WHEAT OUTLOOK May 13, 1997 Approved by the World Agricultural Outlook Board ================================================================== WHEAT OUTLOOK is issued electronically once a month by the Economic Research Service, U.S. Department of of Agriculture, Washington, DC 20005-4788. No printed copies available. WHS-0597. =================================================================== HIGHLIGHTS --U.S. wheat production down slightly in 1997 --April freeze dampens U.S. winter wheat production --U.S. wheat exports projected up slightly in 1997/98 --Major wheat exporters to drop production in 1997/98; importers' production increases USDA forecasts 1997 U.S. winter wheat production at 1.56 billion bushels, up 6 percent from 1996 but below the 5-year average of 1.65 billion. Freezing weather in mid-April in the Southern Plains curtailed what many observers thought were blockbuster crops in Kansas, Oklahoma, and Texas. Total U.S. wheat production is forecast at 2.26 billion bushels in 1997, down just 1 percent from 1996 and down 3 percent from the 5-year average of 2.33 billion. A projected spring wheat crop of 700 million bushels is included based on the area reported in Prospective Plantings, 5-year average yields, and 5-year average harvest-to-planted ratios. With higher beginning stocks and steady year-over-year imports, the U.S. wheat supply in 1997/98 is forecast to rise 2.5 percent to 2.82 billion bushels, marking the first increase in 4 years. Demand is projected to be fairly strong, with domestic food use and exports expected to rise almost 2 percent. A moderately tight world wheat market, with relatively strong world trade, is expected to push U.S. exports to 1 billion bushels, up from a projected 985 million in 1996/97. However, domestic feed and residual use is expected to decline 20 percent to 250 million bushels as an expected larger corn crop will likely weigh on corn prices this summer, making wheat feeding less attractive. With expected gains in supply greater than gains in use, ending stocks are forecast to build to 557 million bushels in May 1998, the highest in 4 years. A rising stocks-use ratio (from 20.4 in 1996/97 to 24.6 in 1997/98) is expected to put downward pressure on farm prices in the new marketing year that begins June 1. The average price received by farmers for wheat is forecast at $3.60-$4.20 a bushel, down from $4.35 in 1996/97 and $4.55 in 1995/96. Prices are expected to be supported this season by the relatively tight world situation. Winter Wheat Output in 1997--Hard Red Up, Soft Red and White Down A hard freeze hit portions of Texas, Oklahoma, Kansas, and Colorado during April 11-13. Many fields sustained considerable damage, especially where there was no snow cover for protection. Nevertheless, average yields and harvested areas are expected to be higher than last year in each of these four States, which together account for almost three-quarters of projected hard red winter (HRW) production in 1997. HRW output is forecast at 894 million bushels, up 17 percent from last year's paultry, drought-afflicted crop. Hard red winter production normally accounts for about 40 percent of the total U.S. wheat crop. Soft red winter (SRW) production is forecast down 3 percent to 410 million bushels in 1997. Harvested acreage is forecast down 10 percent, more than offsetting a 7-percent increase in average yields. Crop prospects are excellent in Ohio, Illinois, and Indiana, the leading SRW-producing States. SRW production normally accounts for about 18 percent of the U.S. crop. White winter (WW) production is forecast at 259 million bushels, down 14 percent from 1996. Harvested area is forecast down 6 percent, and yields are expected down from high levels last year in Washington, Oregon, and Idaho, which together account for about 90 percent of WW production. WW output normally accounts for about 11 percent of the U.S. crop. Wet Fields Slow Spring Wheat Plantings Very wet field conditions following spring storms and snowmelt, especially in the Red River Valley, along with chilly weather, have slowed spring wheat planting in the Northern Plains. As of May 11, farmers had planted only 33 percent of the spring wheat crop, compared with the 5-year average of 56 percent. Planting progress has been very slow in North Dakota--the largest spring wheat State, which typically accounts for about one-half of U.S. planted spring acreage. If fields do not dry out enough to plant wheat by the first week or two of June --the end of normal planting time for spring wheat--farmers may switch to other crops or leave some land idle. But with recent price strength in the wheat market and with good planting conditions and warm weather, spring wheat plantings could increase from earlier expectations, offsetting the slow start to the planting season. Moreover, there is little evidence that late plantings result in lower yields. For example, plantings in North Dakota were late in 1996, but the average yield was 31.6 bushels per acre, compared with the 10- year average of 29.6 bushels. The first firm indication of spring wheat plantings will be on June 30, when USDA releases its Acreage report. The first production forecast for spring wheat (based on surveyed yields and acreage) will be on July 11, 1997. The first wheat-by-class supply and use projections for 1997/98 will also be available on July 11. U.S. Wheat Exports Forecast Up Slightly U.S. exports are expected to grow increase slightly in 1997/98, up less than 2 percent, while world wheat trade is expected to expand by close to 4 percent. Compared to the previous year, U.S. exports will face increased competition early in the 1997/98 marketing year, but somewhat less later in the year. In the summer of 1997, Canada, Australia, and even Argentina to some extent, will have increased old-crop supplies that will be marketed in competition with U.S. new-crop winter wheat. Transportation and logistical problems this past winter have reduced Canada's exports in 1996/97, leaving a large part of the bumper 1996 crop to move later than usual. However, as the 1997/98 season progresses, U.S. exports will likely face reduced competition from lower expected production in all the major exporting countries. Increased U.S. wheat supplies and lower prices are expected to maintain the pace of exports after the summer. Major Exporters To Reduce Wheat Production in 1997/98 Combined production by the five major wheat exporters--the United States, Canada, the European Union (EU), Australia, and Argentina--is projected to drop 13 million tons in 1997/98. Wheat prices have declined, especially compared with oilseeds, and wheat area is expected to decline in the United States, Canada, and Argentina. Australia may maintain wheat area, after a very successful year in 1996/97, but record yields are unlikely to be repeated, leaving production prospects down 5 million tons. In the EU, wheat area is up because the set aside area was reduced from 10 percent to 5 percent. However, planting problems and drought have reduced production prospects in Spain and Portugal, leaving EU production forecast down slightly for 1997/98. While the major exporters are expected to reduce wheat production in 1997/98, the rest of the world, especially the major importers, is expected to boost production by 10 million tons, offsetting most of the decline in the exporting countries. Production is forecast up sharply in China, Eastern Europe, and the Newly Independent States (NIS or former Soviet Union minus the Baltic states) mostly because favorable growing conditions are expected to boost yields. However, drought has struck North Africa, devastating production prospects. For the major importers, the projected declines in production have more trade effects than projected increases. North Africa will turn to world markets to maintain wheat consumption, boosting import demand, while large wheat production in China, NIS, and Eastern Europe is expected to keep these regions from increasing imports significantly. World wheat consumption is forecast down 1 percent in 1997/98, mostly because of reduced wheat feed use, especially in the United States, Canada, and South Korea. Wheat feeding is often the result of quality problems, usually occurring at harvest (e.g., Canada in 1996/97), and it is too early to identify any such problems. Reduced world wheat consumption and increased beginning stocks more than offset the slight decline in production, and global wheat ending stocks are projected up 6 percent in 1997/98, with much of the stock buildup in the United States and China. Prospects for increased world wheat ending stocks contribute to lower price prospects in 1997/98, but the global stocks-to-use ratio remains fairly tight at 20 percent, limiting price declines in the U.S. and world markets. **************************************************************************** * Information Contacts: * * * * Dennis Shields (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: http:\\econ.ag.gov * * * * ERS Autofax system: Call (202) 219-1107 * * * Document Number: 12105 * * * * The next Wheat Outlook report will be released on June 13, 1997. * * * * The 1997 Wheat Yearbook is also 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 1 -- Wheat: U.S. market year supply and disappearance Item | 1992/93 1993/94 1994/95 1995/96 1996/97E 1997/98P -------------------|------------------------------------------------------- Area (mil. ac.) | ARP (%) | 5.0 0.0 0.0 0.0 N.A. N.A. Nat'l total base | 89.6 89.6 88.9 88.5 87.9 77.3 CRP base retired | 10.6 10.8 10.8 10.8 10.6 10.1 Eff.base/ctr.acres| 78.9 78.4 78.1 77.7 77.3 0.00 0,50/92/85 | 4.0 5.7 5.2 6.1 N.A. N.A. Planted | 72.2 72.2 70.3 69.1 75.6 69.2 Harvested | 62.8 62.7 61.8 60.9 62.9 61.0 Yield (bu/ac) | 39.3 38.2 37.6 35.8 36.3 37.1 | Supply (mil. bu.) | Beg. Stocks | 475.0 530.7 568.5 506.6 376.0 465.3 Production | 2,466.8 2,396.4 2,321.0 2,182.6 2,281.8 2,261.5 Imports 1/ | 70.0 108.8 91.9 67.9 90.0 90.0 TOTAL | 3,011.8 3,035.9 2,981.4 2,757.1 2,747.8 2,816.8 | Use | Food | 834.8 871.7 852.9 883.0 895.0 910.0 Seed | 99.1 96.3 89.2 104.1 103.0 100.0 Feed & Residual | 193.6 271.7 344.4 151.9 300.0 250.0 Exports 1/ | 1,353.6 1,227.8 1,188.3 1,241.1 985.0 1,000.0 TOTAL | 2,481.2 2,467.4 2,474.8 2,381.1 2,283.0 2,260.0 | Ending stocks | 530.7 568.5 506.6 376.0 465.3 556.8 Farmer-owned | reserve | 28.0 6.0 0.0 0.0 N.A. 0.0 CCC inventory 2/ | 150.0 150.0 142.0 118.0 93.0 93.0 Free stocks | 352.7 412.5 364.6 258.0 372.3 463.8 Stocks-to-use | 21.4 23.0 20.5 15.8 20.4 24.6 | Prices ($/bu.) | Season average | 3.24 3.26 3.45 4.55 4.35 3.60-4.20 Target price | 4.00 4.00 4.00 4.00 N.A. N.A. Loan rate | 2.21 2.45 2.58 2.58 2.58 2.58 Def. payment/ | contract rate 3/ | 0.81 1.03 0.61 4/ 0 0.874 0.620 | Def./Contract pmts.| (mil. dollars)3/ | 1,371 1,900 1,146 100 1,976 1,401 Market value | of production | (mil. dollars) | 7,984 7,812 8,007 9,931 9,926 8,820 -------------------------------------------------------------------------- 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/ Includes Food Security Reserve. 3/ Prior to 1996/97 Deficiency payment rate; 1996/97-contract rate. 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 79 883 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 | .2 54.9 0 14 21 90 TOTAL | 916 787.6 457 424 163 2,748 | Use: | Total domestic | 488 302 269 147 92 1,298 Exports 2/ | 292 285 140 230 38 985 TOTAL | 785 587 409 377 130 2,282 | Ending stocks | 136 201 48 47 33 465 --------------------------------------------------------------------- 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 2,757 883 104 152 1,241 376 1996/97P | Jun-Aug | 2,282 15 2,673 224 9 381 334 1,724 Sep-Nov | 0 21 1,745 234 60 (77) 308 1,219 Dec-Feb | 0 27 1,246 214 2 26 182 822 Mar-May | 0 27 849 224 32 (32) 161 465 Mkt. year| 2,282 90 2,748 895 103 300 985 465 --------------------------------------------------------------------------- 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.) ----------------------1997----------------------- 1996 | November December January February March --------------|------------------------------------------------------------ Mill grind +| 73,694 71,607 72,158 67,286 70,647 Food exports -| 2,846 2,336 1,452 2,025 N/A Food imports +| 1,789 1,957 1,570 1,526 N/A Non-flour | food use +| 2,000 2,000 2,000 2,000 2,000 Food use | 74,637 72,947 72,158 68,787 1/ 72,647 ------------------------------------------------------------------------- 1/ Does not include March 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 | 4.98 3.88 | 5.01 3.90 | 5.72 4.31 | 4.81 3.80 Mar | 5.07 3.93 | 5.06 3.98 | 5.73 4.32 | 4.88 3.83 Apr 1/| 5.32 4.16 | 5.39 4.26 | 5.63 4.40 | 5.21 4.04 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 4.61 | 5.62 4.63 | 4.84 3.78 | 5.44 4.10 Feb | 5.67 4.52 | 5.81 4.57 | 4.83 3.55 | 5.59 4.13 Mar | 5.63 4.58 | 5.67 4.67 | 4.79 3.71 | 5.38 4.25 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 | 207 176 | 0.00 0.00 Feb | 5.82 4.45 | 6.86 5.25 | 219 172 | 0.00 0.00 Mar | 5.81 4.62 | 6.97 5.18 | 216 177 | 0.00 0.00 Apr | 6.53 | 7.01 | 250 183 | 0.00 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.) --------------------------1997----------------------------- 1996 | September October November December January February --------------|----------------------------------------- ------------------ Wheat grain | 125,910 98,302 75,245 50,979 63,431 59,039 Wheat flour | 3,133 2,496 2,748 2,240 1,344 1,897 Products | 149 172 135 119 110 155 Total | 129,192 100,970 78,129 53,338 64,886 61,091 U.S. wheat imports, (1,000 bu.) 1997 1996 | September October November December January February --------------|------------------------------------------------------------ Wheat grain | 2,997 5,498 7,160 6,780 5,712 9,533 Wheat flour | 556 682 651 659 508 376 Products | 833 1,151 1,139 1,301 1,063 1,152 Total | 4,386 7,331 8,950 8,740 7,282 11,061 --------------------------------------------------------------------------- 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 --------------------------------------------------------------------------- | 1995/96 | 1996/97 | --------------------------------------------------------------------------- | Total Shipments |Export Sales (as of 5/01/97)|Census |-----------------------------------------------------|--------- | | | Out- Total | | | | Ship- standing com- |USDA | Census | Export Sales| ments sales mitments |forecast -----------|-----------------------|--------------------------------------- | | --1,000 metric tons-- | Algeria | 444 452 | 316 0 316 | China | 3,057 2,979 | 1,050 44 1,094 | Egypt | 5,069 5,072 | 2,825 115 2,940 | FSU | 929 651 | 288 25 313 | Japan | 3,094 3,468 | 2,936 441 3,377 | S. Korea | 1,413 1,406 | 1,505 156 1,661 | Morocco | 674 693 | 421 0 421 | Nigeria | 820 880 | 641 69 710 | Pakistan | 1,652 1,672 | 1,867 0 1,867 | Philippines| 1,856 2,059 | 1,786 141 1,927 | | | | Total grain|32,823 32,778 |24,788 1,815 26,606 | | | | Total(incl)| | | products)1/|35,842 33,055 |24,927 1,841 26,768 | 26,808 ------------------------------------------------------------------------- 1/ Grain equivalent basis. END_OF_FILE