Wheat Situation and Outlook Yearbook. Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, WHS-2003, March 2003. Contents Summary U.S. 2003/04 Winter Wheat Responds to Tight supplies Outlook for 2003/04 Winter Wheat Acreage Is Up Wheat Supply and Ending Stocks Likely Up in 2003/04 Foreign Wheat Production Likely To Increase in 2003/04 Situation and Outlook for 2002/03 Prices Strengthen As Ending Stocks Decline in 2002/03 World Wheat Production and Stocks Plummet in 2002/03; Trade Declines The Lowest U.S. Wheat Exports in Over 30 Years Forecast for 2002/03 Wheat by Class, 2002/03 Wheat Quality Good in 2002/03 Situation Coordinator Gary Vocke (202) 694-5285 Principal Contributors Edward Allen (202) 694-5288 Gary Vocke (202) 694-5285 Production Assistance Mary Fant (202) 694-5272 Editors Martha R. Evans Lou King Layout & Text Design Wynnice Pointer-Napper Summary U.S. 2003/04 Winter Wheat Area Responds to Tight Supplies U.S. farmers boosted winter wheat seedings for 2003 to 44.2 million acres, the largest since 1998. Seedings are up 2.5 million acres from 2002 because of high prices during September and October when most of the winter wheat was planted. However, little change is expected in spring wheat area in 2003. U.S. wheat prices are down from the highs of last fall, so alternative crops are offering competitive returns to spring wheat. U.S. wheat plantings dropped annually from 1996/97's high of 75.1 million acres through 2001/02. Low returns to wheat encouraged wheat producers to shift to competing crops, especially soybeans and corn. This trend was slightly reversed in 2002/03 as planted area increased 0.8 million acres to 60.4 million acres. However, this small increase in planted area was more than offset as producers abandoned the largest percentage of planted area since 1936 due to the severe drought. Harvested area was the lowest since 1970, and with drought-reduced yields, 2002 production dropped to 1,616 million bushels. This is the lowest U.S. wheat production since 1972. Further constraining supplies, imports also are dropping as drought reduced Canada's exports. Lower domestic production, sharply lower forecast imports from Canada, and lower beginning stocks put projected U.S. wheat supplies for 2002/03 at 2,459 million bushels, the lowest since 1974/75. The reduced supplies sharply limited feeding and altered milling patterns. The reduced availability of hard red spring (HRS) wheat, with smaller domestic production and fewer imports from Canada, encouraged millers to substitute hard red winter wheat for HRS. Overall, forecast food use of wheat grain is slightly higher year-to-year as declining per capita flour use is partially offset by a lower flour-extraction rate than a year ago. Tightening U.S. stocks and reduced supplies in most of the major exporters boosted U.S. prices significantly. Average farm prices rose to a peak of $4.37 in October, $1.50 above the year-earlier price. Subsequently, world and U.S. prices began to weaken as foreign millers began taking advantage of the increased availability of wheat supplies from countries exporting through the Black Sea and from the European Union (EU). While U.S. prices have dropped from their peaks of last fall, they remain well above EU offers. Thus, U.S. exports are forecast to be 875 million bushels, the lowest since 1971/72. This is the first year since 1958/59 that exports have been lower than food use. Outlook for 2003/04 Winter Wheat Acreage Is Up Winter wheat plantings are reported up 2.5 million acres from a year earlier and little change in spring wheat (including durum) plantings are expected from a year ago. The U.S. Department of Agriculture will release its first official forecast of the 2003 production on May 12, 2003. ------------------------------------------------------ Winter Wheat Acreage Up From a Year Ago The Winter Wheat Seedings report released by the National Agricultural Statistics Service (NASS) on January 10, 2003, provided the first indication of wheat plantings for 2003/04. Winter wheat planted area in 2003 is estimated at 44.2 million acres, up 2.5 million acres from 2002 (fig. 1). Hard red winter (HRW) wheat seeded area is 32.1 million acres, up 2.3 million acres from a year earlier. Significant acreage increases are reported in all major HRW States, led by gains in Kansas and Oklahoma of 693,000 and 495,000 acres, respectively. Two major factors, higher prices at the time of seeding and the 2002 drought, contributed to the larger acreage. Prices were strong last fall, especially during September and October when most of the winter wheat was planted. The 2002 drought left soil moisture supplies low. Wheat requires less moisture than many alternate crops in the major HRW States, making it a more appealing option. Additionally, the drought left forage supplies limited, and many growers in the southern Great Plains planted wheat in hopes that enough moisture would be received to provide grazing. Soft red winter (SRW) seeded area is down only slightly (70,000 acres) from a year ago to 8.3 million acres. Acreage declines are noted in the Delta States, most Southeast States, and along the northern Atlantic Coast, due primarily to excessively wet conditions during the fall. Planted acreage increased significantly in Illinois, Indiana, Michigan, and Ohio, where seeding conditions were more favorable. Seeded acres also increased sharply in Georgia, where growers continue to plant additional wheat in place of rye as a cover crop. Wisconsin growers planted a record-high acreage. White winter wheat seeded area for 2003 is 3.9 million acres, up 315,000 acres from 2002. Dry conditions prevailed across the Pacific Northwest (Idaho, Oregon, and Washington) during planting. Seeding progress was generally faster than average, but dry soil conditions delayed emergence. Rising prices during planting contributed to the larger acreage, with the largest increase in Oregon. Durum wheat seeded area in Arizona and California for the 2003 harvest is estimated at a combined 178,000 acres, down 6,000 acres from a year earlier. Spring Wheat Acreage Prospects Little change is expected in spring wheat area in 2003, with a small increase in durum area offsetting a drop in other spring wheat acres. Even though drought sharply cut production in the United States, Canada, and Australia in 2002/03, gains in wheat prices have been much less than earlier expectations. Importers have switched to much lower priced wheat from Russia, Ukraine, and other 'minor' exporters. Thus, U.S. prices are down sharply from the highs of early last fall (fig. 2). Alternative crops are offering better returns than spring wheat (fig. 3). For example, contract prices for malting barley are reportedly up sharply from a year ago due to drought-reduced supplies in the United States and Canada. Dry Weather in Plains Less a Concern for 2003/04 Crop The National Agricultural Statistics Service provides an assessment of the condition of the 2003 winter wheat crop for the 18 major winter wheat States showing this year's crop is in better condition than the 2002 crop. For the week ending March 30, 14 percent of the crop was rated poor to very poor and 51 percent was rated good to excellent. A year ago at this time, 34 percent of the crop in these 18 States was rated poor to very poor, while 31 percent was rated good to excellent. The condition of the winter wheat crop in the Plains States is much improved from the 2002 crop. Notably, 55 percent of the 2002 Oklahoma crop rated poor to very poor, much higher than the 2003's 4 percent. Similarly, the 2002 States' crops rating poor to very poor for Montana, Texas, and Kansas were 60, 46, and 41 percent, respectively. The corresponding crop condition ratings for these States for 2003 is 11, 21, and 18 percent. Nebraska is an exception, the drought situation is worse this year than in 2002. In Nebraska, 28 percent of the 2003 crop was rated poor to very poor compared to the 2002 rating of 15 percent. Outlook for 2003/04 Wheat Supply and Ending Stocks Likely Up in 2003/04 Higher production due to increased harvested acreage and higher yields in 2003/04 is partially offset by smaller carryin stocks, resulting in an expected increase in supplies from a year earlier. Total use of wheat in 2003/04 is expected to remain weak as only feed and residual use is likely to increase. Prices are expected to decline from 2002/03. ------------------------------------------------------ The following supply and use projections for 2003/04 were released at the 2003 Agricultural Outlook Forum on February 21, 2003. The first official U.S., world, and country-specific supply and use projections for 2003/04 will be in the May 12 World Agricultural Supply and Demand Estimates report. All Wheat Production Is Projected Up From 2002 The major questions about potential U.S. wheat production center around harvested acres and yields, especially given the current dry conditions in parts of the Plains, prolonged wet conditions in the Delta, and cold weather in the Midwest. The 2002 harvested acres were the lowest since 1970 (fig. 4), and the harvested-to- planted ratio was the smallest since 1936. An unusually large percentage of both winter and spring wheat planted acres was not harvested for grain. In 2002, some of the increase in winter wheat seeded area was intended to be hayed and/or grazed instead of harvested for grain. However, drought resulted in increased abandonment and plantings of other crops or increased haying and/or grazing in order to salvage something from the crop. The harvested area in 2003 is projected at 53.4 million acres, up 7.6 million from 2002, using a 10-year average harvested-to- planted ratio by State. While the assumed harvested-to-planted ratio is above the levels of the past 2 years, it is well below those in the mid-to-late 1990s. The assumed yield for 2003 is also a 10-year average by State (fig. 5) and results in a projected production of 2,065 million bushels, up almost 450 million from 2002. The larger production and the recovery of imports from Canada more than offsets lower carryin stocks, leaving 2003/04 supplies up 171 million bushels from a year earlier. Total Use Is Projected Slightly Up Food use will likely stay the same as in 2002/03 (fig. 6). Per capita consumption is no longer increasing due to changes in diets, and an expected recovery in the flour extraction rate from 2002/03 limits expansion of wheat grain for food use. Feed and residual use, however, is up sharply from the unusually small 100 million bushels expected in 2002/03 to 225 million in 2003/04. Reduced wheat prices, especially during harvest, will promote the use of wheat for feeding. Hog and poultry feeders in the Southeast and Atlantic Coast areas and cattle and hog feeders in the Plains likely will see relatively high prices for corn during the early summer. These areas had poor corn and sorghum crops in 2002 and will have to source corn for feeding from a greater distance than usual. U.S. 2003/04 exports are expected to face increased competition from expanding production in the major foreign exporters, especially Australia and Canada, and continued strong competition from Russia, Ukraine, and Eastern Europe. Wheat Ending Stocks Up and Market Prices Down Total use in 2003/04 is expected to increase less than supplies, boosting ending stocks. Prices received by producers are projected down 40 cents from the midpoint of the price range for 2002/03 to $3.20 per bushel, due to continued poor exports. However, if crops in the major foreign exporters do not rebound strongly from 2002/03, U.S. and global prices will have to rise sharply to ration limited supplies because the 'minor' exporters will not be able to take up as much of the slack as they have in 2002/03. Outlook for 2003/04 Foreign Wheat Production Likely To Increase in 2003/04 Winter wheat plantings in the Northern Hemisphere were up in some countries and down in others, but on balance, strong wheat prices during the fall of 2002 encouraged plantings. Barring a repeat of unfavorable weather, such as happened in 2002, global wheat production will increase in 2003/04 because of rebounding yields. World wheat use is likely to grow slowly, with most of the increase driven by population growth supporting human consumption. However, with decreasing wheat production likely in the former Soviet Union, and possibly lower prices for other grains, reduced foreign wheat feeding is likely in 2003/04. Global Wheat Production, Declining for the Last 5 Years, Likely To Increase in 2003/04 The U.S. Department of Agriculture will issue its first global and country-specific supply and use projections for 2003/04 on May 12. Winter wheat was planted in the Northern Hemisphere last fall, when global wheat prices were relatively high, and area is reportedly up in some regions. However, several of the largest wheat-producing countries have producer prices that are not closely linked to world prices, and are reporting reduced plantings. Yields will depend on the weather during the coming months. Moreover, spring wheat in the Northern Hemisphere and wheat in the Southern Hemisphere have not been planted. Global wheat production has declined for the last 5 years, as generally low prices from 1998/99 to 2001/02 discouraged plantings, and unfavorable weather hurt yields in some regions. Wheat prices strengthened modestly in many countries in 2001/02, providing an incentive to increase area planted for 2002/03, but unfavorable weather struck several of the largest wheat-exporting countries, especially Australia, Canada, and the United States. World wheat production could post a large increase in 2003/04 if weather is generally favorable and yields return to average or trend levels. The 2003/04 wheat crop is harvested first in South Asia, beginning in India in March, and soon after in Pakistan. Area in India is reportedly down, resulting in lower production than a year earlier. However, government wheat stocks remain large. According to the International Grains Council, a small increase in area boosts production prospects slightly in Pakistan. In China, the world's largest wheat-producing country, a Ministry of Agriculture survey indicated wheat area in 2003/04 will be down 5 percent (fig. 7). Producers are shifting to other crops because of higher returns, scarce water supplies, and the reduced role of government procurement. The 2002 wheat yields were somewhat below trend because of unfavorable weather. Yields in 2003/04 will hinge on spring rains. In addition, producers have increased plantings of lower yielding, higher quality varieties. Even with some increase in average yield, production could decline because of the large drop in area. In the European Union (EU), COCERAL, the major grain trade lobby, has forecast 2003/04 wheat area and production down slightly, but still large by historical standards. Durum plantings and production are expected to decline slightly more than soft wheat, but the expected decline in production is small. Wet conditions in December delayed plantings in Northern Europe, Spain, and Portugal. The French cereals office, ONIC, projected a decline of more than 2 percent in sowings. Equalized compensatory payments for oilseeds and grains favor wheat plantings. Eastern Europe's wheat production in 2003/04 will largely depend on spring weather. However, wheat area planted is reported down in Romania, Bulgaria, Serbia, and Croatia as producers switch to oilseeds or corn, but area may increase slightly in Hungary and Poland. The Ukrainian Ministry of Statistics reported that farms planted 6.7 million hectares of wheat in the fall of 2002, down from 7.2 million a year earlier. Several episodes of bitterly cold weather from November through January likely resulted in considerable damage to winter crops. Conditions were most severe, in terms of potential crop damage, in southern Ukraine, where about 40 percent of the country's winter wheat are grown. The continuing cold weather will likely delay the resumption of vegetative growth. Since January, ice crusting has presented a threat for winter wheat. Snow depth in Ukraine during February and early March has been the highest in several years. The cycle of thawing and re- freezing has resulted in an ice crust which has persisted for several weeks, long enough to potentially smother wheat. An industry source indicates that potential damage, while perhaps not as high as the 35- to 50-percent winterkill estimates variously reported, could exceed 20 percent. The full extent of winterkill will be difficult to determine until winter crops resume vegetative growth. As of mid-March, snow still covers a large portion of the winter wheat production zones in Ukraine and Russia, in sharp contrast to a year ago. A year ago, a warm February kicked off an early spring, winter grains emerged from dormancy earlier than usual, and farmers were over half finished with spring sowing by the end of March. In Russia, meanwhile, officials forecast a significant reduction in 2003/04 winter grain output due to the combination of an 18- percent drop in sown area and winter grain losses of roughly 20 percent. According to SovEcon, an independent Moscow-based agricultural research group, winter grain area fell by 10 to 15 percent in the three main production districts, and sown area throughout Russia totaled 14.0 million hectares, against 16.1 million for 2002/03. SovEcon estimates winterkill at approximately 2.0 million hectares compared with 1.5 million last season. Production prospects are generally favorable in North Africa, although parts of Morocco have suffered from dryness. Planting and winter growing conditions across the Middle East have been generally favorable this year. The critical reproduction period for winter wheat occurs during March and April. Spring rains will be critical for the continued development of the crop. Spring wheat producers in the Northern Hemisphere and Southern Hemisphere have not yet planted wheat for harvest in 2003/04. This includes major exporters such as Canada, Australia, Argentina, and Kazakhstan. In 2003, Canada is expected to rebound from 2002's drought- devastated crop. However, the long-term drought has left low soil moisture reserves, so a return to normal spring rains is needed to facilitate plantings. A return to normal weather would boost harvested area as well as yield, because large areas were not harvested for grain a year ago. Timely spring and summer rainfall will be crucial for crop prospects. However, since the 2002 wheat crop was hurt by drought, a return to average yields would sharply boost production. Australia was also devastated by drought in 2002/03. According to the Australian Bureau of Agriculture and Resource Economics, Australia's wheat area and production will rebound strongly if rainfall is favorable. Sheep and cattle numbers dropped because of the 2002 drought, leaving room to expand wheat area. A return to normal rainfall could easily double wheat production in 2003/04. Higher wheat plantings are expected in Argentina because the 2002/03 crop planting was disrupted by the worst of the economic/financial crisis. The exchange rate changes make producing for export very attractive. Wheat is likely to be favored over other crops, because the cost of inputs is lower for wheat than for most alternative crops, and much of the wheat crop is exported. Increased wheat production prospects in the United States, Australia, and Canada are expected to more than offset declines in the former Soviet Union and India. The declining trend in global production over the last 5 years is likely to be reversed in 2002/03, with a significant increase likely. Beginning Stocks in 2003/04 To Limit Supplies Global wheat stocks at the start of 2003/04 are forecast down 29 million tons from the previous year. Combined stocks of the major exporters (the United States, Canada, EU, Australia, and Argentina) are expected to drop 14 million tons. China's forecast wheat stocks are projected down 15 million tons. Even with a second year of above-trend yields and production in 2002/03, wheat stocks in the former Soviet Union are forecast up less than 2 million tons as domestic use and exports increase. Despite reduced yields, India's high support prices have maintained production larger than consumption, boosting already large stocks another 2 million tons despite increased exports. Larger world wheat production in 2003/04 could offset reduced carryin stocks and maintain or increase wheat supplies compared with a year earlier. However, it is somewhat more likely that adverse weather will occur in some areas in coming months and the rise in world production will be less than the decline in beginning stocks, reducing wheat supplies. Also, low stocks in the major exporting countries mean that supplies of higher quality wheat will depend on 2003/04 production. However, if crops in the major foreign exporters do not rebound strongly from 2002/03, U.S. and global prices will have to rise sharply to ration limited supplies because the 'minor' exporters will not be able to take up as much of the slack as they have in 2002/03. Modest Global Wheat Consumption Growth Expected In 2003/04, world wheat use is expected to grow slowly after the large increase in 2002/03 (fig. 8). Most of the growth in wheat consumption is expected to be the result of population growth slowly boosting food use. There is evidence that per capita wheat food use is declining in some places. For example, some surveys indicate that wheat food use in China's urban areas is declining as incomes increase and diets diversify. Reduced wheat feed and residual use could offset increases in food use in 2003/04. Reduced production in the former Soviet Union and reduced exports of low quality wheat could limit wheat feed use. EU wheat feed use is already at a very high level, and import restrictions could cause some decline. Wheat prices are expected to decline in 2003/04, but feed grains prices may decline even faster, reducing the incentive to feed wheat, especially in countries like South Korea and Israel. (BOX) Exports From the Black Sea Region: A Permanent Increase or a Weather-Driven Flash in the Pan? Russia emerged as the world's third-largest wheat exporter in 2002/03, and the former Soviet Union's wheat exports are forecast to reach nearly 24 million tons. In 2001/02 and 2002/03, wheat production in Russia and Ukraine increased dramatically compared with the previous 3 years. Most of the increase can be attributed to much more favorable weather. While drought and severe winters battered wheat production from 1998/99 through 2000/01, growing conditions were much more favorable during the following 2 years. How exceptional was the favorable weather? In Russia, winter wheat typically accounts for about 50 percent of production, with spring wheat contributing the remaining 50 percent. However, in Ukraine, most of the wheat grown in the country consists of winter varieties. In Russia, during the fall of 2000, adequate planting moisture and mild weather conditions in major winter wheat-producing areas of southern Russia favored winter wheat establishment prior to dormancy. Winter wheat entered dormancy in better condition than the previous year. A mild winter along with above-normal precipitation provided favorable overwintering conditions for crops, resulting in below-average winterkill. Favorable spring weather boosted crop yield potential, while hot, dry weather conditions in July benefited winter wheat maturation and harvesting. In major spring-wheat producing areas, an early arrival of spring warmth helped planting, while near- to above- normal precipitation during the growing season boosted yield prospects from the northern Urals eastward through Siberia. Russia's 2002 crop increased because of a larger area planted to winter wheat, along with another season of overall favorable growing conditions. During the fall of 2001, adequate planting moisture and mild weather conditions favored winter wheat establishment prior to dormancy. In December, bitterly cold weather was accompanied by frequent snowfalls, which provided a protective blanket of snow in most winter wheat areas. December's bitter cold was followed by a prolonged period of unseasonably mild weather that began around mid-January and continued through March, providing favorable overwintering conditions for winter wheat. An early arrival of spring warmth caused winter wheat to break dormancy about 2-3 weeks earlier than usual and raised soil temperatures to sufficient levels for early spring grain planting. Despite dryness in May, timely rains in June favored winter wheat development. Hot, dry weather conditions in July benefited winter wheat maturation and harvesting. In major spring wheat-producing areas, weather conditions favored planting activities in May. Dryness in July lowered spring wheat prospects in the Urals, while farther east, spring-wheat producing areas in Siberia experienced the wettest June and July weather in at least 25 years, increasing the potential for disease development. However, the onset of winter was later than normal, allowing spring wheat harvest to get completed. Russia's average wheat yield for 2002 matched 2001 and production was the highest since the U.S. Department of Agriculture began tracking Russia separately from the Soviet Union in 1987/88. In Ukraine, while dryness during October 2000 limited moisture for winter wheat establishment, unusually mild weather in November was accompanied by beneficial showers, allowing winter wheat to become sufficiently established prior to entering dormancy. Winter wheat entered dormancy about 2-3 weeks later than usual, but in better condition than the previous year. Weather conditions during the winter were mostly favorable for winter wheat. An early arrival of spring warmth prompted earlier- than-usual greening in winter wheat, and cool, wet weather in May boosted yield prospects for wheat as it advanced through the heading stage. As a result, wheat production in Ukraine rose by 109 percent over the drought-stressed crop of the previous year and was the highest since 1993. In the fall of 2001, Ukraine's winter wheat entered dormancy adequately established in most areas. The exceptions were parts of south-central and southeastern Ukraine, where dryness during planting likely caused poor root establishment. However, showers in November improved moisture conditions in these areas. Bitter cold in December was accompanied by frequent snowfalls that provided a protective blanket of snow. December's unusually cold weather pattern lasted until mid-January, and was replaced by an unusually mild weather pattern that persisted during the remainder of the winter. Timely rains in early June followed dryness in May, providing much-needed moisture for winter wheat in the reproductive to filling stages. As a result, wheat production fell less than 4 percent despite lower area and yields. For both countries, growing conditions were not uniformly favorable in 2001/02 and 2002/03, but, when a problem developed, such as dryness or delayed maturity, it was followed by a favorable event, such as rain or an extended harvest window. So most of the increase in wheat production can be attributed to weather. However, other developments indicate that at least in Russia the agricultural sector has benefited from increased investment and a more favorable climate of economic growth. For example, tractor sales in Russia have increased dramatically since 1999. So, while weather may be the main cause of higher yields and less winterkill, the increase in planted area in Russia for the 2002/03 crop is likely a symptom of an increasingly dynamic agricultural sector. In both Ukraine and Russia there has been significant investment in port facilities in recent years. During the fall of 2002 and into the winter of 2003, weather conditions have been less favorable than during the previous 2 years. So, some drop in wheat yields and production is expected in 2003, limiting export potential for 2003/04. Wheat exports are expected to persist, but at a reduced level. Wheat accounts for the largest share of grain fed to animals in Russia. As a result, over the long run, the future of wheat exports from Russia and Ukraine will largely depend on whether the growth in grain production is faster or slower than the increase in demand for grain to be fed to the livestock sector. (END BOX) Situation and Outlook for 2002/03 Prices Strengthen As Ending Stocks Decline in 2002/03 U.S. wheat production declined in 2002/03 from a year ago because of reduced harvested acres and yields for winter, other spring, and durum wheat. Supplies for 2002/03 are down more than total use, resulting in declining ending stocks and higher season- average prices received by farmers. 2002/03 Overview: U.S. Wheat Supplies Are Down; Prices Up U.S. wheat production is estimated at 1,616 million bushels in 2002/03, down 341 million bushels from 2001/02 as both area and yield fell with unfavorable weather (table 1). Winter and other spring wheat production in 2002/03 dropped 219 and 118 million bushels, respectively, from a year ago. Durum production was down 4 million bushels from a year ago. Beginning stocks were 99 million bushels less than a year earlier while imports are projected to be 43 million bushels below a year ago. Imports are down because of the 2002 drought that reduced Canadian production and exportable supplies. The net result is that the U.S. wheat supply in the 2002/03 (June-May) marketing year is forecast to drop 482 million bushels from a year ago (fig. 9). The estimated monthly average farm price rose from a low of $2.93 per bushel during June of the 2002/03 marketing year to a peak of $4.37 in October. This peak was $1.50 above the year- earlier October price. Prices have declined substantially from this October high, but remain substantially above a year earlier. Prices will continue to drop in the absence of fresh export demand or a serious weather-related change in crop conditions. The season-average farm price in 2002/03 is forecast at $3.55- $3.65 per bushel (fig. 10), substantially above the average of $2.78 per bushel received a year ago. Current prices are significantly above the average $2.62 received by farmers in 2000/01 and the recent low of $2.48 in 1999/2000, but still well below the record $4.55 in 1995/96 (fig. 10). U.S. ending stocks this marketing year are projected to total 465 million bushels, 313 million less than a year ago and lower than each of the past 5 years. Unfavorable Weather Influenced 2002 Crop Development Dry weather aided winter wheat seeding across the Great Plains and Pacific Northwest in the fall of 2001. While temperatures were favorable for winter wheat development across most of the Nation, topsoil moisture shortages led to spotty and uneven emergence and growth, especially in Kansas and Oklahoma. Abnormally warm December weather delayed the onset of freezing temperatures and extended the period for winter wheat root development. On the other hand, wet weather slowed soft red winter (SRW) in the Midwest. Dry conditions persisted across the Great Plains during the winter. Although some precipitation was received across much of the Plains during the spring of 2002, it was not enough to relieve the drought conditions plaguing the hard red winter (HRW) wheat region. Persistent drought conditions across the Plains reduced yields for most States. Most SRW wheat-producing States' yields were down sharply from 2001/02. While excessive spring precipitation reduced yields across Illinois, Missouri, and Ohio, drought conditions reduced yields across portions of the Southeast and Mid-Atlantic coast. Warm, dry weather spurred spring wheat planting in the Pacific Northwest during the first half of April, especially in Washington. After mid-month, planting accelerated rapidly in South Dakota, as dry weather and above-normal temperatures supported progress until late-month interference by wintery weather. The cold weather hampered emergence and growth. Adverse weather also slowed planting and emergence in North Dakota, the largest spring-wheat producing State. While early June rains supported crop development in Montana, spring wheat development lagged across most of the northern Great Plains and Pacific Northwest. Crop conditions deteriorated in many areas due to moisture shortages, leading to significant drought-induced abandonment, particularly in the Dakotas. In contrast, fields in northwest and north central Minnesota suffered from excessive moisture and flooding. Adverse Weather Reduced Harvested Area and Yields All-wheat, 2002/03 planted area of 60.4 million acres was slightly higher than during 2001/02, after steady year-to-year declines from the fairly recent high in 1996/97. Harvested area, however, continued its decline because of the high rate of abandonment for 2002/03 due to dry weather. The harvested area for 2002/03 was only 45.8 million acres. For comparison, the 1996/97 peak had planted and harvested areas of 75.1 and 62.8 million acres, respectively. The national harvested-to-planted ratio for 2002/03 was 75.9 percent, down 5.7 percentage points from a year earlier. Harvested area is the lowest since 1970. The largest year-to-year increases in the percentage rate of abandonment among the major wheat-producing States were in Texas, Colorado, and South Dakota. The 2002/03 winter wheat harvested area fell 1.6 million acres year-to-year as the rate of abandonment increased by 5.1 percentage points. Spring wheat harvested area dropped, by 1.2 million acres, as its rate of abandonment increased by 6.8 percentage points year-to-year. The harvested area of other spring wheat was down 1.1 million acres while durum harvested was down 0.09 million acres. The adverse weather also dropped yields. The 2002/03 all-wheat yield was 35.3 bushels per acre, down from a year earlier's 40.2 and the record high of 43.2 bushels per acre in 1998/99. Among the major wheat-producing States, Indiana, Illinois, Minnesota, South Dakota, and Colorado led losses in year-to-year bushels per acre Winter wheat yields were off 5.0 bushels per acre from a year earlier, to 38.4. Spring wheat yields were down 5.1 bushels per acre, to 29.3. Other spring yields were off from a year earlier by 5.9 bushels per acre, while durum yields were down only 0.6. Total Use Falls in 2002/03 Total disappearance of U.S. wheat in 2002/03 is forecast to drop 170 million bushels from a year ago, to 1,994 million. Both domestic use and exports are down, 83 and 86 million bushels, respectively. Exports are forecast at 875 million bushels for 2002/03. Food use is projected at 935 million bushels, up 9 million from a year earlier. This is the first marketing year that exports have been lower than food use since 1958/59. Expected 2002/03 food usage is higher year-to-year, in part because of lower flour-extraction rates than a year ago. Per capita food use of wheat has been declining in recent years with changes in consumer preferences. Feed and residual use is projected to drop 94 million bushels year-to-year to 100 million in 2002/03. Seed use is forecast up slightly because of an expected increase in planted area for the 2003 crop. Calendar Year 2002 Per Capita Flour Consumption Down Per capita wheat flour use for calendar year 2002 is estimated at 138.7 pounds, down 2.1 pounds from a year ago and down 7.6 pounds from the recent high in 2000 (appendix table 23). Until the late 1990s, U.S. wheat producers could count on rising per capita food use of wheat to expand the domestic market for their crop. The strength of this domestic market developed out of the historic turnaround in U.S. per capita wheat consumption that occurred in the 1970s. For nearly 100 years, per capita wheat consumption had declined in the United States, as hard physical labor became less common and diets diversified. Wheat consumption dropped from over 225 pounds per person in 1879 to a low of 110 pounds in 1972. By 1996, consumption had rebounded to 147 pounds per capita. The overall growth in per capita consumption that occurred between 1973 and 1996 reflected changes that included the boom in away- from-home eating, the desire of consumers for greater variety and more convenience in food products, promotion of wheat flour and pasta products by industry organizations, and wider recognition of health benefits stemming from eating high-fiber grain-based foods. Since 1997, however, this growth appears to have ended with changing consumer preferences. These changes likely include increasing numbers of weight-conscious people following diets that include fewer carbohydrates. Another factor is starting to spread through the milling industry that will reduce the quantity of wheat needed to be milled to meet the Nation's food use demand. Extended shelf life (ESL) technologies are being adopted that can double or even triple the shelf life of a fresh loaf, from several days to 10 days or more (Sosland). The outcome for U.S. bakers is a reduction in 'stales,' meaning bread that does not sell and is taken back by the baker, from levels as high as 15 percent to less than 8 percent (Sosland). Also, there will likely be less throw-away bread at home due to longer freshness. Reducing stales directly reduces the quantity of flour required to supply the same consumer demand. Price Support for Wheat Farmers in 2002/03 The 2002 Farm Act extended the U.S. Department of Agriculture's (USDA) programs to assist farmers facing low market prices, including nonrecourse marketing assistance loans and loan deficiency payments (LDP). Nonrecourse marketing assistance loans provide interim financing to eligible wheat producers. Producers pledge their wheat as collateral and obtain a loan equivalent to the loan rate established in their county by USDA's Farm Service Agency. The loan proceeds are often used to cover short-term cash needs. As of March 11, 2003, wheat producers had acquired $292 million on 102 million bushels of the 2002-crop loans. For comparison, on March 4, 2002, wheat producers had acquired $469 million on 182 million bushels of the 2001-crop loans. The total value of the 2001 crop loans was $508 million. Loans may be forfeited to the Commodity Credit Corporation at maturity or repaid at the loan repayment rate at, or before, maturity. The loan repayment rate is the lower of the loan rate plus interest or the posted county price (PCP), a proxy for the local price. The PCP--calculated each day the Federal Government is open--is based on terminal market prices and a fixed differential to each county, largely reflecting transportation costs and other marketing factors. When a farmer repays the loan at a PCP below the loan rate, the difference between the loan rate and the PCP is called a ' marketing loan gain.' If the PCP is lower than the county loan rate, eligible producers may opt for an LDP during the loan eligibility period on part or all of the crop in lieu of securing a loan. The loan eligibility period is from the date of harvest through March 31 of the calendar year following the year the crop is harvested. The LDP rate is the amount by which the county loan rate exceeds the PCP on the date the application is made. The wheat cannot be placed under loan once an LDP is paid. If producers take the LDPs and immediately sell their crop and if the PCP accurately reflects local prices, producers effectively receive a per-unit revenue equal to the loan rate, partly from the market and partly from the Government. After an LDP is accepted, the farmer can sell the crop and avoid storage costs or hold it in the expectation of a price rally later in the marketing season. As of March 5, 2003, producers had collected $12 million in LDPs covering 79 million bushels of the 2002 wheat crops. The average payment was 15 cents per bushel. LDP payments and quantities in previous years were much larger because prices were lower. The 2001-crop payment was $163 million on 688 million bushels for an average payment of 24 cents per bushel; the 2000 crop payment was $791 million on 1,782 million bushels for an average payment of 44 cents per bushel; and the 1999-crop payment was $890 million on 1,911 million bushels for an average payment of 47 cents per bushel. Reference Sosland, Morton. Forces At Work Reducing Usage of Flour. World Grain. November 2002. Situation and Outlook for 2002/03 World Wheat Production and Stocks Plummet in 2002/03; Trade Declines Global production is estimated down 13 million tons in 2002/03. World consumption is forecast up nearly 13 million tons from the previous year, and is nearly 29 million tons larger than production, dropping stocks to the lowest level in 6 years. World wheat trade is expected to decline mostly because of a nearly 4- million-ton drop in wheat imports by Iran, which had a much larger crop. Russia and Ukraine emerged as major wheat exporters of lower priced wheat, limiting the decline in trade. 2002/03 World Wheat Production the Lowest Since 1995/96 World wheat production in 2002/03 is estimated at 567 million tons, down 13 million from the previous year (fig. 11). However, much of the decline was in the United States, with foreign production down less than 4 million tons. In China wheat prices were low compared with other crops, but for most other countries increased wheat prices during the Northern Hemisphere winter wheat planting (fall of 2001) provided an incentive to plant wheat. Sharply higher prices prevailed during the planting period for spring and Southern Hemisphere crops. However, unfavorable weather (or the adverse economic climate in Argentina's case) was widespread, frustrating producers' attempts to expand production. Foreign wheat harvested area declined slightly from the previous year, mainly because of drought in Canada and Australia, despite relatively strong prices. Drought often resulted in reduced area harvested as fields were not harvested for grain. In 2002/03, foreign area was nearly 5 percent less than the recent peak reached in 1996/97, following record-high prices. However, foreign 2002/03 average wheat yield matched the previous year's record. Production increased 12 million tons in the European Union (EU) as area rebounded from the previous year's flood-reduced level. Wheat production in the former Soviet Union increased more than 5 million tons from the previous year's large crop as growing conditions were generally favorable. Winter conditions were not too harsh, and the crop had snow cover when bitter cold came. Also, periods of hot dry weather were short, and an extended fall allowed most of the wheat crop to be harvested in eastern Russia and Kazakhstan. Iran boosted wheat production an estimated 3.5 million tons as normal rains returned after consecutive droughts in previous years. Turkey also rebounded from the previous year's drought, boosting production 3 million tons. India's production increased 3 million tons as high government support prices contributed to an increase in area while favorable growing conditions and ample irrigation produced a record yield. Foreign wheat production declined in 2002/03 despite significant increases in several countries, largely because of a huge drop in Australia's production. Australia's wheat production dropped more than 15 million tons to only 9.5 million as severe drought gripped all significant wheat-growing regions. Canada suffered from a second year of drought in Alberta and most of Saskatchewan, while Manitoba was hit by excessive rains and disease. Canada's wheat production dropped almost 5 million tons from the previous year's relatively low level. Eastern Europe's wheat production declined 4 million tons as the previous year's favorable conditions were not duplicated due to pockets of severe dryness, especially in Romania and Hungary. Argentina's wheat production dropped 3 million tons mostly because area dropped due to planting problems caused by the economic/financial crisis. China's wheat production declined almost 3 million tons because of reduced area. Support prices are not high enough to keep land in wheat, other crops are more profitable, and irrigation supplies on the North China Plain are a constraint. Wheat yields in China increased in 2002/03 despite the increased adoption of higher quality, lower yielding varieties. World Wheat Disappearance To Grow Significantly in 2002/03 Global consumption is forecast at a record 595 million tons, up 2 percent from the previous year. After declining for 2 years, world wheat use is rebounding in 2002/03, but mostly because of an increase in feed use. Foreign non-feed use is forecast to increase at less than 1 percent, much less than population growth, which is closer to 2 percent. Wheat food use has failed to keep pace with population growth for some decades, indicating a decline in per capita consumption. In some populations (e.g., urban China) per capita wheat consumption appears to be declining because of an increase in incomes leading to a diversification of diets. In some poor populations, increased mechanization could be allowing a decline in caloric consumption as occurred in the United States early in the twentieth century. Global feed use of wheat is expected to increase in 2002/03 despite a sharp drop in the United States. Foreign wheat feed use is forecast up 12 million tons to 115 million. Abundant supplies of competitively priced, low-quality wheat from India and the Black Sea region are encouraging wheat feed use in countries like South Korea and in the EU. Corn prices increased because of a short U.S. crop, opening the door for wheat to be used more extensively. Wheat feed use is forecast up 17 percent in South Korea, but remains only half the record level reached in 1993/94. Wheat feed and residual use in the former Soviet Union is expected to increase 5 million tons because of increased supplies and the beginning of a turnaround in animal production. EU wheat feed use is expected to increase 6 million tons to a record 53 million. A large domestic crop and the availability of large supplies of competitively priced Black Sea region wheat are boosting wheat feed use, especially in Southern Europe. Much of the increase in wheat feeding has come at the expense of coarse grains and other feeds. The level of price supports encourages delivery of feed grains, especially barley and rye, into government intervention stocks, but feed wheat is not eligible for placement into intervention. Imports of Black Sea region wheat became so large that the EU emerged as by far the world's largest importer of wheat. This has resulted in a new import regime, including quotas, that will put a lid on future imports. Australia is expected to increase wheat feed use 2 million tons despite a sharply reduced crop because of lack of forage and other alternative feeds. Australia is also importing feed wheat from the United Kingdom (UK), because wheat is the most economical grain to import. UK feed wheat, displaced from some of its customary markets by Black Sea region competition, is also being imported into the East Coast of the United States. World Wheat Stocks Forecast To Drop 29 Million Tons in 2002/03, Lowest Since 1996/97 Global ending stocks are forecast at 173 million tons, down sharply from the previous year, but still the eighth largest on record. Foreign wheat stocks are expected to drop 20 million tons, but remain higher than in all but 2 years before 1996/97. China is expected to show a 15-million-ton drop in ending stocks during 2002/03. The size of China's wheat stocks is considered a state secret, and USDA's estimate is an approximation, so the year-to-year change in stocks is likely more important than the forecast level. Grain stocks in China are large, and supplies are adequate, but such large stocks declines should eventually tighten supplies and support market prices. However, prices in China have not rallied significantly, indicating supply prospects are not a concern. World wheat ending stocks excluding China and the United States may give a more useful portrayal of the stocks situation than considering foreign stocks because developments in China figure so prominently. 'Rest-of-the-world' stocks are forecast to decline less than 5 million tons from a year ago's record to 99 million (fig. 12). However, these stocks are up 10 million tons from 2000/01 and are significantly larger than in any year between 1993/94 and 2000/01. Measured this way, 2002/03 wheat ending stocks appear ample, and should limit wheat prices. The largest wheat stocks in this group are held by India, the former Soviet Union, and the EU, all expected to have at least some increase in stocks during 2002/03. The major exporters' (United States, Canada, Australia, EU, and Argentina) ending stocks are forecast down 14 million tons, but two-thirds of the drop is expected in the United States. Historically, wheat prices were largely set by supplies in the major exporting countries, but this relationship was severely disturbed this year by importers willing to purchase dramatically lower priced wheat from other countries. Russia has emerged in 2002/03 as the third-largest wheat exporter in the world, playing a significant new role, along with Ukraine, in price discovery. The reduction in major exporters' supplies has resulted in higher wheat prices during 2002/03, but prices are much lower than many expected in the fall of 2002. EU Imports Expected To Boost World Wheat Trade in 2002/03 Global trade (excluding intra-EU trade) in 2002/03 is forecast at 105 million tons, down 5 million from the previous year but equal to the average level of world wheat trade from 1996/97 to 2000/01. Wheat trade is down mostly because of a nearly 4- million-ton drop in wheat imports by Iran, which had a much larger crop. U.S. imports are forecast down more than 1 million tons because of tight supplies in Canada. Egypt is expected to economize on imports by 0.8 million tons, mostly by drawing on stocks, but also with a small decrease in consumption and a small increase in production. Turkey is expected to reduce imports 0.5 million tons as its crop rebounds, but import levels are modest. Brazil and China are each expected to reduce imports 0.4 million tons. However, some countries are boosting imports. The EU, the largest importer by a wide margin, is expected to reach 10.5 million tons in 2002/03 (fig. 13). Wheat from the Black Sea area poured into the EU in anticipation of quotas imposed at the beginning of calendar 2003. The quotas are fairly large, so July- June 2002/03 imports are expected to be almost 0.7 million tons larger than the previous year. Tunisia is expected to increase imports more than 0.5 million tons because drought devastated production. Algeria, the Philippines, and Eastern Europe are each expected to increase imports about 0.3 million tons. Situation and Outlook for 2002/03 The Lowest U.S. Wheat Exports in Over 30 Years Forecast for 2002/03 U.S. wheat exports are forecast to decline 7 percent in 2002/03 because of relatively high prices and increased competition from 'minor exporters'. Reduced competition is expected from Australia, Canada, and Argentina because of their smaller crops. Egypt, in many years the largest market for U.S. wheat, is buying most of its wheat elsewhere. However, U.S. exports to the Western Hemisphere will increase because of reduced competition from Canada and Argentina. U.S. Wheat Exports Forecast the Lowest Since 1971/72 U.S. 2002/03 wheat exports are forecast at 23.8 million tons, down 2.3 million tons on a June/May local marketing year. Shipments during the first three-quarters of 2002/03 lagged year- earlier levels. Census data from June 2002 through January 2003 show U.S. wheat grain exports of 16.1 million tons, down more than 1.4 million tons from the previous year's relatively slow pace (fig. 14). Also, grain inspections data for February 2002 were down more than 0.5 million tons from inspections a year earlier. Moreover, according to U.S. Export Sales, outstanding sales of 3.3 million tons as of February 27, 2003, were reported down 0.1 million from a year ago. Wheat sales and shipments during the final quarter of 2002/03 are expected to remain sluggish, not matching the year-ago pace. Competition from the Southern Hemisphere during the last months of 2002/03 is an important factor determining U.S. export prospects. Australia's production has been devastated by drought, and competition from Australia will be reduced this year. Economic and financial chaos disrupted Argentina's wheat planting, and supplies will be down there, too. However, there is the expectation that wheat prices will decline as the new U.S. crop is harvested. As a result, Australia and Argentina have an incentive to aggressively export their available supplies before the new U.S. crop comes to market. Several Major Customers Turning to Competitors Since 1993, the level of U.S. wheat exports ranged between 26 and 33 million tons. Moreover, the major markets for U.S. wheat also remained largely unchanged. During recent years, the top five purchasers of U.S. wheat have been Egypt, Japan, Mexico, the Philippines, and South Korea. In 2001/02 Nigeria moved ahead of the Philippines and South Korea, but Egypt, although reducing purchases from the United States, remained the largest market. However, in 2002/03, Egypt reduced U.S. purchases significantly. According to U.S. Export Sales commitments (the sum of shipments and outstanding sales) to Egypt were just over 1 million tons, (as of February 27, 2003), about one-third the previous year's level. Instead of the lead customer for U.S. wheat, Egypt is likely to drop to fourth, fifth, or sixth place. Egypt's turning to other sources for wheat, especially the Black Sea region and EU, explains much of the drop in U.S. exports. Evidently, Egypt's millers have been able to meet their quality standards blending Black Sea region, EU, and only some U.S. wheat. Foreign exchange constraints have been especially critical for purchasing decisions in 2002/03. In most years, U.S. spring wheat and durum compete in the EU market with Canadian wheat. Despite tight supplies in Canada, EU commitments to purchase U.S. wheat have dropped dramatically, at 1 million tons, just over half a year ago's level. While hard red spring commitments are up slightly, durum purchases are down sharply as EU production rebounded in 2002/03. The EU has not purchased any soft red winter, as Black Sea sources have been cheaper. Japan has been the largest purchaser of U.S. wheat in 2002/03, but even Japan's commitments of 2.7 million tons are down 4 percent from a year ago. Several Western Hemisphere wheat importers have been purchasing more wheat from the United States in 2002/03 because of reduced supplies in Canada and Argentina. As of the end of February, Brazil has taken more than six times as much as a year ago from the United States, with shipments of 0.7 million tons. Mexico's commitments are up 15 percent to 2.2 million tons. Colombia, Ecuador, Venezuela, and Guatemala have increased commitments. However, Nigeria, a key growth market in past years, with commitments of 1.7 million tons, is down 9 percent. This reduction is likely because high U.S. prices have caused Nigerian purchasers to diversify their sources of wheat. Commitments are up slightly to South Korea at 1.2 million tons, and the Philippines at 1.5 million. U.S. Share of Global Wheat Trade Lowest in Over 40 years Foreign countries are finding it profitable to increase wheat production, while U.S. producers are frequently turning to other crops. This is gradually boosting U.S. wheat prices compared with our competitors. U.S. wheat exports peaked more than two decades ago. Since then, U.S. exports have been on a downward trend. World wheat trade reached a record 114 million tons in 1988/89, and since then has averaged 105 million tons, but has fluctuated between 99 million and 113 million over the last 15 years. As a result, the U.S. share has declined from more than 40 percent in the 1970s to a low of 23 percent forecast in 2002/03 (fig. 15). Even though the United States consistently remains the world's largest wheat exporter, in 2002/03 the U.S. share will be the lowest in over 40 years. USDA's database only goes back to 1960. The United States is expected to remain the world's largest wheat exporter. However, if U.S. producers continue to turn to crops like corn and soybeans, and our competitors still find wheat a relatively profitable crop, the U.S. share of world wheat exports is likely to continue to decline. As this occurs, U.S. supply changes have less effect on prices. For example, when the United States, Canada, and Australia suffered from drought in 2002/03, most market analysts thought prices would increase more than has happened. Non-traditional exporters and the EU were able to export enough to keep a lid on prices. Over the long run, certain areas of the world have a comparative advantage in growing and exporting wheat, but policies, macroeconomic conditions, and politics can modify comparative advantage. For example, countries in the former Soviet Union and Central and Eastern Europe reduced agricultural and consumer subsidies during the 1990s, resulting in a sharp drop in animal numbers and wheat feed use. Wheat area planted dropped in the region, and average yields declined as less fertilizer was used. However, these countries have kept growing wheat, and when weather turned favorable, they emerged as surplus wheat producers. Wheat exports from the former Soviet Union surged in 2001/02 and 2002/03 facilitated by non- governmental investment in Port capacity. Russia, at 10 million tons, is forecast to be the third-largest wheat exporter in 2002/03 and Ukraine is expected to be the fifth- or sixth- largest. (See box 'Exports From the Black Sea Region: A Permanent Increase or a Weather-Driven Flash in the Pan?') Historically, EU wheat production and exports depended on large subsidies. However, during the 1990s the EU lowered internal wheat prices, generating some savings on export subsidies. EU wheat production has continued to grow because of relatively favorable net returns, but is increasingly used for domestic feed use rather than for exports. The EU is expected to be the second-largest wheat exporter in 2002/03, boosting exports 4 million tons to 15.5 million. A larger crop has increased supplies. The EU Commission did not subsidize wheat exports during the first months of the marketing year, and export licenses were small. However, in recent months, with the persistence of a strong Euro and weakening internal prices, the Commission has turned to larger restitutions to make EU wheat more competitive and limit government stock increases. Australia is expected to export 9 million tons in 2002/03 (July- June) despite a devastated crop. Shipments early in the marketing year from the previous crop were strong, limiting the decline. Canada's exports are forecast to fall to 8.5 million tons, just over half the previous year's level. A second year of drought left both production and stocks low, severely curtailing exports. Argentina's exports will also fall because of reduced production, reaching only 7.5 million tons, the lowest since 1995/96. Kazakstan and India are each expected to increase exports to 5 million tons in 2002/03 because of attractive international prices and large stocks. India, Pakistan, and China have emerged as net exporters of wheat in recent years. High government production supports during the 1990s boosted production and stocks. When the cost of maintaining these stocks became oppressive, exports increased, particularly as prices increased in 2002/03. Turkey, with increased production, is expected to double exports to 1 million tons. However, Eastern Europe's wheat exports in 2002/03 are likely to decline 0.5 million tons to about 3.5 million tons because of drought along the Danube River. Wheat by Class in 2002/03 Wheat Quality Good in 2002/03 The quality of the 2002 crop is generally good. Production in 2002 of each class of wheat, except white wheat, is below year- ago levels. Ending stocks of each class are expected down year- to-year. ------------------------------------------------------ HRW Production Lower Than a Year Ago Hard red winter (HRW) wheat production for 2002/03 was off sharply in the Plains States as harvested area dropped 1.26 million acres from the year before to 19.61 million acres (table 2). The U.S. average yield for HRW was also down 5.7 bushels to 31.1 bushels per acre. The biggest year-to-year decrease in production was 60 million bushels in Kansas. Large production drops also occurred in Colorado, Oklahoma, and Texas. Projected HRW supplies in 2002/03 are reduced 206 million bushels from a year earlier because production dropped 158 million bushels and beginning stocks were 48 million bushels lower. Use is expected to drop 51 million bushels compared with a year ago (fig. 16). Reduced exports account for 26 million bushels of this decline (fig. 17). Total projected domestic use is down 26 million bushels because reduced feed and residual use more than offsets an increase in food use. Food use of HRW is projected up from a year ago as the 2002 drought reduced the availability of hard red spring (HRS) wheat in the United States and Canada. The net result is to reduce projected HRW ending stocks by 154 million bushels compared with a year ago. The projected ending stocks-to-use ratio is 27.4 percent, substantially lower than 2001/02's 44.5 percent. Dry conditions during the fall of 2001 delayed germination and slowed growth of the 2002 HRW crop before winter. Most of the country's HRW wheat experienced continued drought conditions throughout the winter and spring. Yields and kernel size were reduced in many areas. Consequently, some millers experienced decreased flour yields due to smaller kernels, increasing the quantity of grain needed to be milled to produce a given quantity of flour. However, the protein content was much higher for the 2002 crop, and the supply of high-protein HRW wheat was readily available. The U.S. Wheat Associates' survey published in the 2002 Crop Quality Report found the overall protein percentage, at 13.4 (12- percent moisture basis), better than the 2001 crop's 12.1 and the 5-year average of 12.1 percent. The overall test weight of 58.9 pounds per bushel was lower than 2001's 60.4 and the 5-year average of 59.6. The average moisture percentage of the crop was 11.2, lower than the previous year's 11.7 and the 5-year average of 11.6. The 2002 HRW crop's average sampled falling number of 425 seconds was slightly better than the 407 the year before and much better than the 5-year average of 388. HRS Production Down Compared With a Year Ago Despite higher planted area than in 2001, harvested area for the 2002/03 crop was lower by 1.1 million acres from a year ago to 12.65 million (table 3). The average HRS yield was 28.2 bushels per acre, down 6.4 bushels from a year earlier. Production fell in all States, except for Montana. Projected HRS supplies in 2002/03 are reduced 143 million bushels from a year earlier. Production was off 119 million bushels and imports are projected down 44 million bushels, more than offsetting a 20-million-bushel increase in beginning stocks. Imports were down because drought reduced Canadian production, and thus exports to the United States. Total projected use, at 507 million bushels, is slightly less than 2001/02. While projected exports are up 49 million bushels, domestic use is down 61 million because of lower food use and feed and residual use. Food use of HRS is projected down because the reduced availability of supplies led some millers to substitute HRW wheat for HRS wheat. The net result is to reduce HRS ending stocks by 130 million bushels compared with a year ago. The projected ending stocks-to-use ratio is 19.7 percent, significantly lower than a year ago's 44.3 percent. Dry conditions reduced the 2002 HRS crop's yields compared with 2001, but enhanced protein and dough properties. The U.S. Wheat Associates' HRS survey published in the 2002 Crop Quality Report includes the four States of Minnesota, North Dakota, South Dakota, and Montana. The survey found the 2002 HRS crop's protein percentage to average 15.1 (12-percent moisture basis), which was higher than 2001's 14.5 and the 5-year average of 14.3. The 2002 crop's average test weight of 59.3 pounds per bushel was lower than the year before's 59.9 pounds and the 5-year average of 59.8 pounds. The average falling number of 321 seconds was lower than 2001's 391 seconds and the 5-year average of 371 seconds because of sprouting. The average moisture percentage of 12.4 was higher than both a year ago's 11.4 and the 5-year average of 11.8. White Wheat Production Up Slightly White winter wheat production, the largest part of U.S. white wheat production, is up from a year earlier by 6 million bushels because of slightly larger area. Yields were about the same (59.7 bushels per acre) as 2001's already low yields because of continued unfavorable weather. The drought resulted in low test weight and small kernels, but little sprout damage. Dry growing conditions during grain filling resulted in higher-than-average protein content in most dryland farming areas of the Pacific Northwest. These higher protein levels are a disadvantage for certain types of soft wheat products. According to the Pacific Northwest harvest survey published by the U.S. Wheat Associates in its 2002 Crop Quality Report, protein percentages of the soft white and club crops at 10.8 and 9.9 (12-percent moisture basis), respectively, are lower than 2001's 11.1 and 10.5 percent. The 5-year averages for the soft white and the club wheat crops are 10.2 and 9.4 percent, respectively. The 2002 test weights for the soft white and club wheat are 59.7 and 59.6 pounds per bushel, respectively, compared with 61.4 and 62.0 in 2001. The 5-year averages for the soft white and club wheats are 60.6 and 60.9 pounds. The 2002 soft white and club wheat moisture percentages are 9.4 and 9.0, respectively. These moisture percentages are lower than the year before at 9.7 and 9.6, respectively, and the 5-year averages of 9.5 and 9.1 percent. The 2002 soft white wheat crop's falling number of 362 seconds, is higher than 2001's 353 and the 5-year average of 338 seconds. The 2002 club wheat falling number of 353 seconds is lower than the year before's 360 seconds, but higher than the 5-year average of 338 seconds. The projected 2002/03 total white wheat supplies are nearly the same as a year ago as a production increase of 7 million bushels is offset by slightly smaller carryin stocks and imports compared with a year earlier (table 4). Total projected use is up 8 million bushels compared with 2001/02, with slightly higher exports and food use. Ending stocks are down only 4 million bushels from a year earlier. The projected ending stocks-to-use ratio is 27.4 percent, lower than a year ago's 30.2 percent. Soft Red Winter Production and Use Are Down Lower yields and harvested area reduced production for 2002/03 by 68 million bushels from a year ago to 332 million. Most soft red winter (SRW) wheat-producing States' yields were down sharply from 2001, dropping the national average 5.9 bushels per acre to 49.8 bushels as excessive precipitation limited yields across Illinois, Missouri, and Ohio and drought conditions reduced yields across portions of the Southeast and Mid-Atlantic coast (table 5). Harvested area was down 0.5 million acres from a year ago to 6.7 million acres. The projected 2002/03 SRW supplies are 117 million bushels lower than a year ago. Production and beginning stocks are down 67 and 57 million bushels, respectively. These decreases are only slightly offset by imports of 7 million bushels. Total projected use is down 101 million bushels compared with a year ago as exports drop 94 million bushels and feed and residual use is down 18 million bushels. Ending stocks are projected down 17 million bushels to 61 million. The projected ending stocks-to-use ratio is 17.3 percent, nearly the same as 2001/02's 17.1 percent. Harvest conditions were dry, except in the upper Midwest where there was some rain. The quality of the 2002 SRW crop is similar to the 2001 crop. According to the Midwestern harvest survey published by the U.S. Wheat Associates in its 2002 Crop Quality Report, the average protein percentage in 2002 for SRW is the same as 2001, 10.5 (12-percent moisture basis), and slightly higher than the 5-year average of 10.1 percent. The moisture percentage of the 2002 crop is 12.5, lower than the 2001 and 5- year average of 13.3 percent. Test weights are slightly higher, at 59.2 pounds per bushel for 2002 compared with 59.1 in 2001. The 5-year average for the SRW test weight is 58.5 pounds. The average 2002 falling number of 364 seconds is better than the 2001 crop's 356 seconds and the 5-year average of 336 seconds. Durum Production and Use Down The projected 2002/03 durum supplies are 21 million bushels lower than a year ago because beginning stocks are down 12 million bushels, while production and imports are each off 4 million bushels (table 6). Total projected use is down 13 million bushels from a year ago as exports decline 18 million bushels (fig. 18). Partially offsetting the lower exports is a higher feed and residual use. Ending stocks are projected down 8 million bushels to 25 million. The projected ending stocks-to-use ratio is 21.6 percent, slightly lower than a year earlier's 25.4 percent. The Northern Great Plains produced about 78 percent of the total estimated U.S. durum production of 79 million bushels. The 2002 production season in the Northern Plains had a slow planting pace and good early-season growing conditions. The crop, however, was subjected to a prolonged, wet harvest period. The crop has an improved grade profile, but lower falling numbers. The protein percentage of the 2002 durum crop grown on the Plains averaged 14.0 (12-percent moisture basis), less than the 14.4 reported for the previous year's crop according to the U.S. Wheat Associates in their 2002 Crop Quality Report. The 5-year average for protein percentage is 14.2. The moisture percentage of the 2002 crop is 12.0, greater than a year ago's 11 percent and the 5-year average of 11.5. Average test weight for the 2002 crop is 59.9 pounds per bushel, greater than a year ago's 58.8 and the 5- year average of 59.4. The average 2002 falling number of 292 seconds is significantly lower than the 2001 crop's 355 seconds. The 5-year average falling number is 307 seconds. California and Arizona accounted for 22 percent of the country's durum production. Desert durum is grown primarily in California's Imperial Valley and adjoining areas in Arizona and is usually delivered 'identity preserved' to buyers because of its unique qualities. The U.S. Wheat Associates in their 2002 Crop Quality Report reported that the 2002 crop's protein percentage is 13.0, less than a year ago's 13.8 percent. The 2002 crop's falling number is at 663 seconds, lower than the 2001 crop's 651 seconds. The 2002 crop's test weight, at 62.4 pounds per bushel, is below the 2001 crop's 63.8 pounds. The 6.5 moisture percentage of the 2002 crop was also below the 2001 crop's 7.2. Reference U.S. Wheat Associates. 2002 Crop Quality Report. 2002