Wheat Outlook. Economic Research Service May 13, Approved by the World Agricultural Outlook Board

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1 Wheat Outlook Economic Research Service May 13, 008 U.S. Department of Agriculture WHS-08dt text and tables Approved by the World Agricultural Outlook Board Continued High Farm Prices Projected for 008/09 The national average farm price for wheat for 008/09 is projected at $6.60 to $8.10 per bushel, compared with the current year forecast of a record $6.55 per bushel. Wheat prices in 008/09 will be supported by farmer forward sales and early season export demand. Overall, the 008/09 U.S. wheat outlook is for higher production, lower exports, increased domestic use, and higher ending stocks. Record world wheat production is projected in 008/09, with strong wheat prices encouraging an increase in area, and improved growing conditions boosting yield prospects. Weather through the beginning of May has been favorable across Europe, but dryness has reduced prospects across parts of North Africa and the Middle East. Wheat consumption is also expected to increase robustly with an increase in feed and residual use. Global production is projected to be larger than global use, resulting in a modest increase in world wheat stocks. Global 008/09 ending stocks are projected up 1 percent to 14 million tons, about the same as in. Increased competition is expected for U.S. exports, so despite increased production, U.S. exports are forecast to drop 7 percent in the 008/09 July-June trade year. 1

2 Domestic Situation and Outlook Ending Stocks Projected to Double in 008/09 Ending stocks of wheat for 008/09 are projected to be up 101 percent from as supplies exceed use. Total wheat supplies for 008/09 are projected up only 4 percent because of historically low carryin. Total wheat use is projected down 5 percent for 008/09 as lower exports more than offset increased domestic use. Total production is projected at,39 million bushels, up 35 million bushels (16 percent) from. Winter wheat production. The survey-based forecast of winter wheat production, at 1,778 million bushels, is up 6 million bushels (17 percent) from 007. Expected area for harvest as grain or seed totals 40. million acres, up 4. million acres (1 percent) from last year. Based on May 1 crop conditions, the U.S. winter wheat yield is forecast at 44.3 bushels per acre, up.1 bushels from the previous year. Winter estimates by class. Hard red winter (HRW) production this year is estimated to be up 50 million bushels (5 percent) from a year ago to 1,011 million bushels. HRW production is estimated to rise despite slightly lower planted area and yield than in 007. The larger harvested area in 008 is because of lower expected abandonment. Abandonment was higher in 007 because of losses due to a late spring frost and heavy rains at harvest time on the Southern Plains. Estimated planted area, harvested area, and yield for 008 are 3.5 million acres, 7. million acres, and 37. bushels per acre, respectively. Soft red winter (SRW) production is likewise estimated to be up 193 million bushels (54 percent) from last year and totals 551 million bushels. SRW production is estimated to rise because of higher planted and harvested areas and yield. SRW production is also up in 008 because of expected lower abandonment. Abandonment was higher in 007 because of losses due to a late spring frost. Estimated planted area, harvested area, and yield for 008 are 10.7 million acres, 9.5 million acres, and 57.8 bushels per acre, respectively. White production is estimated to total 15 million bushels, up 10 percent from a year ago. Of the White production total, 3. million bushels are hard white and 19 million bushels are soft white. Spring wheat production. Spring wheat production is expected higher with seeded area up 10 percent in the March 31 Prospective Plantings report. Durum and other spring wheat production is projected at 614 million bushels, up 1 percent from, based on 10-year harvested-to-planted ratios and trend yields.

3 Projected 008/09 utilization. Food use is projected at 960 million bushels, up 10 million from the current year reflecting steady growth in domestic demand. Feed and residual use is projected at 30 million bushels, up sharply from the 60 million projected for. Larger supplies of soft red winter wheat and higher corn prices are expected to boost wheat feeding. Exports are projected at 975 million bushels, down 4 percent from. Ending stocks for 008/09 are projected at 483 million bushels, more than double the current year's projected 39 million. Winter Wheat Heading Slowed by Cool Weather The National Agricultural Statistics Service s (NASS) May Crop Production reported that winter wheat developed slowly during April under cooler than normal conditions in many areas. By April 7, heading had not begun in the Pacific Northwest, northern Great Plains, and eastern Corn Belt. Nationally, 15 percent of the crop was at or beyond the heading stage, 9 points behind last year and 10 points behind the 5-year average. Significant delays were evident in Arkansas, the middle Mississippi Valley, as well as the central and southern Great Plains. However, the crop continued to develop ahead of schedule in California and North Carolina. The winter wheat condition rating varied between 45 and 47 percent good and excellent throughout the month of April. Spring Wheat Planting and Emergence Slower Than Normal The NASS May Crop Production reported that at the end of April, with 34 percent of the spring wheat crop planted, spring wheat producers were 6 points ahead of last year, but 6 points behind normal. Planting was active in all States during the last week of April; however, in Minnesota, where the panting pace was 9 points behind last year and 7 points behind normal, only 6 percent of the crop was planted. Following the planting delays, emergence, at 4 percent, was delayed and 8 points compared with last year and normal, by the end of April. Emergence was behind normal in all States and progress was over 0 points behind the 5-year average in the Pacific Northwest and South Dakota. Minor Changes in Projections Leave Ending Stocks Nearly Unchanged Projected imports were raised 5 million bushels in May to 95 million bushels based on the import pace to date. All of the increase was allocated to hard red spring wheat. Projected exports were raised 5 million bushels in May to 1,80 million bushels based on the export pace to date. All of the increase was allocated to hard red winter wheat. Small changes were made in by-class food and seed use. Total food use, however, remains unchanged while total seed use is up slightly. The higher seed use drops total ending stocks slightly, about 3 million bushels. Mill Grind Revisions Raise Flour Use in 006 and 007 In May, the U.S. Bureau of the Census revised its mill grind data upward for 006 and 007. The higher mill grind resulted in higher ERS per capita flour use estimates for 3

4 these two years. Estimated flour use for 006 is now pounds per person, up from ERS s previous estimate of pounds. Estimated flour use for 007 is now pounds per person, up from ERS s previous estimate of pounds. The new estimates for these two years are up from the recent low of 134. pounds in 005, but are still below the recent high of 146. pounds in 000. Per capita flour use dropped sharply after 000 with the sudden interest of many consumers in low-carbohydrate diets. 4

5 International Situation and Outlook World Wheat Production To Increase 8 Percent to Record Level in 008/09 World wheat production in 008/09 is projected to reach 656 million tons, up 8 percent from the previous year. Foreign wheat production is projected up 7 percent over, and is expected to be 7 million tons larger than the 004/05 record. Strong wheat prices have encouraged expanded plantings in many parts of the world, pushing global area up 3 percent to the largest in 10 years. Generally favorable growing conditions in the largest wheat-producing regions support a 4.6-percent increase in projected yields. The EU-7 is expected to be the world s largest wheat-producing region in 008/09, increasing wheat production to 140 million tons, a 17-percent increase from the droughtand flood-plagued crop in. The reduction of the set-aside from 10 percent to zero facilitated the increased area. Good growing conditions support a return to trend yields or above. The winter was relatively mild and winterkill is expected to be below normal. Rainfall has been abundant across much of the EU-7; even in Spain, the, although short, it has been timely. China is expected to be the second largest wheat producer in 008/09 reaching 109 million tons, a 3-percent increase from last year. Area planted is reported up slightly as wheat returns and government payments were enough to maintain area. Severe winter weather was mostly outside the major wheat-producing areas, and trend yields are expected. Wheat production in the former Soviet Union (FSU-1) is forecast at 99 million tons in 008/09, up 7 percent from a year earlier. Fall planting conditions were much better for this year s crop, facilitating a rebound in winter wheat plantings in Ukraine and parts of Russia. Strong wheat prices are expected to boost area across Ukraine, Russia, and Kazakhstan. Spring wheat yields in 008/09 in Russia and Kazakhstan are not expected to match the previous year s above-trend level, but winter wheat yields across Ukraine and Russia are expected to increase. India is projected to produce a record 77 million tons in 008/09, up 1 percent from a year earlier. This crop is already largely harvested, and the Government of India reports larger-than-expected procurements. Support prices were increased significantly. There was some dryness in non-irrigated areas, but this was more than offset by unusually mild temperatures. Pakistan, however, reported planting delays, and harvested area is expected to decline. The wheat crop is forecast down 8 percent to 1.5 million tons. The Middle East has suffered from a winter drought across many wheat-producing areas. Production is projected down 1 percent to 35 million tons. Drought has extended from western Syria and Israel, across Iraq and into parts of Iran. Turkey has reported problems 5

6 in some regions, but not as bad as a year ago, so wheat production in Turkey is projected up only 6 percent from the very poor crop in. North Africa s wheat production in 008/09 is projected up 14 percent to 16 million tons. The drought in Morocco is less severe than a year ago. The countries to the east had generally better rainfall than Morocco. Canadian planting intentions surveys indicate an increase in sowings of Canadian Western Red Spring Wheat, and a larger planned increase for Durum. Canola prices have been strong enough to limit wheat area expansion, but barley and oats are expected to lose area in favor of wheat. Moreover, winter wheat seedings in eastern Canada increased sharply due to improved planting conditions last fall. Total wheat area harvested in Canada is projected up 16 percent in 008/09, and with trend yields expected, production in 008/09 is forecast up 5 percent to 5 million tons. Argentina s 008/09 wheat production is projected to decline 3 percent to 15 million tons due to a decline in expected planted area. Government restrictions on registering wheat exports, in order to limit internal price increases, have reduced producer incentives to plant wheat. The Government has tried to encourage wheat and corn area by increasing export taxes on soybeans, but the producers reaction was to go on strike. This increases uncertainty about forecasts for Argentina. Australia is expected to rebound from devastating drought in and, boosting wheat production 83 percent to 4 million tons in 008/09. Increased Supplies To Boost Use in 008/09 World wheat beginning stocks for 008/09 are forecast down 11 million tons to 110 million. This stocks decline partly offsets the projected 50-million-ton increase in production, but global supplies are still up significantly year-to-year. Some of the countries with tight beginning stocks for 008/09 are the traditional major exporters: the United States, Canada, the EU-7, and Australia. EU-7 beginning stocks are projected down million tons to only 1 million, with government intervention stocks liquidated. Australia s beginning stocks are forecast to remain small at less than 4 million tons as stocks were drawn down following consecutive droughts. Canada is expected to reduce beginning stocks 3 million tons to 4 million as world prices have encouraged large exports. World wheat disappearance in 008/09 is projected to increase 3.5 percent to 64 million tons. Global wheat feed and residual use is expected to increase 15 percent to 113 million tons. High corn prices should encourage wheat feeding. Increased wheat production in the EU-7, FSU-1, United States, Canada, and Australia is expected to help boost the use of wheat for feed. World food, seed, and industrial use of wheat is expected to increase in most countries around the world, by about 1 percent in 008/09. 6

7 The increase in world wheat use is projected to be smaller than the increase in wheat supplies, boosting global stocks at the end of 008/09 for the first time in 4 years. World wheat ending stocks are projected to increase 14 million tons to 14 million, about the same as years earlier and still low by historical standards. Record World Wheat Trade Projected in 008/09, U.S. Exports to Drop World wheat trade in 008/09 (July-June trade year) is projected to reach 117 million tons, up 6 percent from the previous year s depressed level, but only percent larger than world wheat trade in. The most dramatic decline in wheat imports in 008/09 is projected for India, with record production and procurements. India is projected to import almost nothing, down sharply from million tons last year. Increased EU-7 production is also expected to limit its need to import. EU-7 imports are forecast down 1.5 million tons to 5.0 million. Increased production and expected lower internal prices will limit the incentive to import, but the decline will be softened by increased export availability from Ukraine and Russia, as the import quota on lower-quality wheat is expected to be used. Iran, with reduced production, is expected to return as a major importer of wheat in 008/09, boosting its imports.3 million tons to.5 million. Algeria, with tight beginning stocks is projected to increase imports 1. million tons to 5.6 million. Syria, suffering from drought, is projected to increase imports 0.6 million tons to 0.8 million. Israel is forecast to increase wheat imports 0.4 million tons to 1.5 million, as increased corn prices and the greater availability of low-quality wheat encourage wheat feeding. Nigeria is projected to increase wheat imports 0.4 million tons to 3.3 million to maintain food consumption. Many other countries are expected to increase wheat imports by smaller amounts to maintain consumption and, in some cases, rebuild depleted stocks. Some growth in imports is expected to leave Egypt, at 7.8 million tons, the world s largest importing country in 008/09, followed by Brazil at 7.3 million. Shifting market shares are expected among wheat-exporting countries in 008/09. Increased production is expected to double Australia s 008/09 trade year exports to 15.0 million tons and boost EU-7 exports 6.0 million tons to 15.0 million. Ukraine is expected to lift export restrictions, increasing wheat exports 5.3 million tons to 6.0 million. Canada is projected to increase exports million tons to 15.0 million. Reduced wheat production and exports are forecast for Kazakhstan, down.5 million tons to 6.0 million, and for Pakistan, down 1. million tons to 1.0 million. China is expected to trim wheat exports 0.7 million tons to.0 million. Turkey and Argentina are projected to trim exports modestly. U.S. Exports To Drop After a Quick Start U.S. wheat exports for the 008/09 July-June international trade year are projected to drop 9.5 million tons from last year, reaching 6.0 million tons. U.S. production is 7

8 expected to increase in 008/09, but very low carryin stocks will limit the increase in supplies. As competitors wheat harvests become available for export, U.S. shipments are expected to slow. The 008/09 June-May local marketing year is projected down 305 million bushels to 975 million. U.S. wheat exports are expected to be relatively strong early in the marketing year because the U.S. crop is harvested earlier than that in most other major exporting countries. Reduced competition is also expected from Australia until after its harvest starting in November 008. U.S. outstanding sales for the year during the first week in May 008 were triple last year s, indicating that U.S. wheat exports will start strong. However, as competitors supplies become available, and their wheat prices decline, U.S. exports are expected to decline. The June-May marketing year forecast for U.S. exports was increased 5 million bushels to 1,80 million bushels because the pace of recent shipments supported the increase, and, with just a few weeks remaining, it is possible to be more precise. Contact Information Gary Vocke (coordinator) (0) gvocke@ers.usda.gov Edward W. Allen (international) (0) ewallen@ers.usda.gov The full issue of Wheat Outlook will be released within 4 business days. Wheat Outlook is issued 11 times a year by the Economic Research Service, U.S. Department of Agriculture, Washington, DC Electronic release only; no published copies are available. The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, age, disability, and, where applicable, sex, marital status, familial status, parental status, religion, sexual orientation, genetic information, political beliefs, reprisal, or because all or a part of an individual's income is derived from any public assistance program. (Not all prohibited bases apply to all programs.) Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDA's TARGET Center at (0) (voice and TDD). To file a complaint of discrimination write to USDA, Director, Office of Civil Rights, 1400 Independence Avenue, S.W., Washington, D.C or call (800) (voice) or (0) (TDD). USDA is an equal opportunity provider and employer. 8

9 Table 1Wheat: U.S. market year supply and disapperance, 05/13/008 Item and unit Area: Planted Harvested Million acres Million acres 00/ / / / / Yield Bushels per acre Supply: Beginning stocks Production Imports 1/ Total supply , , , , , , , , , , , , , ,731.5 Disappearance: Food use Seed use Feed and residual use Total domestic use Exports 1/ Total disapperance , , , ,158.3, ,169. 1,065.9, ,15. 1,00.8, , , , ,80.0, , ,49.0 Ending stocks CCC inventory / Stocks-to-use ratio Loan rate Contract/direct payment rate Farm price 3/ Dollars per bushel Dollars per bushel Dollars per bushel Government payments Market value of production Million dollars Million dollars 1,17 5,679 1,37 7,99 1,18 7,83 1,151 7,171 1,10 7,710 1,118 13,537 17,581 Latest market year is projected; previous market year is estimated. Totals may not add due to rounding. 1/ Includes flour and selected other products expressed in grain-equivalent bushels. / Stocks owned by USDA's Commodity Credit Corporation (CCC). Most CCC-owned inventory is in the Bill Emerson Humanitarian Trust. 3/ U.S. season-average price based on monthly prices weighted by monthly marketings. Prices do not include an allowance for loans outstanding and government purchases. Source: USDA, World Agricultural Outlook Board, World Agricultural Supply and Demand Estimates and supporting materials. Date run: 5/1/008

10 Table Wheat: U.S. market year supply and disappearance, 05/13/008 Hard red Market year, item, and unit All wheat winter 1/ Area: Planted acreage Million acres Harvested acreage Million acres Hard red spring 1/ Soft red winter 1/ White 1/ Durum Yield Bushels per acre Supply: Beginning stocks Production Imports / Total supply , , Disappearance: Food use Seed use Feed and residual use Total domestic use Exports / Total disappearance , , Ending stocks Area: Planted acreage Harvested acreage Million acres Million acres Yield Bushels per acre Supply: Beginning stocks Production Imports / Total supply , , , Disappearance: Food use Seed use Feed and residual use Total domestic use Exports / Total disappearance , ,80.00, , Ending stocks Latest market year is projected; previous market year is estimated. Totals may not add due to rounding. 1/ Area and yield data are unpublished National Agricultural Statistics Service data. Supply and disappearance data, except production, are approximations. / Includes flour and selected other products expressed in grain-equivalent bushels. Source: USDA, National Agricultural Statistics Service, Crop Production and unpublished data; and USDA, World Agricultural Outlook Board, World Agricultural Supply and Demand Estimates and supporting materials. Date run: 5/1/008

11 Table 3Wheat: U.S. quarterly supply and disappearance (million bushels), 05/13/008 Market year and quarter 000/01 Jun-Aug Sep-Nov Dec-Feb Mar-May Production,8,8 Imports 1/ Total supply 3,198,378 1,88 1,361 3,68 Food use Seed use Feed and residual use Exports 1/ ,06 Ending stocks,353 1,806 1, /0 Jun-Aug Sep-Nov Dec-Feb Mar-May 1,947 1, ,849,185 1,651 1,35, ,156 1,63 1, /03 Jun-Aug Sep-Nov Dec-Feb Mar-May 1,606 1, ,410 1,77 1,333 9, ,749 1, /04 Jun-Aug Sep-Nov Dec-Feb Mar-May,345, ,85,057 1,533 1,037, ,158,039 1,50 1, /05 Jun-Aug Sep-Nov Dec-Feb Mar-May,158, ,7 1,957 1,448 1,001, ,066 1,938 1, /06 Jun-Aug Sep-Nov Dec-Feb Mar-May,105, ,663 1,944 1, , ,003 1,93 1, Jun-Aug Sep-Nov Dec-Feb Mar-May 1,81 1, ,410 1,780 1,346 89, ,751 1, Jun-Aug Sep-Nov Dec-Feb,067, ,553 1,738 1,156, ,80 1,717 1, /09,39 100, Latest market year is projected; previous market year is estimated. Totals may not add due to rounding. 1/ Includes flour and selected other products expressed in grain-equivalent bushels. Source: USDA, World Agricultural Outlook Board, World Agricultural Supply and Demand Estimates and supporting materials. Date run: 5/1/008

12 Table 4Wheat: Monthly food disapperance estimates (1,000 grain-equivalent bushels), 05/13/008 Mkt year and month 1/ Wheat ground for flour + Food imports / + Nonmilled food use 3/ Food exports / Food use 4/ Jun 70,780,376 1,181 73,974 Jul 74,1,81 1,198 77,304 Aug 81,118,347 1,776 83,688 Sep 78,001 1,961 1,009 80,95 Oct 79,831,617 1,704 8,744 Nov 76,411,640 1,504 79,547 Dec 71,73,466 1,764 74,45 Jan 7,918,661 1,31 76,68 Feb 7,340,130 1,953 74,517 Mar 76,749,651 1,656 79,744 Apr 75,365,371,109 77,68 May 77,058,18 4,15 77,034 Jun 73,75,63,376 75,613 Jul 76,11,50 1,644 78,78 Aug 83,195,156 1,83 85,58 Sep 79,998 1,961,486 81,473 Oct 8,745,383,959 84,168 Nov 79,199,90 4,078 79,41 Dec 74,341,17,653 75,905 Jan,57 1, Feb,066 1, / Current year is preliminary. Previous year is preliminary through August of current year, estimated afterwards. / Food imports and exports used to calculate total food use. Includes all categories of wheat flour, semolina, bulgur, and couscous and selected categories of pasta. 3/ Wheat prepared for food use by processes other than milling. 4/ Estimated food use equals wheat ground for flour plus food imports plus nonmilled food use minus food exports. See for more information. Sources: Calculated using data from U.S. Department of Commerce, Bureau of the Census, Flour Milling Products (MQ311A) and trade data. Date run: 5/1/008 - =

13 Table 5Wheat: National average price received by farmers 1/, 05/13/008 Month June July August September October November December January February March April May All wheat Winter / Preliminary mid-month, weighted-average price for current month. Source: USDA, National Agricultural Statistics Service, Agricultural Prices. Durum Other spring Table 6Wheat: National average prices received by farmers by class, 05/13/008 Month Hard red winter Soft red winter Hard red spring White June July August September October November December January February March April May Source: USDA, National Agricultural Statistics Service, Agricultural Prices. Date run: 5/1/008

14 Table 7Wheat: Average cash grain bids at principal markets, 05/13/008 Month June July August September October November December January February March April May No. 1 hard red winter (ordinary protein) Kansas City, MO No. 1 hard red winter (13% protein) Kansas City, MO No. 1 hard red winter (ordinary protein) Portland, OR No. hard red winter (ordinary protein) Gulf ports, LA 1/ (dollars per metric ton) June July August September October November December January February March April May No. 1 dark northern spring (13% protein) Minneapolis, MN No. 1 dark northern spring (14% protein) Minneapolis, MN No. 1 dark northern spring (14% protein) Portland, OR No. 1 hard amber durum Minneapolis, MN June July August September October November December January February March April May No. soft red winter St. Louis, MO No. soft red winter Chicago, IL No. soft red winter Toledo, OH = Not available or no quote. 1/ Free on board. Barge delivered to Louisiana gulf. Source: USDA, Agricultural Marketing Service, State Grain Reports, No. 1 soft white Portland, OR Date run: 5/1/008

15 Table 8Wheat: U.S. exports and imports for last 6 months (1,000 bushels), 05/13/008 Item Exports All wheat grain All wheat flour 1/ All wheat products / Total all wheat Sep ,168 1,135 1, ,666 Oct ,064 1,758 1,09 161,03 Nov ,504,515 1,574 10,593 Dec 007 8,343 1, ,03 Jan ,539 1, ,8 Feb ,414 1, ,48 Imports All wheat grain All wheat flour 1/ All wheat products / Total all wheat 5, ,118 7,03 4, ,48 7,135 4, ,449 7,073 4, ,419 7,150 6, ,46 8,54 6, ,40 8,374 Totals may not add due to rounding. 1/ Expressed in grain-equivalent bushels. Includes meal, groats, and durum. / Expressed in grain-equivalent bushels. Includes bulgur, couscous, and selected categories of pasta. Source: U.S. Department of Commerce, U.S. Census Bureau; and ERS calculations using Census trade data. Date run: 5/1/008

16 Table 9Wheat: U.S. exports, Census and export sales comparison (1,000 metric tons), 05/13/08 005/06 (as of 05/01/08) Importing Outstanding country Shipments Shipments sales Total Data Export Export Export source Census 1/ sales / Census 1/ sales / sales / Country: Japan,909,966 3,188 3,8, ,40 Nigeria 3,160 3,036,455,441,351 98,649 Mexico,654,564,65,138, ,79 Egypt 1,13 1,181 1,98 1,98 3, ,163 Philippines 1,650 1,676 1,648 1,739 1, ,681 South Korea 1,097 1,143 1,174 1,191 1,385 1,607 Taiwan , ,109 Iraq,78, , ,313 EU-7 1,08 1, , ,911 Yeman Total grain 6,903 5,30 4,078,90 30,546 3,460 34,005 Total (including products) 7,461 5,370 4,766,950 30,590 3,463 34,053 USDA forecast of Census 34,840 1/ Source is U.S. Census Bureau / Source is Foreign Agricultural Service's weekly U.S. Export Sales report. Source: USDA, Foreign Agricultural Service's, U.S. Export Sales: and U.S. Department of Commerce, U.S. Census Bureau.