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WHEAT OUTLOOK

(December 14, 2000) Total U.S. exports are forecast at 1,125 million bushels, up 25 million from last month. Also, food use is increased by 5 million bushels, reducing the ending stocks forecast to 862 million bushels, down 30 million from a month earlier. The higher export forecast has the potential to strengthen prices later in the marketing year. However, relatively large supplies in the major wheat exporting countries are keeping U.S. wheat prices in check.

The preliminary farm price for all wheat was up to $2.72 per bushel in November, 4 cents above the October farm price and 6 cents above November 1999. The projected season-average price range for the price received by farmers is narrowed 5 cents on both ends of the range, and is now projected to fall between $2.50 and $2.70 per bushel.

Hard Red Spring And Durum Food Use Increased

The total food use projection for the 2000/01 marketing year is up 5 million bushels this month. The projected total, if realized, will be 20 million above the estimated food use during 1999/2000. The projected food use of durum is 5 million bushels above last month because of a strong mill grind. The Flour Milling Products report released by the U.S. Census Bureau for the third calendar quarter is the basis for the higher projection. The durum mill grind in the third calendar quarter was 32 percent above the same period in 1999. Much of this increase reflects the inclusion into the milling census in 2000 four integrated mills operated onsite at integrated pasta plants.

The durum mill-grind during the first 4 months of the 2000/01 marketing year (June-September) is 5.0 million bushels above the same period last year. Likewise, after accounting for imports and exports of durum food products, durum food use is up 5.3 million bushels from the previous year during that 4-month period. The Economic Research Service (ERS) projection for 2000/01 assumes that the higher mill-grind pace will continue during the last 3 months of calendar year 2000 before stabilizing at the previous years level during the last 5 months of the marketing year (January-May 2001). For the marketing year, durum food use is now projected to total 80 million bushels, an increase of about 9 million bushels above the total in 1999/2000.

Projected food use of hard red spring (HRS) wheat during 2000/01 was increased 5 million bushels this month, while the food use projection for hard red winter (HRW) wheat was reduced by a similar amount. This change reflects current market conditions.

Imports And Exports By Class Revised

The projection of durum wheat imports was increased by 2 million bushels this month because of a tight supply situation for milling quality durum in the United States. This offsets a 2-million reduction in HRS imports.

Export projections for three classes of wheat were revised this month based on the pace of shipments and sales to date and prospects of increased sales of higher quality wheat. Increases were made for hard red winter (HRW), up 10 million; hard red spring (HRS), up 5 million; and soft white (SW), up 10 million. Export projections for soft red winter (SRW) wheat and durum wheat are unchanged from last month.

Plantings Progress Lags Behind Normal

The final Crop Progress report for the year indicated that on November 26 only 94 percent of the winter wheat crop in the 18 states covered by the report was seeded, 3 points below average for that date. Nationwide, 85 percent of the crop had emerged as of that date, 8 points below average. The condition of the crop that had emerged was rated 59 percent good to excellent, up from 43 percent the previous year. Concerns about late planting dates in the hard red winter growing region have provided some strength to wheat futures prices in recent weeks. Cold weather during November has slowed crop emergence and development, and the crop will be more vulnerable to winter kills in locations where snow cover is inadequate. For the week ending November 26, wheat seeding in Oklahoma was only 84 percent complete, well below the 5-year average of 99 percent. Emergence of the crop in Oklahoma, pegged at 71 percent, was 20 points below the 5-year average.

In Texas, 87 percent of the crop had been seeded (9 points below the average), and only 72 percent of the intended acreage had emerged (15 points below the average). Although seeding has been delayed, the increased soil moisture enhanced the emergence of previously planted fields. The condition of the wheat acreage that has emerged is rated better than last year at this time.

The Winter Wheat Seedings report scheduled for release on January 11, 2001 will be the next indication of the acreage actually planted this fall. That report is based on a survey conducted by the National Agricultural Statistics Service during the first week of December.

Loan Deficiency Payments Support Wheat Farmers' Income

The 1996 Farm Act contained key policy tools to assist farmers when market prices are low. The key provisions are the non-recourse marketing assistance loans (MAL) and loan deficiency payments (LDP). Producers that entered into Production Flexibility Contracts with United States Department of Agriculture are eligible to participate in these programs. See the October 2000 issue of the Wheat Outlook report for a detailed discussion of how the program works.

As of December 6, 2000, wheat producers had entered 158 million bushels of 2000-crop wheat in the national loan program. Producers had repaid loans on 72 million bushels, and about 69 million bushels covered by the redeemed loans involved a market gain totaling $36 million. As of that date, eligible wheat producers had also collected $757 million in LDPs covering 1,700 million bushels of 2000-crop wheat or about 76 percent of the 2000 crop. The average payment rate was 45 cents per bushel. About 83 percent of the 1999 crop received, so participation, measured as a percent of the crop involved, is expected to be smaller this year, especially since market prices have recently risen above the loan rate at many locations.

Global Wheat Trade Increased 9 Percent
In 1999/2000, But Is Expected To Decline In 2000/01

World wheat trade in 1999/2000 is estimated at 111 million tons, up 9 million from the previous year and only 4 million less than the 1987/88 record. Drought in North Africa and parts of the Middle East, coupled with food aid shipments to the former Soviet Union, boosted global imports. Recently acquired 1999/2000 data boosted world imports this month by more than 2 million tons. Increases occurred for many countries, with imports up by more than 100,000 tons for Russia, Tajikistan, Afghanistan, Israel, Uzbekistan, the European Union (EU), Cuba, and Kyrgyzstan.

World wheat trade in 2000/01 is not expected to match the previous years strong pace, mostly because of reduced imports by Russia, Pakistan, and India. India and Pakistan harvested record wheat crops and are expected to become net exporters of wheat in 2000/01. Russia's production also rebounded in 2000/01. However, continued drought across North Africa and parts of the Middle East, combined with population growth across most countries, are expected to maintain strong demand for imports in 2000/01.

This month the 2000/01 world wheat production forecast increased 0.5 million tons because the increased production reported by Canada more than offset reduced projections for Australia and Brazil. However, with low quality wheat being produced because of wet harvests in several countries, wheat feed use forecasts were increased for the EU, Australia, and South Korea. Increased feed use boosted global consumption more than production increased, reducing global ending stocks to less than 110 million tons for the first time since 1995/96.

U.S. Wheat Export Forecast Increased 0.5 Million Tons This Month

U.S. 2000/01 wheat exports are projected up 0.5 million tons this month to 30.5 million in 2000/01 (1.125 billion bushels for June/May), up more than 3 percent from the previous year. This month's increase was based on increased import demand.

World wheat trade is forecast up 0.6 million tons this month. Larger imports are forecast this month for South Korea, Brazil, and Cuba. South Korea is expected to import more wheat for feeding because of an increased supply of low quality wheat, particularly in Australia. Brazil is expected to increase imports to offset reduced production. And Cuba is boosting imports to meet expanding consumption.

Increased production forecast this month for Canada boosted their export prospects by 1 million tons. However, the EU export forecast dropped 1 million tons this month because of the slow pace of sales to date and strong domestic prices. Domestic demand for grain in the EU has been strong. The EU Commission appears to be limiting the use of export subsidies in an attempt to keep internal prices in check. As a result, EU export quotes are reportedly at a significant premium compared with U.S. SRW.

The United States is expected to have increased shipments in the latter part of the marketing year as competitors supplies of higher quality wheat are gradually depleted. The pace of U.S. exports of grain, flour, and selected products on a wheat-equivalent basis started 2000/01 more slowly than the year before, with shipments reported by Census from June through September down by 0.5 million tons. According to Grain Inspections, October wheat shipments were down more than 20 percent. However, in recent weeks the shipment pace has increased, and according to the U.S. Export Sales report, as of November 30 outstanding sales were up 3 percent from a year earlier.

December 14, 2000

Economic Research Service

USDA, Washington, D.C.

202-219-0515

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