Wheat YEARBOOK -- SUMMARY March 28, 2006 Month Year, ERS-WHS-2006s Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. The text of the yearbook will be available electronically about 1 week following this summary release. ----------------------------------------------------------------------------- U.S. Wheat Supply, Demand, and Prices Expected To Be Stable in 2006/07 U.S. winter wheat seeded area for 2006 was reported in January to total 41.4 million acres, up .9 million acres from 2005, which was the lowest since 1971. Seeding began last August and fell behind the 5-year average pace because of a lack of moisture in the southern Great Plains during September and much of October. Precipitation during mid-October relieved moisture concerns somewhat in major producing areas, enabling seeding to advance ahead of the 5-year average during the latter part of the month as mild and dry weather prevailed. U.S. spring wheat acreage is expected to decline slightly to 16.6 million acres in 2006, unless U.S. winter wheat production problems or other events cause a significant rally in wheat prices before spring wheat planting (mostly in May). Relatively attractive returns for soybeans, corn, sunflower seed, dry peas, and lentils are expected to limit spring wheat area in the northern Plains. Total U.S. wheat planted area for 2006 is projected at 58.0 million acres, .8 million more than in 2005, which was the lowest since 1972. On March 31, NASS will release its Prospective Plantings Report. Total U.S. wheat production is expected to fall 30 million bushels to 2,075 million bushels in 2006, driven by a lower harvested area. This reflects a return to normal abandonment rates for most States, along with a modest downward adjustment for Texas and Oklahoma to account for ongoing drought. U.S. wheat production is estimated at 2,105 million bushels for marketing year 2005/06, down 54 million bushels from 2004/05 as yield dropped. Reduced abandonment on the Plains meant that harvested area for 2005/06 was up compared with 2004/05, despite a lower planted area. The lower production and lower beginning stocks lead to a forecast of a 45-million bushel drop in U.S. wheat supply in 2005/06 from a year earlier. U.S. wheat disappearance in 2005/06 is projected to drop 47 million bushels from a year before to 2,188 million bushels. Domestic use is forecast up 16 million bushels, not enough to offset a 63-million-bushel year-to-year decline of exports. U.S. wheat exports are projected at 1,000 million bushels for 2005/06, down because of increased competition in world markets, smaller purchases by China, and tight U.S. supplies. U.S. wheat food use is projected at 910 million bushels, up 5 million from a year earlier. Population increased at a higher rate than wheat food use, so per capita food use declined for calendar year 2005. Feed and residual use is projected to increase slightly in 2005/06, by 11 million bushels, to 200 million bushels. U.S. ending stocks in 2005/06 are projected to total 542 million bushels, about the same as for the previous 2 years. The season-average farm price in 2005/06 is forecast at $3.35-$3.45 per bushel. This price range brackets the $3.40 of the previous 2 marketing years. Although in many locations world wheat prices were somewhat higher in the fall of 2005 than in the previous year, especially for high protein wheat, higher costs for energy and other inputs limited prospective returns. Along with poor weather conditions, this put a brake on area expansion in some Northern Hemisphere countries. Reduced production prospects in the United States, Ukraine, and Russia are expected to offset normal/favorable conditions elsewhere, leaving global wheat production down in marketing year 2006/07. The decline in production is expected to be exacerbated by reduced beginning stocks, leaving global wheat supplies in 2006/07 down. For marketing year 2006/07, global food use is likely to continue growing, with population increases supporting human consumption in many developing countries. However, reduced use of wheat for feed in 2006/07 (due to adverse growing conditions in the Black Sea region that provides much of the wheat used as feed) may help even-out supply and demand. Even with stagnant use, however, reduced global supplies are expected to support prices. Global wheat production in 2005/06 is estimated down 10 million tons to 617 million, but is still the second-largest on record. Favorable growing conditions boosted production in the FSU-12, and China had the largest crop in 5 years. At the same time, drought conditions centered in Spain reduced EU-25 production 14 million tons and cut production in parts of North Africa. Conversely, global wheat consumption for marketing year 2005/06 is forecast up 15 million tons from the previous year, supported by increasing use of wheat for feed. This puts global use at 7 million tons above production and trims projected ending stocks to 143 million tons. Global wheat trade is expected to contract, mostly because of reduced imports by China.