414 | N.A. 1,672 | 266 295 561 | Philippines| 1,752 1,852 | N.A. 2,059 | 490 154 645 | | | | | Total grain| 30,597 30,027 | N.A. 32,778 | 9,503 5,275 14,778 | | | | | Total (incl| | | | products)3/| 33,067 30,817 | N.A. 33,055 |9,780 5,282 15,062 |25,174 ----------------------------------------------------------------------------- 1/ June - May. 2/ U.S. Export Sales Report. 3/ Grain equivalent basis. Table 8-- Other Spring Wheat Production and Yield by State, 1996 --------------------------------------------------------------------------- Production Yield ------ 1,000 bushels------ --------Bushels-------- --------------------------------------------------------------------------- Month 8/1 9/1 1995 : 8/1 9/1 1995 --------------------------------------------------------------------------- State Idaho 51,800 49,000 44,800 74.0 70.0 80.0 Minnesota 81,600 103,200 70,400 34.0 43.0 32.0 Montana 114,800 110,700 133,000 28.0 27.0 35.0 North Dakota 285,000 313,500 221,400 30.0 33.0 27.0 South Dakota 68,200 77,000 33,600 31.0 35.0 28.0 United States 634,994 686,994 535,948 32.5 35.1 32.2 --------------------------------------------------------------------------- Table 9--Durum Wheat Production and Yield by State, 1996 --------------------------------------------------------------------------- Production : Yield ------- 1,000 bushels-------- ------- Bushels -------- --------------------------------------------------------------------------- State 8/1 9/1 1995 : 8/1 9/1 1995 --------------------------------------------------------------------------- Minnesota 350 430 360 35.0 43.0 30.0 North Dakota 84,100 78,300 77,760 29.0 27.0 27.0 South Dakota 672 720 896 28.0 30.0 28.0 United States 119,652 113,980 102,280 34.6 33.0 30.5 --------------------------------------------------------------------------- END-OF-FILE