WHEAT OUTLOOK June 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-0697. ---------------------------------------------------------------------------- HIGHLIGHTS FOR 1997/98 --U.S. winter wheat prospects improve; total wheat output forecast up 1 percent from last year --Ending stocks to build, putting downward pressure on wheat prices --Wheat prices to follow normal seasonal pattern, hitting lows during June-September --Total CRP acreage essentially unchanged in top five wheat States U.S. Wheat Production Forecast Grows Total U.S. wheat production is forecast at 2.30 billion bushels in 1997, up 1 percent from last year. The June forecast is up 43 million bushels from last month due to higher winter wheat yields. The total still assumes a 700-million-bushel spring crop based on USDA's Prospective Plantings released in March and 5-year average yields and harvest-to-planted ratios. The 1997 U.S. winter wheat production forecast now stands at 1.60 billion bushels, up 8 percent from 1996. With larger beginning stocks and steady year-over-year imports, the U.S. wheat supply in 1997/98 is forecast to rise almost 4 percent, marking the first increase in 4 years. Demand is projected to be fairly strong, with domestic food use marching steadily upward from 890 million bushels in 1996/97 to 900 million in 1997/98. A moderately tight world wheat market, with relatively strong world trade, is expected to nudge U.S. exports to 1,025 million bushels, up from a projected 995 million in 1996/97. However, domestic feed and residual use is expected to decline 20 percent to 250 million bushels as expected ample corn supplies will likely weigh on corn prices this summer, making wheat feeding less attractive. Ending stocks will build from last year, which will put downward pressure on farm prices in the new marketing year that began June 1. The average price received by farmers for wheat is forecast between $3.45 and $4.05 per bushel in 1997/98, down from $4.35 in 1996/97 and $4.55 in 1995/96. The stocks-to-use ratio is projected to climb from 20.1 in 1996/97 to 25.4 in 1997/98. Normal Seasonal Price Pattern Expected in 1997/98 Monthly average prices received by farmers are expected to follow a normal seasonal pattern in 1997/98, hitting lows from June through September. Prices would then climb gradually through the rest of the season, reflecting the cost of storing grain and likely world supply and demand developments. In 1996/97, U.S. winter wheat production problems and strong export sales supported wheat prices at the beginning of the crop year. Then prices tumbled each month from June through early fall as prospects improved first for U.S. winter wheat and then spring wheat in the United States and Canada. Prices continued to decline during most of the rest of the season as wheat production rose to record levels in many of the major wheat-producing countries in the Southern Hemisphere. In contrast, at the beginning of 1997/98, large old-crop supplies in Canada and Australia will provide stiff export competition during the U.S. harvest, and prices will be far below a year-earlier level. However, U.S. exports will likely face much less competition in second-half 1997/98 than a year earlier, and a price rally is likely. Spring wheat area intentions are down in the United States and Canada. Area planted is expected to decline in Argentina and reduced production is forecast in Australia. Combined production by the five major wheat exporters--the United States, Canada, the European Union, Australia, and Argentina--is projected to drop 5 percent in 1997/98. Gains elsewhere in the world will not offset the major exporters' decline, lowering world production 1 percent from a year earlier. World trade is projected up 4 percent in 1997/98 (July/June), with demand especially strong in North Africa and the Middle East. The region's output will decline from a year ago. Increasing import demand relative to available supplies is likely to support U.S. and world wheat prices as 1997/98 unfolds. World ending stocks will remain relatively low. In 1996/97, Egypt and Iran are expected to be the world's top wheat importers, with 6.6 million tons and 6.5 million, respectively. Dry Conditions Propel U.S. Spring Wheat Plantings Contributing to price fluctuation in late spring was delayed planting in the Northern Plains, where a large portion of the U.S. spring wheat crop is grown. Chilly temperatures, along with the extremely wet field conditions following spring storms and snowmelt, especially in the Red River Valley, slowed spring wheat planting in the region. As of May 11, farmers had planted only 33 percent of the spring wheat crop, compared with the 5-year average of 56 percent. But by early June, planting progress pulled even with the 5-year average as excellent drying conditions persisted across the region since mid-May. Despite a late planting start, emergence of spring wheat in the Northern Plains is slightly ahead of average due to warm weather. Dry conditions have now become a concern in parts of the Northern Plains, especially in western North Dakota. The condition of the spring wheat crop has declined somewhat due to dry soils in North Dakota and Montana. This was the driest early June recorded in North Dakota since 1988. The first firm indication of spring wheat plantings will be published on June 30 in USDA's Acreage report. The first survey-based production forecast for spring wheat will be on July 11, 1997. Harvesting Gears Up in the Southern Plains The hard freeze that hit portions of Texas, Oklahoma, and Kansas during April 11-13 curtailed what many observers thought would be extraordinary crops. 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 States, which together account for almost three-quarters of projected hard red winter (HRW) production in 1997. Outside of the freeze area, weather conditions have been generally favorable during much of the growing season. Prospects have improved during the last month in Kansas and Oklahoma, with yield forecasts in each State up 2 bushels per acre from the May forecasts. HRW output is forecast at 921 million bushels, up 3 percent from May and up 21 percent from last year's drought-afflicted crop. Hard red winter production normally accounts for about 40 percent of the total U.S. wheat crop. As of June 9, 1997, 60 percent of the U.S. winter wheat acreage rated good to excellent, compared with just 31 percent last year. About 84 percent of the U.S. winter wheat crop was headed, just above last year's 81 percent. Wheat harvest in Texas is moving northward, but it is lagging behind the average pace. Reportedly, yields are highly variable, reflecting pockets of freeze damage. Rain and high humidity in Oklahoma are preventing combines from rolling through the fields. The crop has improved in recent weeks in Kansas, where wheat is rapidly turning color in the southern third of the State. Harvest has been hampered by damp weather in California, Georgia, and North Carolina. Soft red winter (SRW) production is forecast at 422 million bushels in 1997, the same as last year. Higher average yields are expected to offset lower harvested acreage. Crop prospects are excellent in Ohio and Illinois, the leading SRW producers. SRW production normally accounts for about 18 percent of the U.S. crop. White winter (WW) production is forecast at 260 million bushels, down 11 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. CRP Update On May 22, 1997, USDA announced the acceptance of 16.1 million acres of cropland into the Conservation Reserve Program (CRP) beginning October 1, 1997. Re-enrolled area totaled 11.7 million acres; 4.4 million will be new land. About 9.7 million acres are scheduled to leave the CRP and become available for production when contracts expire on September 30, leaving a total CRP of 27.6 million, down 5.3 million acres from the current total. Just over 7 million acres were offered but not accepted for this enrollment, the 15th signup. Some of this land may be rebid during the next CRP signup scheduled for this fall. Acreage can also be added to the program on a continous basis (e.g., filter strips). Excluding any additional enrollments, land under CRP contract in the top 10 wheat States (based on harvested area) would decline just 3 million acres this fall. The States accounted for nearly 80 percent of U.S. harvested acreage during the last 5 years. Another 740,000 acres would become available in the 6 States that account for another 10 percent of production. If the entire net change of 3.74 million acres is planted to wheat (an extreme assumption) and average yields by State prevail, additional U.S. wheat production would total about 150 million bushels (or 7 percent of 1996 output). About three-quarters of this amount would come from the top 10 States. Total CRP acreage in the top five wheat States would be essentially unchanged at 11.3 million acres. Gains in North Dakota and South Dakota offset reductions in Kansas, Montana, and Oklahoma. Each of the remaining top 10 states will lose CRP area, especially Texas (down 1.02 million acres), Minnesota (down 770,000 acres), and Washington (down 613,000 acres). *************************************************************************** * * * Information Contacts: * * * * Dennis A. 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 www.econ.ag.gov * * ERS Autofax system (202) 219-1107 * * Document Number 12105 * * Next Wheat Situation Outlook Report will be released on June 13, 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 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 | 475.0 530.7 568.5 506.6 376.0 460.3 Production | 2,466.8 2,396.4 2,321.0 2,182.6 2,281.8 2,303.6 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 2,853.9 | Use | Food | 834.8 871.7 852.9 883.0 890.0 900.0 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 1,241.1 995.0 1,025.0 TOTAL | 2,481.2 2,467.4 2,474.8 2,381.1 2,288.0 2,275.0 | Ending stocks | 530.7 568.5 506.6 376.0 460.0 578.9 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 | 352.7 412.5 364.6 258.0 367.3 485.9 Stocks-to-use | 21.4 23.0 20.5 15.8 20.1 25.4 | Prices ($/bu.) | Season average | 3.24 3.26 3.45 4.55 4.35 3.45-4.05 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 8,638 -------------------------------------------------------------------------- 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 | 483 302 269 147 92 1,293 Exports 2/ | 292 290 140 235 38 995 TOTAL | 785 587 409 377 130 2,288 | Ending stocks | 141 196 48 42 33 460 --------------------------------------------------------------------- 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 (76) 308 1,219 Dec-Feb | 0 27 1,246 214 2 26 179 822 Mar-May | 0 27 849 219 32 (35) 173 460 Mkt. year| 2,282 90 2,748 890 103 300 995 460 --------------------------------------------------------------------------- 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 | December January February March April --------------|------------------------------------------------------------ Mill grind +| 71,607 72,158 67,286 70,647 72,285 Food exports -| 2,336 1,452 2,025 2,620 N/A Food imports +| 1,957 1,570 1,526 594 N/A Non-flour | food use +| 2,000 2,000 2,000 2,000 2,000 Food use | 72,947 72,158 68,787 70,621 1/ 74,285 ------------------------------------------------------------------------- 1/ Does not include April import/export data. 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 | 5.32 4.11 | 5.39 4.14 | 5.63 4.40 | 5.21 4.04 May 1/| 5.73 4.09 | 5.81 4.14 | 5.62 4.50 | 5.67 3.94 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 4.78 | 6.71 4.85 | 5.65 3.99 | 5.66 4.54 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 4.78 | 7.01 5.35 | 250 183 | 0.00 0.00 May | 7.14 | 7.22 | 262 | 0.00 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 | October November December January February March --------------|----------------------------------------- ----------------- Wheat grain | 98,302 75,245 50,979 63,431 59,039 55,936 Wheat flour | 2,496 2,748 2,240 1,344 1,897 2,490 Products | 172 135 119 110 155 168 Total |100,970 78,129 53,338 64,886 61,091 58,594 U.S. wheat imports, (1,000 bu.) 1997 1996 | October November December January February March --------------|------------------------------------------------------------ Wheat grain | 5,498 7,160 6,780 5,712 9,533 8,703 Wheat flour | 682 651 659 508 376 373 Products | 1,151 1,139 1,301 1,063 1,152 222 Total | 7,331 8,950 8,740 7,282 11,061 9,298 ---------------------------------------------------------------------------- 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| 1997/98 --------------------------------------------------------------------------- | Total Shipments| Export Sales (as of 6/05/97) |------------------------------------------------------------- | | | | Out- Total | | Export | Ship- | Ship- standing com- | Census| Sales | ments | ments sales mitments -------------|----------------|--------|----------------------------------- | --1,000 metric tons-- Algeria | 444 452| 350 | 0 0 0 China | 3,057 2,979| 1,065 | 0 43 43 Egypt | 5,069 5,072| 2,825 | 0 915 915 FSU | 929 651| 288 | 0 25 25 Japan | 3,094 3,468| 3,264 | 54 405 459 S. Korea | 1,413 1,406| 1,646 | 28 229 258 Morocco | 674 693| 421 | 0 0 0 Nigeria | 820 880| 698 | 18 93 111 Pakistan | 1,652 1,672| 1,973 | 40 140 179 Philippines | 1,856 2,059| 1,876 | 28 151 179 Total grain |32,823 32,778| 25,964 | 279 4,345 4,624 Total(incl) | | | products)1/ |35,842 33,055| 26,127 | 280 4,380 4,660 USDA forecast| of Census | | 27,079 | 27,896 ---------------------------------------------------------------------------- 1/ Grain equivalent basis. Note: Census data for 1996/97 released July 18, 1997. END_OF_FILE