WHEAT OUTLOOK March 12, 1997 Approved by the World Agricultural Outlook Board --------------------------------------------------------------------------- WHEAT OUTLOOK is published monthly by the Economic Research Service, U.S. Department of of Agriculture, Washington, DC 20005-4788. WHS-0397. --------------------------------------------------------------------------- Recent Developments HIGHLIGHTS --U.S. 1996/97 season average farm price range narrowed to $4.25 to $4.35 per bushel from last month's range of $4.20 to $4.40. --No change in the 1996/97 export forecast, but the white wheat export forecast was raised 5 million bushels, offset by another decline in the soft red winter wheat export forecast. --Hard red winter wheat crop entering the spring growing season in good condition. --World trade for 1996/97 forecast up 1 million tons from February to 92 million tons. --Special Report: Trends, Shifts, and Growth in U.S. Flour Production. Season Average Farm Price Narrowed for 1996/97 Monthly average farm prices for the 1996/97 crop continue to fall. The average price in February was $3.91 per bushel, down from $4.03 in January. During the past 8 years, an average of 87 percent of the crop was marketed by the end of February. Marketings in 1996/97 appear to be slower than this average. Therefore, a larger than usual proportion of the crop likely will be sold at lower prices than were seen in the first half of the marketing year. Futures prices rose towards the end of February and early March, apparently in response to fund buying and support from the corn and soybean markets. However, the fundamentals of the market remain bearish. Export sales remain weak, especially for the new crop year, as buyers wait for new-crop prices to fall further. White Wheat Export Forecast Increases While the 1996/97 export forecast remains unchanged at 950 million bushels, the forecast for white wheat exports was adjusted upwards by 5 million bushels. Earlier in the year, importers had been turning to suppliers who were offering wheat at lower prices than were U.S. exporters. In January and February, U.S. exporters lost bids to export wheat to traditional white wheat customers such as Egypt and Pakistan. But port congestion in Canada and large nearby shipping commitments by Australia allowed the United States to capture all of a recent tender by Pakistan for 450,000 tons of white wheat. Thus, while exports are forecast to drop from last year's level, white wheat will account for a larger share of total U.S. exports. The 1996/97 forecast for soft red winter wheat exports was lowered 5 million bushels as shipments and sales continued to stagnate. SRW shipments were relatively strong in the first quarter of the marketing year but slowed dramatically in the fall. China is usually a major SRW buyer and China's absence from the market has had a strong impact on this class of wheat. Other large, price-conscious buyers, such as Egypt, who typically purchase SRW have been turning to lower cost suppliers or to other types of wheat. Reports indicate that while quoted U.S. f.o.b. export prices appear attractive, there are apparently few SRW export supplies available to meet importers' quality specifications. Hard Red Winter Wheat for 1997/98 in Good Condition Winter wheat conditions in the Southern Plains are generally favorable. Rain in September and October led to some planting delays, but to generally good overall planting conditions and germination. Although there have been some incidents of severe cold, the region has not experienced the severe temperature fluctuations that occurred last year. Timely, beneficial rain and snow at the end of February have, at least temporarily, eased concerns about winter dryness and will allow the crop to enter the spring season in good condition. Crop conditions in Kansas as of March 9 were 82 percent good to excellent. In Texas, conditions are reported to be 60 percent good to excellent, and in Oklahoma the crop is reported to be 83 percent good to excellent. World Wheat Trade Forecast Up 1 Million Tons for 1996/97 Increased 1996/97 imports expected for Iran and Poland more than offset reductions for Algeria and Cuba. World trade is forecast to reach 92 million tons, up 1 million from last month, and only down 1 million from 1995/96. World trade is declining only 1 percent compared to a year ago, because the expected dramatic 8-million-ton drop in China's wheat imports is being almost offset by an increase of 7 million tons by other importers. Iran is expected to have the largest year-to-year increase in wheat imports, doubling from 3 million tons in 1995/96 to 6 million. The 1996 Iranian wheat crop was of poor quality, increasing animal feeding and driving market prices above government procurement prices. As a result, imports have increased sharply to satisfy increasing food use. Moreover, an unknown amount of wheat is reportedly being shipped by Iran to neighboring countries. In 1996/97, Iran is forecast to be one of the top import markets in the world, equaling Egypt's 6.0 million tons and approaching Japan, the top importer, at 6.3 million. Iran has not imported wheat from the United States since January 1982. Forecast EU 1996/97 wheat exports increased 1 million tons this month to 15.5 million. In recent weeks the EU increased the volume of wheat and flour subsidies awarded. With ending stocks expected to increase in 1996/97, and with a lower set-aside increasing production prospects for 1997, the EU Commission has an incentive to export wheat to keep stocks from building too rapidly. Moreover, in the spring of 1997 there appears to be a window of opportunity opening for EU wheat exports. Australia and Argentina have already sold most of their 1996/97 exportable wheat supplies, Canada is tied up with transport and port delays, and U.S. old-crop supplies are tight. The EU is the only major exporter with large supplies available for prompt shipment until the U.S. 1997 crop begins to be harvested and exported in June. Trends, Shifts, and Growth in U.S. Flour Production 1/ Over the last 10 years, technological advancements in milling equipment and transportation have changed the way wheat is milled into flour and transported. Scale economies in processing, procurement, finance, and transportation have influenced the structure of the milling industry. These economies appear to be responsible for the drop in mill numbers and increases in average milling capacities per plant 2/. Using Census data from the M20A millgrind report, this article provides descriptive statistics for U.S. flour production and attempts to identify growth, trends, and possible shifts in flour production among the States. This article covers Census data from 1986 to 1995 3/. Monthly data for 1996 are available, but they are still preliminary. The Bureau of the Census will release the final 1996 data within the next month. Flour milling takes place all across the United States and although the large wheat producing States mill a significant portion of the total, the largest growth from 1986 to 1995 occurred in smaller wheat producing States. The top four flour milling States from 1986 to 1995 were Kansas, Minnesota, New York, and Missouri, which milled an average of, 90, 77, 69, and 53 million bushels of wheat a year, respectively. Kansas' 90 million bushels were 11 percent of the average U.S. total. The U.S. millgrind has increased, on average, approximately 1.9 percent per year since 1986. Among the top four States, Missouri experienced the greatest amount of annual growth at a rate of 2.2 percent from 1986 to 1995. Kansas' annual growth during this period was 1.5 percent. Among the smaller wheat producing states, Pennsylvania experienced the greatest annual growth at 4.1 percent. Many other States such as Ohio, North Carolina, and Michigan experienced annual growth rates ranging from 2.1 to 3.4 percent. 1/ Data for this analysis provided by U.S. Bureau of the Census, M20A Annual Reports, 1986-1995. Also, the original data set is available from the ERS Autofax system. Using a phone attached to a fax machine, call (202) 219-1107 (document 12117) for a complete directory of ERS wheat reports and data products select document 12100. 2/ Harwood, Joy L., Leath, Mack N., and Heid, Walter G., "The U.S. Milling and Baking Industries", Economic Research Service, Agricultural Economic Report No. 611, 1989. 3/ Autofax document No. 12117 will be updated after the 1996 Census M20A Summary is released. **************************************************************************** * Information Contacts: * * Sara Schwartz (domestic) (202) 219-0768 * * James N. Barnes (domestic) (202) 219-0711 * * Edward W. Allen (international) (202) 219-0831 * * Electronic copies available at: * * World Wide Web Site www.econ.ag.gov * * ERS Autofax system (202) 219-1107 * * Document Number 12105 * * Next Wheat Situation Outlook Report will be released on April 14, 1997 * * The 1997 Wheat Yearbook is now available at: * * * * 1) ERS autofax; Call (202) 219-1107 and select document 12100 for a * * complete directory of the historical tables and special articles. * * 2) ERS homepage: www.econ.ag.gov/, select Products and Services, then * * Publications, Field Crops, and Wheat. * **************************************************************************** Table A-1** Wheat Ground for Flour, 1986-1995 Million bushels ---------------------------------------------------------- Annual millgrind Avg. annual 1986-90 ---------------------------- %change Average |1991 1992 1993 1994 1995| 1986-95 ----------------|----------------------------|------------ U.S. 759 | 809 833 871 885 869| 1.90 Kansas 89 | 88 89 91 94 91| 1.47 Minnesota 75 | 75 75 84 81 79| 0.50 New York 68 | 67 70 77 71 67| (0.02) Missouri 48 | 54 55 59 63 60| 2.20 Pennsylvania 29 | 31 33 29 33 33| 4.10 ---------------------------------------------------------- Table A-2** Wheat Ground for Flour, by State, 1986-1995 Thousand bushels ------------------------------------------------------------ Descriptive statistics U.S. KS MN NY MO ------------------------------------------------------------ Mean 806,186 90,133 77,193 69,301 53,142 Median 798,576 91,362 77,448 69,067 52,325 Stand. Dev. 56,395 4,729 3,900 3,043 6,032 Maximum 884,707 96,511 84,267 76,596 62,732 Minimum 731,338 82,363 71,311 65,826 44,185 Range 153,369 14,148 12,956 10,770 18,547 ---------------------------------------------------------------- **Data from Census Millgrind Report (M20A) Summaries, 1986-1995. 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 Eff.base/ctr.acres| 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 69.1 75.6 Harvested | 57.8 62.8 62.7 61.8 60.9 62.9 Yield (bu/ac) | 34.3 39.3 38.2 37.6 35.8 36.3 | Supply (mil. bu.) | Beg. Stocks | 868.1 475.0 530.7 568.5 506.6 376.0 Production | 1,980.1 2,466.8 2,396.4 2,321.0 2,182.6 2,281.8 Imports 1/ | 40.7 70.0 108.8 91.9 67.9 80.0 TOTAL | 2,889.0 3,011.8 3,035.9 2,981.4 2,757.1 2,737.8 | Use | Food | 789.5 834.8 871.7 852.9 884.0 910.0 Seed | 97.7 99.1 96.3 89.2 104.1 104.0 Feed & Residual | 244.5 193.6 271.7 344.4 151.9 300.0 Exports 1/ | 1,282.3 1,353.6 1,227.8 1,188.3 1,241.1 950.0 TOTAL | 2,413.9 2,481.2 2,467.4 2,474.8 2,381.1 2,264.0 | Ending stocks | 475.0 530.7 568.5 506.6 376.0 473.8 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 95.0 Free stocks | 273.0 352.7 412.5 364.6 258.0 378.8 Stocks-to-use | 19.7 21.4 23.0 20.5 15.8 20.9 | Prices ($/bu.) | Season average | 3.00 3.24 3.26 3.45 4.55 4.25-4.35 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 Def. payment/ | contract rate 3/ | 1.35 0.81 1.03 0.61 4/ 0 0.874 | Def./Contract pmts.| (mil. dollars)3/ | 2,246 1,371 1,900 1,146 100 1,976 Market value | of production | (mil. dollars) | 5,957 7,984 7,812 8,007 9,931 9,812 -------------------------------------------------------------------------- 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/ Prior to 1996/97 Deficiency payment rate; 1996/97-contract rate.4/ 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 10.6 5.1 3.4 69.1 Harvested | 27.7 15.7 9.3 4.9 3.4 61.0 Yield (bu/ac) | 29.8 30.2 49.0 66.6 30.5 35.8 Supply: (mil. bu.)| Production | 825 475 456 325 102 2,183 Beg. stocks | 194 193 37 57 26 507 Imports 2/ | 0 30 0 19 18 68 TOTAL | 1,019 698 492 401 147 2,757 Use: | Total domestic | 481 262 207 108 82 1,140 Food | 347 231 150 77 79 884 Seed | 40 27 23 7 7 104 Feed and residual| 95 4 34 23 -4 152 Exports 2/ | 384 330 250 238 39 1,241 TOTAL | 865 592 457 346 121 2,381 | Ending stocks | 154 106 35 55 26 376 1996/97P | HRW HRS SRW White Durum All wheat ------------------|-------------------------------------------------- Area: (mil. ac.) | Planted | 35.8 19.1 11.8 5.3 3.6 75.6 Harvested | 25.8 18.7 9.7 5.2 3.5 62.9 Yield (bu/ac) | 29.6 33.6 43.4 68.9 32.7 36.3 Supply: (mil. bu.)| Production | 762 627 422 355 116 2,282 Beg. stocks | 154 106 35 55 26 376 Imports | 1 48 0 10 21 80 TOTAL | 917 781 457 420 162 2,738 | Use: | Total domestic | 493 313 270 147 92 1,314 Exports 2/ | 280 275 140 220 35 950 TOTAL | 773 588 410 367 127 2,264 | Ending stocks | 144 193 48 53 36 474 --------------------------------------------------------------------- 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- Ending Year | tion Imports Supply Food Seed Feed Exports 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 1,491 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 | 2,183 23 2,712 215 8 305 303 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 (67) 283 376 Mkt. year| 2,183 68 2,757 884 104 152 1,241 376 1996/97P | Jun-Aug | 2,282 15 2,673 225 9 381 334 1,724 Sep-Aug | 0 21 1,745 235 60 (78) 308 1,219 ---------------------------------------------------------------------------- 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 1997 | September October November December January --------------|------------------------------------------------------------ Mill grind +| 75,507 83,069 73,996 71,607 70,040 Food exports -| 3,161 2,648 2,846 2,336 N/A Food imports +| 1,385 1,830 1,789 1,957 N/A Non-flour | food use +| 2,000 2,000 2,000 2,000 2,000 Food use | 75,531 84,252 74,938 73,228 72,040 ------------------------------------------------------------------------- 1/ Jun-Oct. 2/ Does not include November import/export data or non-flour est. 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 | 4.26 4.58 | 4.22 4.52 | 5.33 5.03 | 4.19 4.63 Sep | 4.53 4.37 | 4.47 4.28 | 5.87 4.69 | 4.27 4.41 Oct | 4.72 4.18 | 4.70 4.07 | 5.80 4.78 | 4.45 4.23 Nov | 4.81 4.14 | 4.78 4.05 | 5.78 4.56 | 4.61 4.11 Dec | 4.88 4.06 | 4.88 4.04 | 5.75 4.59 | 4.72 4.01 Jan | 4.83 4.03 | 4.80 4.02 | 5.66 4.47 | 4.66 3.95 Feb 1/| 4.98 3.91 | 5.01 3.89 | 5.72 4.45 | 4.81 3.83 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 | 5.01 5.04 | 4.13 4.62 | 4.65 5.02 Sep | 5.00 4.70 | 5.26 4.71 | 4.56 4.38 | 4.96 4.79 Oct | 5.28 4.76 | 5.59 4.75 | 4.92 4.02 | 5.17 4.28 Nov | 5.34 4.78 | 5.60 4.78 | 5.07 3.85 | 5.35 4.10 Dec | 5.51 4.70 | 5.71 4.72 | 5.14 3.90 | 5.50 4.06 Jan | 5.40 5.40 | 5.62 4.63 | 4.84 3.78 | 5.44 4.10 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 5.29 | 6.35 5.77 | 185 192 | 0.00 0.00 Sep | 5.27 4.63 | 7.26 5.47 | 194 179 | 0.00 0.00 Oct | 5.52 4.69 | 6.76 5.41 | 204 178 | 0.00 0.00 Nov | 5.63 4.64 | 7.23 5.56 | 203 176 | 0.00 0.00 Dec | 5.80 4.51 | 7.11 5.57 | 209 176 | 0.00 0.00 Jan | 5.62 4.62 | 6.95 5.42 | 207 | 0.00 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, (1,000 bu.) 1996 | July August September October November December --------------|----------------------------------------- ----------------- Wheat grain | 108,437 145,840 125,910 98,302 75,245 50,979 Wheat flour | 2,008 1,669 3,133 2,496 2,748 2,240 Products | 113 142 149 172 135 119 Total | 110,558 147,651 129,192 100,970 78,129 53,338 U.S. wheat imports, (1,000 bu.) 1996 | July August September October November December --------------|------------------------------------------------------------ Wheat grain | 2,875 3,392 2,997 5,498 7,160 6,780 Wheat flour | 553 553 556 682 651 659 Products | 1,155 1,189 833 1,151 1,139 1,301 Total | 4,583 5,135 4,386 7,331 8,950 8,740 ---------------------------------------------------------------------------- Source: Department of Commerce, Bureau of Census. Wheat flour and products converted to wheat grain equivalent. Table 7 -- Wheat: U.S. exports, Census and export sales comparison 2/ --------------------------------------------------------------------------- | 1995/96 | 1996/97 --------------------------------------------------------------------------- | Total Shipments |Export Sales (as of 2/27/97)|Census |-----------------------------------------------------|--------- | | | Out- Total | | | | Ship- standing com- |USDA | Census | Export Sales| ments sales mitments |forecast -----------|-----------------------|--------------------------------------- | | --1,000 metric tons-- | Algeria | 444 452 | 229 0 229 | China | 3,057 2,979 | 1,012 26 1,038 | Egypt | 5,069 5,072 | 2,696 70 2,766 | FSU | 929 651 | 288 0 288 | Japan | 3,094 3,468 | 2,319 592 2,911 | S. Korea | 1,413 1,406 | 1,334 156 1,490 | Morocco | 674 693 | 400 0 400 | Nigeria | 820 880 | 542 58 600 | Pakistan | 1,652 1,672 | 1,336 494 1,830 | Philippines| 1,856 2,059 | 1,306 229 1,535 | | | | Total grain|32,823 32,778 |21,132 2,755 23,886 | | | | Total(incl)| | | products)3/|35,842 33,055 |21,240 2,811 24,051 | 25,855 ----------------------------------------------------------------------------- 1/ June - May. 2/ "U.S. Export Sales" report. 3/ Grain equivalent basis. END_OF_FILE