Wheat YEARBOOK -- SUMMARY March 27, 2007 March 2007, ERS-WHS-2007s Approved by the World Agricultural Outlook Board --------------------------------------------------------------------------- This summary is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC. The text of the yearbook will be available electronically at a future date. --------------------------------------------------------------------------- U.S. 2007/08 Wheat Supplies Are Expected To Increase More Than Use U.S. 2007/08 Forecast U.S. wheat supplies for 2007/08, as forecast at the Agricultural Outlook Forum 2007, are expected to be 244 million bushels above 2006/07 because of expanded acreage and higher yields. High wheat prices in the fall of 2006 created expectations of high prices for 2007-crop winter wheat. Responding to higher expected returns, producers sowed 3.5 million more acres last fall as compared to fall 2005 and 3.7 million more acres than in the fall of 2004. Planted area in 2004 was the smallest since 1971. Yields are projected up for 2007/08 with a return to more normal weather after last year's drought. When expected spring wheat plantings are added, the total planted area for 2007/08 is forecast to be 60 million acres, 2.7 million acres above 2006/07. The expected year-to-year increase in production of 358 million bushels to 2,170 million bushels more than offsets the 99-million-bushel decrease in carryin stocks to 472 million bushels, the lowest since 1997/98. Total use for 2007/08 is projected up 210 million bushels from 2006/07 to 2,236 million bushels. This forecast is largely influenced by high prices generated by reduced wheat production worldwide in 2006/07 because of weather problems in the United States and elsewhere in the world and rising U.S. ethanol demand for corn. The high U.S. wheat prices and the higher foreign production projected for the 2007/08 marketing year are expected to limit United States exports to 925 million bushels. This is only 50 million bushels higher than projected in 2006/07 despite an expected recovery of U.S. wheat production in 2007/08. Wheat feeding in the U.S. is expected to increase 155 million bushels year-to-year as the expected expansion of U.S. ethanol production raises the price of corn relative to wheat prices. The shifting corn and wheat price relationship favors wheat feeding over exports, especially with larger wheat supplies expected in other major exporting countries. Food use of wheat is expected to increase in 2007/08, but the increase will still be slower than population growth. The sharp increase of consumer interest in low-carbohydrate diets starting in 2000 has slowed. Per capita all-wheat flour use dropped from 146.3 pounds in 2000 to 133.5 pounds in 2006. Per capita use dropped 9.6 pounds from 2000 to 2002, but only 0.8 pounds from 2004 to 2006. Notably, per capita durum-flour use rose in both 2005 and 2006 after declining from 2002 through 2004. Expected supply and use changes for 2007/08 result in ending stocks only 34 million bushels above 2006/07. The expected season average price is $4.30 per bushel, which would match the second-highest on record, achieved in 1996/97. The highest was $4.55 per bushel in 1995/96. World wheat use is expected to increase in 2007/08. Global food use is likely to grow slowly, mostly due to population growth. High feed-grain prices and increased wheat production in the United States, EU-25, and the former Soviet Union (FSU-12) are expected to boost wheat feed use. Increasing global use is expected to support prices. With global beginning stocks projected at their lowest level since 1982/83, growing conditions in 2007 will be crucial to determining available supplies and the size of any change in stocks. Through early March 2007, the weather across the Northern Hemisphere has been mixed for growing wheat, but the early outlook for crops in major exporting countries is good. U.S. 2006/07 Situation and Outlook Low U.S. carryin stocks for 2007/08 are the result of sharply lower 2006 production because of a severe drought in the U.S. Great Plains. The drought reduced both yields and harvested area, particularly in the Southern Plains. Production of hard red winter (HRW) and hard red spring (HRS) were down 248 million bushels and 34 million bushels, respectively, year-to-year. In Texas, wheat production was the lowest since 1971 and the area harvested the lowest since 1925. Oklahoma's production was the lowest since 1971 and harvested area the lowest since 1955. All wheat production totaled 1,812 million bushels in 2006, 293 million bushels or 14 percent below 2005. Harvested area was 46.8 million acres, down 7 percent from 2005/06 even though planted area rose slightly. The U.S. average yield is 38.7 bushels per acre, down 3.3 bushels from 2005. Durum had the lowest harvested area since 1961 and the lowest production since 1988. U.S. domestic wheat use in 2006/07 is projected to be about the same as in 2005/06 as slightly higher food use offsets lower feed and residual use. U.S. exports for the 2006/07 marketing year are expected to be 875 million bushels, 134 million bushels below 2005/06 because of relatively high domestic wheat prices. These high prices can be attributed to lower U.S. production, reduced foreign production prospects, and support provided by high corn prices late in 2006. Corn prices were bid up as 2006 corn area and yield fell below expectations and as concerns rose that not enough land will be planted to corn in 2007 to meet the booming ethanol demand for corn. Smaller U.S. wheat exports drop the projected U.S. share of the world export market from 24 percent in 2005/06 to 22 percent for the current marketing year. U.S. exports of hard wheats in early 2006/07 were slowed relative to the previous marketing year while soft-wheat exports exceeded the previous year's pace. The drought in the Southern and Central Plains caused hard-wheat prices to rise early in the marketing year, slowing their exports. Relatively abundant supplies of soft wheats held down their prices until the late fall when news of the extent of the Australian drought and soaring corn prices raised international prices. The durum export pace to date is slightly up from last year but is expected to face increasing competition from the large Canadian supplies the remainder of the marketing year. Projected all-wheat exports for 2006/07 are 134 million bushels below 2005/06. Exports for 2006/07 for HRW, HRS, and durum are down 165 million bushels, 32 million bushels, and 17 million bushels, respectively, from 2005/06. Projected 2006/07 exports for soft red winter (SRW) and white are up year-to-year by 54 million bushels and 25 million bushels, respectively. The ending stocks of wheat for 2006/07 are down nearly 100 million bushels from 2005/06. The sum of the hard-wheat ending stocks is about 300 million bushels, the lowest since 1995/96. The ending stocks of the soft wheats are a more typical total; however, white-wheat ending stocks are very low as lower area and yields reduced production. Durum wheat ending stocks are also at a historic low, mostly due to a one-third reduction in plantings from 2005/06 because of very low durum prices in the spring of 2006. The season average price for all wheat for 2006/07 is expected to be between $4.20 and $4.30 per bushel, which is substantially higher than in recent years. Global Situation and Outlook Worldwide, key wheat-producing countries had lower production in 2006/07 than in 2005/06 and these shortfalls contributed to higher world wheat prices. Production in the European Union (EU-25) and Russia were down 5 percent and 6 percent, respectively. Production is down in the EU because of high temperatures in July and in Ukraine and Russia because of reduced planted area. Importantly, Australian production is sharply reduced due to a very severe drought, which lowered output 58 percent. U.S. soft white wheat (SWW) benefited from the Australian shortfall as its price rose sharply with respect to SRW. In the first half of calendar 2006, SWW prices were as much as $.33 per bushel below SRW prices, but by September SWW prices were $.56 per bushel over SRW. Of the major exporters, Canada and Argentina had good production in 2006/07. While Argentina's expected trade year exports are up 20 percent, Canadian exports are projected to be up 31 percent year-to-year. In addition to a good production year, other events favorable for Canada's exports was the ending of the U.S. antidumping and countervailing duties on Canadian HRS imports and an even weaker currency than the U.S. dollar. On the import side, India is dramatically increasing imports to the highest in 30 years, due to tight stocks and increasing consumption. This follows 6 years of being a net exporter. World imports for 2006/07 are 109 million metric tons (mmt), nearly the same as the two previous marketing years, as reductions in several countries' imports offset the increase for India. Global world use for 2006/07 is down 1 percent year-to-year with smaller production and higher world wheat prices. The decline was mostly due to a 3-percent decline in feeding, much of which occurred in the EU and Russia. Wheat feeding in the EU-25, which accounts for over half of the world's wheat feeding, is down because feed grain prices, particularly barley, were more price competitive. World production has dropped 2 years in a row from a recent peak of 629 mmt in 2004/05 to 593 mmt for 2006/07. World ending stocks for 2006/07 are forecast at the lowest level since 1982. ---------------------------------- NOTE: This year, the appendix tables of the Wheat Yearbook will be released as predefined tables in a wheat data product on the ERS website. The 33 tables will cover U.S. acreage, production, yield, and farm price; world production, supply, and disappearance; U.S. supply and disappearance; food use; government and private stocks; domestic and international prices; exports and imports; and flour production and prices. Most of the tables will be updated monthly as new data become available. All of the tables will be available in HTML, Excel, and PDF, as well as a single Excel and PDF file.