Wheat Yearbook. Commercial Agriculture Division, Economic Research Service, U.S. Department of Agriculture, February 1995. WHS-1995 Contents Summary U.S. Wheat Production Expected Up in 1995, But Supplies May Be Little Changed Outlook for 1995/96 U.S. Wheat Production Expected Up in 1995 Bright World Wheat Production Prospects for 1995/96 1994/95 Situation Global Wheat Stocks To Fall in 1994/95 U.S. Exports Climb in 1994/95 Strong Use Tightens U.S. Old Crop Supplies Import Developments Joint Commission on Grains Works To Find Long-term Solutions Wheat by Class Hard Red Winter Wheat Stocks Forecast Lowest in Over 20 Years List of Tables Situation Coordinator Edward W. Allen (202) 219-0831 Principal Contributors Edward W. Allen (202) 219-0831 Jenny Gonzales (202) 501-8552 (Statistical) Bryan Just (202) 501-8524 Carolyn Whitton (202) 219-0825 (International) Approved by the World Agricultural Outlook Board. Summary released February 24, 1995. Additional copies of the Wheat Yearbook are available from ERS-NASS, 341 Victory Drive, Herndon, Va. 22070. Or call, toll free, 1-800-999-6779 (8:30-5:00 ET, U.S. and Canada only). All other areas, please call 703-834- 0125. Text may be accessed electronically. For details call (202) 720-5505. The Wheat Outlook will be made available on Fax and by computer, eleven times a year, except when the Wheat Yearbook is issued (February). See the back cover for details and information for Wheat Situation and Outlook subscribers. The United States Department of Agriculture (USDA) prohibits discrimination in its programs on the basis of race, color, national origin, sex, religion, age, disability, political beliefs and marital or familial status. (Not all prohibited bases apply to all programs). Persons with disabilities who require alternative means for communication of program information (braille, large print, audiotape, etc.) should contact the USDA Office of Communications at (202) 720-5881 (voice) or (202) 720-7808 (TDD). To file a complaint, write the Secretary of Agriculture, U.S. Department of Agriculture, Washington, D.C., 20250, or call (202) 720-7327 (voice) or (202) 720-1127 (TDD). USDA is an equal opportunity employer. Summary U.S. Wheat Production Expected Up in 1995, But Supplies May Be Little Changed U.S. wheat supplies are expected to remain relatively tight in 1995/96 and U.S. wheat exports will face heightened competition from expanding production in most major competing countries. With total use dropping, stocks will rise and farm prices could decline 15 to 20 cents per bushel. However, with U.S. and foreign wheat stocks low, a different scenario could evolve. Based on an increase in planted area of 0.5 to 1 million acres and an assumed yield of 38.5 bushels per acre, the 1995 wheat crop is expected to be up 75 to 100 million bushels from the 2,321 million produced in 1994. Carryin stocks on June 1, 1995, are forecast down 112 million bushels from a year earlier. Moisture and a mild winter are generally favorable for wheat prospects across much of the country, but problems are notable in Washington, where nonirrigated wheat still shows the effect of poor emergence caused by drought at planting, and in Texas, where the Panhandle is too dry. There also are concerns about disease problems in some areas because of an abnormally warm winter. However, it is too early to get any significant sense if overall U.S. wheat yields in 1995 will be above or below trend. Foreign wheat production is also likely to increase in 1995 in response to improved weather conditions in some areas, better prices for wheat than for alternative crops in some other areas, and the reduction in the set-aside in the European Union. Because much of the production increase will likely be in the major foreign exporting countries, competition will be heightened in world markets and U.S. exports will be somewhat lower than in 1994/95. In 1994/95, world wheat production fell 6 percent, while consumption is expected to decline about 2 percent from 1993/94. Use will exceed output by around 28 million tons, markedly tightening anticipated ending stocks. At an estimated 115 million tons, global ending stocks are expected to be the lowest since 1981/82, pushing the ending stocks-to-use ratio to its lowest in USDA's global database, which begins in 1960/61. World trade is projected down 2 percent and export prices are up. Despite the drop in U.S. wheat production in 1994/95, exports are projected to expand about 1.5 million tons to 35.5 million and the U.S. share of the export market is projected about 3 percentage points greater at 36 percent. Total use of U.S. wheat in 1994/95 is forecast up 2 percent, exceeding 2.5 billion bushels for the first time since 1987/88. Neither domestic use nor exports are projected to reach record or even near-record levels, but both are well above the average of the previous 5 years. Supplies of less than 3 billion bushels and strong use are reducing forecast stocks to their lowest in decades. 1995/96 Outlook U.S. Wheat Production Expected Up in 1995 Despite a surprisingly small increase in winter wheat seedings for 1995, U.S. total wheat plantings are expected to increase. The higher plantings and an assumed yield of 38.5 bushels per acre would result in a 2.4-billion-bushel crop. Winter Wheat Seedings Less than Expected Winter wheat seedings for 1995 were estimated at 49.6 million acres, up 400,000 acres from a year earlier, but less than any of the previous 4 years. The increase was mostly in soft red winter (SRW) area, up 7 percent to an estimated 10.6 million acres. Hard red winter (HRW) area was down 1 percent to 34.8 million acres. White winter wheat plantings declined modestly to 4.2 million acres, as dryness reduced seedings. The increase in winter wheat area was less than expected. The average estimate of 16 industry analysts was 51.8 million acres, ranging from 50.3 million to 53.7 million. Most analysts had expected higher seedings because wheat prices were increasing during and immediately before fall planting, the wheat acreage reduction program (ARP) remained at 0 percent for the third year in a row, and weather for planting, on average, was better than a year earlier. Throughout last fall, wheat prices were significantly higher than during the previous two falls. Before and during winter wheat planting, it became clear that foreign production was down and major foreign exporter supplies were tight. Winter wheat prices, in particular, were up from the previous 2 years. In July 1994, the average farm price for winter wheat hit a low for the year at $2.99 per bushel, 8 percent higher than a year earlier. By October, winter wheat prices were 26 percent, or 78 cents a bushel above October 1993. The increased farm prices were also reflected in higher wholesale market quotes. White wheat prices were particularly high because ongoing drought was dropping Australia's production prospects. Meanwhile, prices of competing crops, feed grains and oilseeds, were dropping as record harvests were posted. Despite these strong price incentives, wheat area responded only slightly. Planting conditions often affect the amount of winter wheat planted. In the fall of 1994, planting conditions were much better than a year earlier in much of the Midwest. Also, the harvest of the large corn and bean crops progressed rapidly, allowing farmers to plant wheat. In the fall of 1993, wheat area in Illinois and Missouri was curtailed by excess moisture and flooding, severely reducing planted area. A rebound in 1994 was expected, and occurred in these States, but Illinois' 1995 area remained modestly below 1993, and Missouri plantings were only up 100,000 acres, after declining 450,000 acres from 1993 to 1994. Moreover, this year, problems appeared elsewhere. Drought in the Pacific Northwest (PNW) hindered seeding of nonirrigated wheat. For the second consecutive year, Montana planting was delayed. This year it was largely because of dryness. Winter wheat area in Montana fell to 1.7 million acres, down more than a third from 2 years ago. Area planted in the Central and Southern Plains in aggregate was little changed. Kansas and Texas increased area, despite some dryness, but Oklahoma, Colorado, and Nebraska had nearly offsetting declines. Conservation compliance and changed crop rotations may be limiting winter wheat area. Producers had an incentive in the early 1980s to expand wheat base acres and increase payments, but with flex acres receiving no program payments, planting those acres may not be justified. Wheat Production Likely Up in 1995 Despite the small increase in winter wheat seedings, total wheat area planted is expected to be up 0.5 to 1 million acres from the 70.4 million in 1994. Durum prices have been high. Hard red spring (HRS) prices, especially with good quality and high protein, are likely to be lower during March and early April, than a year earlier. However, oilseed and feed grain prices have dropped much more than wheat prices and are expected to remain lower through spring planting. Montana's spring wheat area is likely to be up sharply as area that was not planted to winter wheat last fall gets planted to spring wheat. However, the increase in spring wheat plantings in other States is likely to be relatively small because spring wheat area has been high by historical standards for the last several years. The high spring wheat area occurred even though North Dakota and Montana each had over a million acres of wheat base idled in the CRP program. Relatively strong wheat prices may encourage producers in the Southern Plains to harvest grain on wheat planted area instead of grazing out the fields in the spring as some normally do. A mild winter (so far) also could contribute to a higher-than-normal percent of planted area getting harvested. Moisture and a mild winter are generally favorable for wheat yield prospects across much of the country, but problems are notable in Washington, where nonirrigated wheat still shows the effect of poor emergence caused by drought at planting, and in Texas, where the Panhandle is too dry. There are also concerns about disease problems in some areas because of an abnormally warm winter. However, it is too early to get any significant sense if overall U.S. wheat yields in 1995 will be above or below trend. U.S. Wheat Supplies Likely Down in 1995/96 Despite Increased Production Beginning stocks in 1995/96 are forecast to be 456 million bushels, down 112 million from a year earlier and the lowest beginning stocks since 1975. The reduction in stocks is likely to offset any increased production unless U.S. average wheat yields turn out to be above trend in 1995. CCC inventory (the Food Security Wheat Reserve) is expected to account for 142 million bushels, or almost a third of beginning stocks. However, no wheat is expected to be in the Farmer-Owned Reserve (FOR), and only 45 million bushels are forecast to remain in the 9-month loan program on June 1. Therefore, privately owned and stored stocks are actually forecast at 269 million bushels, more than the 253 million on June 1, 1992. As a result, this measure of stocks is not expected to be tighter than in the recent past. Mills that use spring wheat (harvested in August and September), especially mills located in the Northern Plains, usually have stocks on hand as of June 1 for milling during the summer. The amount of old-crop wheat on June 1, 1995, uncommitted and available to meet unexpected demand, will be similar to what was available in 1992. Imports in 1995/96 are difficult to project. The U.S./Canada Memorandum of Understanding implemented tariff-rate quotas on imports for the 12 months starting September 12, 1994. This is likely to result in a reduced pace of imports during the summer of 1995 as they approach quota levels (see section on U.S. import developments). However, after September 12, 1995, no one knows what, if any, constraints will be in place. Demand for U.S. Wheat May Be Down in 1995/96 If foreign wheat crops develop as expected, competitor supplies will increase in 1995/96, reducing U.S. export prospects. U.S. domestic use likely will be little changed as food use continues to expand but feed and residual use declines. Low feed grain prices compared to wheat result in somewhat reduced wheat feed and residual use. However, with U.S. and foreign wheat carryin stocks low, production surprises could cause a different demand scenario to evolve. If total use declines in 1995/96 as expected, ending stocks would increase, despite the tight supplies. The prospect of increased stocks is likely to lead to lower prices in 1995/96. The advanced deficiency payment rate announced by USDA was 70 cents per bushel. That implies a season average farm price of $3.30 per bushel, or a 5-month price of $3.20, somewhat lower than the $3.40-3.50 February forecast for 1994/95. 1995 Wheat Program Provisions The 1995 wheat crop will be the last one produced under the Food, Agriculture, and Conservation, and Trade Act of 1990. Major provisions affecting target price and payment acres remain unchanged from 1994. This year, however, to maintain program payment eligibility, program participants are required to purchase crop insurance on all insurable crops that account for 10 percent or more of the farm's value of crop production. This is the result of the crop insurance reform package signed into law by the President in October 1994. The catastrophic level of crop insurance, the minimum required by linkage with the commodity programs, can be purchased for a processing fee of $50 per crop per county, up to a maximum of $200 and $600 per farmer in total (if the farmer operates in several counties). Processing fees will be waived for limited resource farmers-- those who had gross incomes (from all sources) of $20,000 or less for the 2 preceding years. The Commodity Credit Corporation (CCC) has announced the Acreage Reduction Program (ARP) for 1995 wheat will be 0 percent and the target price will be $4.00 per bushel. These are unchanged from 1994. The projected deficiency payment rate is 70 cents per bushel. Fifty percent of the preliminary deficiency payment rate will be available for an advanced deficiency payment. The final deficiency payment rate will be equal to (1) the target price minus the higher of the loan rate or (2) the lower of the 5-month price plus 10 cents or the 12-month price. The 1995 loan rate was not announced as of February 23, 1995. Planting Flexibility Continues Participants are allowed to plant wheat, other program crops, or other permitted crops on 15 percent of wheat base referred to as normal flex acres. Normal flex acres are not eligible for deficiency payments. Participants can flex an additional 10 percent of wheat base under the optional flex acre provisions. If wheat optional flex acres are planted to a permitted crop other than wheat, deficiency payments are forfeited. The crops not allowed on normal flex acres include fruits, vegetables, tobacco, peanuts, nuts, wild rice, trees, and tree crops, except those planted for biomass production. Under the 0/85 program, participants must idle or plant selected crops on 15 percent of their maximum payment acres without payments, to be eligible for guaranteed deficiency payments on remaining acres idled or planted to selected crops. Maximum payment acres for 1995 equal the wheat base less 15 percent of the wheat base for normal flex acres. Therefore, if a participant planted no wheat on his or her wheat base, under the 0/85 program 72.3 percent of the base would be eligible for 0/85 deficiency payments (0.85 maximum payment acres times 0.85). Under certain conditions, producers may continue to receive payments on up to 92 percent of their maximum payment acres as with the old 0/92 program. Conditions allowing 0/92 payments are: planting minor oilseeds, sesame, crambe, and "industrial and other crops;" being prevented from planting; and having reduced yields on failed acres because of a natural disaster. Participants should contact their local Consolidated Farm Service Agency (CFSA) office for more information about these exceptions. 1995/96 Situation and Outlook Bright World Wheat Production Prospects for 1995/96 Weather for 1995/96 winter wheat has been favorable across most of the Northern Hemisphere. Larger fall plantings were stimulated by good weather and relatively high prices. Assuming normal weather during the season, prospects appear good for increased production. World winter wheat plantings for 1995/96 appear to have risen and weather conditions since planting have been encouraging, except in Morocco, which is experiencing drought. Winter grain area dropped in Russia and the Ukraine, but rose in the United States, the European Union (EU), and China, and may have risen in Eastern Europe, and India. Spring wheat in the Northern Hemisphere and wheat in the Southern Hemisphere will not be planted for several months, but forecasters in Canada and Australia are projecting higher planting and production. The first USDA country-by- country projections for 1995/96 will be made in May 1995. Dry weather delayed planting and reduced sowing in much of Russia's winter grain area. Despite a period of cold temperatures in November, Russia's grain area this winter has had adequate snow cover to protect it from above average winterkill and temperatures have been mild. Despite Russia's reduction in area planted to total winter grains, winter wheat plantings may have been little changed as some area was shifted from rye to wheat because wheat prices are relatively more attractive. Surpluses of barley and rye in 1994 led to lower prices. In addition, the necessary seed stocks of grains reportedly are available for spring planting. On the other hand, potential problems for Russia's wheat crop include uncertain government support and machinery difficulties. As Russia's budget nears finalization, it now appears possible that the agricultural lobby will succeed in getting into the budget a level of agricultural support near last year's. Last year approximately 10 of the 14 trillion rubles budgeted were actually distributed to agriculture. However, it is not clear (1)that funds will be available to distribute at anywhere near last year's level, (2)that inflation won't reduce support to insignificance, or (3)that funds will be distributed in time for use in spring fieldwork. In addition, sales of the 1994 crop to the state have been slow, likely leaving farmers with large stocks and questionable funds to begin spring fieldwork. And, as usual in Russia, it also has been reported that much of the farm machinery is not prepared for spring use. But past spare parts and fuel shortages tended to be overstated and apparently had limited impact on production. In the Ukraine, weather at planting time was dry. One Ukrainian source reported winter grain area planted down to 6.83 million hectares, compared with 7.55 million in 1994/95. But the Ukrainian Ministry of Agriculture reports increased harvested area of both total winter grains and winter wheat. Through mid- February, winter weather was favorable, providing adequate snow- cover and improved moisture conditions in most areas. Additionally, Ukraine plans to increase spring wheat area in 1995/96. Other countries of the former Soviet Union (FSU) grow very little winter grain. Dry weather at planting may have adversely affected Moldova's winter wheat. But weather was favorable for planting of winter grain in Belarus and the Baltics. Kazakhstan's Ministry of Agriculture and Food reports plans to reduce spring-sown grain area, with all of the reduction in barley and oats, while wheat area remains unchanged, and corn area is increased. Wheat exports are one of Kazakhstan's major foreign exchange earners to pay for or barter for needed imports. And Uzbekistan's government reports a planned increase in spring grain area to 1.5 million hectares, compared with 1.3 million in 1994. This increase is to be achieved by shifting some irrigated land from cotton and vegetables. One of China's news services reported that China's winter grain area planted rose 330,000 hectares, of which the winter wheat area accounted for 200,000 hectares. It is not yet known if these are official statistics. At a national conference in January, China's Minister of Agriculture announced the plan for 1995--455 million tons of grain production from 110 million hectares planted. This compares with 444.6 million tons produced this year. While it is not clear if China will reach these targets, grain and cotton prices were raised to encourage production and a few provinces reported plans to increase investment in grains in 1995. Winter precipitation has been normal in China's main winter wheat areas, but temperatures have been above normal in some areas and there are increasing reports that wheat is growing more rapidly than it normally would. Because the winter season in China's North China Plain usually is dry, if wheat is maturing early, moisture reserves may be depleted, limiting crop growth prior to the onset of the rainy season. In Northern Africa, a reversal of the 1994/95 situation is now in prospect. For 1995/96 winter wheat, Tunisia and eastern Algeria have had better conditions than the 1994/95 drought. But in Morocco, severe drought has reduced 1995/96 wheat potential well below the 1994 record. Good winter weather to date also suggests higher winter crop production in Eastern Europe, where area planted for the 1995 crop ranged from larger in the north, to unchanged in Hungary, to the lowest in 15 years in Bulgaria. Area in Romania also reportedly fell, affected by the same dry conditions that prevailed in southern Russia and the Ukraine. And area apparently dropped in the former Yugoslavia. Bulgaria and the former Yugoslavia suffered from lack of or delays in obtaining needed credits and inputs. Excellent winter weather in India means favorable prospects for winter grain production there. Assuming weather remains normal throughout the season, the good start and the 3-percent increase in wheat prices announced last fall should lead to another large outturn. Winter grains in the EU have largely escaped the recent flooding and crop prospects are favorable. Area planted to winter crops rose for several reasons, including a lower set-aside requirement for 1995/96 and better prices for wheat than other grains and oilseeds. Although during the floods transportation was disrupted temporarily, it will be restored well before wheat emergence and the beginning of spring fieldwork. Thus floods should have little effect on the spring distribution of inputs. Canada will not plant its main spring wheat crop until May and Statistics Canada will not release planting intentions until March. But some unofficial Canadian forecasters have already indicated they anticipate larger 1995/96 area and production. The Canadian Wheat Board (CWB) forecasts wheat area up from 11 million hectares to 12.2 million hectares and production up to 26 million tons, compared with 23.4 million in 1994/95. CWB also projects another increase in durum wheat area to 6.3 million acres, up 9 percent, resulting in a production record of 5 million tons. High world wheat prices are expected to be the main impetus for Canadian producers who had switched out of wheat in the last few years to return to wheat. Many producers had switched to canola because of its high value, but agronomists recommend canola not be grown on the same land more than once in every 3 or 4 consecutive years, so many producers will need to switch back to another crop in 1995/96 and wheat will likely be the crop of choice. In addition, payments under the Gross Revenue Insurance Program (GRIP) have declined in the last couple of years, so producers continue to favor production of higher value crops such as canola and wheat. In fact, many producers are limiting their dependence on government programs. Saskatchewan, the largest wheat producing province, has opted out of the GRIP program entirely for 1995. The pending decision on this year's method of distributing Canada's Western Grain Transportation Act benefits may have some effect on wheat. It has been proposed to make these payments directly to farmers rather than to rail handlers. A change in this program might further encourage switching to production of crops with higher values, such as wheat and canola. The Australian Bureau of Agriculture and Resource Economics (ABARE) recently forecast 1995/96 wheat production at 16 million tons, a huge rebound from this season's drought-reduced crop of 9 million. This implies a large yield gain based on the assumption that wheat areas will receive the necessary heavy precipitation to replenish soil moisture between now and the start of planting in May. ABARE also projects planted area up 17 percent to 9.6 million hectares. 1994/95 Situation and Outlook Global Wheat Stocks To Fall in 1994/95 In 1994/95, world production fell 6 percent, while consumption is expected to decline 2 percent from 1993/94. Use will exceed output by 28 million tons, markedly tightening anticipated ending stocks. At an estimated 115 million tons, ending stocks are expected to be the lowest since 1981/82, pushing the ending stocks-to-use ratio to its lowest since the beginning of the USDA database in 1960/61. World trade is down 2 percent and export prices are up. Global wheat production in 1994/95, estimated at 524 million tons, is down from 559 million in 1993/94. Area and yield fell about 3 percent each. Much of the decline in world wheat production for 1994/95 occurred in the former Soviet Union (FSU) and Australia, where adverse weather accounted for sharp drops in both area and yields. Reduced area, winterkill, and low prices reduced FSU outturn by 23 million tons to just 60.4 million, while drought in Australia is reducing the crop by an estimated 7.9 million to 9 million tons. In addition to the 31-million-ton decline in the FSU and Australia, production also fell 11.8 million tons in total in Canada, China, Turkey, and the United States. Canada and China shifted area from wheat into more profitable crops, while Turkey suffered from dry weather. In contrast, Argentina, the EU, and Eastern Europe increased output 6-million-tons. Despite lower production, world imports are forecast down in 1994/95. Imports are estimated down 2 percent to only 97.7 million tons, the lowest since 1986/87 and below last season's already weak performance. Imports are expected to fall in the FSU, Morocco, Iran, South Korea, Eastern Europe, and the United States. But these reductions are moderated by the huge import gain projected for China. With consumption well above production, global ending stocks are forecast to drop 28 million tons below carryin. The ending stocks-to-use ratio is projected at 20.9 percent, down from 25.4 percent last season. Nearly two-fifths of this stock decline is expected to occur in the FSU because of the sharply lower production. Stocks are also dropping in the major exporting countries. Carryout stocks of major wheat exporters (including the United States) are projected to drop 12 million tons to the lowest since 1974/75. These lower stocks will mean most exporters will have to depend on the 1995 crop to meet needs. While Australia is using stocks from its 1993 crop to help maintain as many export markets as possible, its drought-reduced 1994 harvest will mean sharply lower exports. This leaves increased export opportunities for the United States and Canada. But it also means lower stocks in these countries because both had smaller crops in 1994. EU exports are expected to fall in 1994/95, but stocks also are falling because of continued strong domestic use. As expectations for exporter supplies tightened during the season, prices rose. The January 1995 U.S. fob Gulf price for No. 2 HRW (less the weighted average EEP bonus) averaged $140.74 per ton. Although this is down slightly from the $146 per ton in December, it is still substantially above the $95 per ton of January 1994. China--A Bright Spot in the Weak Global Import Market China's trade continues to have a major impact on world imports and represents the major uncertainty in the forecasts for 1994/95. Late in 1994 and early in 1995 China purchased 2.7 million tons from the United States and some additional wheat from other sources. This purchasing, coupled with imports from earlier in the season, some of which were carried over from the previous season, raised China's projected total imports for 1994/95 to 11 million tons. This is more than 2.5 times China's 1993/94 wheat imports, but still well under the peak of 15.9 million in 1991/92. The recent purchases lent buoyancy to the otherwise weak world demand and raised market hopes that more buying might occur. Although China's 1994/95 wheat production slipped below that of 1993/94, it was second only to last season's record. But consecutive large crops did not provide the needed government supplies. Late in 1993, upon learning that the government would raise wheat purchase prices beginning in April 1994, farmers began holding grain off the market. At the same time, consumers, fearing sharp price rises, rushed to stock up on flour. These actions sent China's 1994 domestic prices soaring. Urban wheat flour prices increased 28 percent between January and November 1994. Shocked officials took action to reduce prices. They limited 1994 exports of rice and corn, reinstituted government grain purchases, and reinstituted some urban wheat flour rationing. During 1994 government wheat reserves also were released into the market to control prices. Stocks had been huge. But the reduction of state subsidies for grain stocks held by China's local Grain Bureaus between 1991 and 1993 had had the effect of dumping wheat into local markets. This led to larger than normal millable supplies and China's wheat imports sagged in 1993 and 1994. But at some point this one-time bulge in millable supplies was bound to end and more normal supply and demand conditions to return. The surge in prices in 1994 may have coincided with the ending of large millable wheat supplies. Population and rapidly rising urban incomes in 1992-1994 led to an increase in demand for flour. Demand exceeded commercial supplies and authorities were faced with the prospect of further price rises, imports, or further stock drawdowns. Conservative officials in charge of government reserves became concerned that reserves were too low and pressed to import grain rather than use reserves. In addition to China, a few other countries are expected to increase imports by much smaller amounts in 1994/95. Imports are up in Tunisia, Turkey, and Pakistan. Tunisia's imports are projected at 1 million tons, a 275,000-ton gain due to the second year of severe drought. Conditions in Turkey were also dry during the year, raising its import needs an estimated 350,000 tons to 1 million. Pakistan's production also fell because of reduced planting and lower yields, and imports were raised 435,000 tons to 2.5 million. These gains in trade only moderated the reductions in other countries. FSU imports continue to play a major role in the weakness of world wheat trade. FSU imports are again forecast down in 1994/95, to 11.6 million tons, compared with 13.5 million last season and levels ranging between 20 and 30 million tons in previous years. Imports by Russia, the largest importer in the FSU, are forecast down 1.5 million tons to 3.5 million. Russia's imports are falling despite its 11.4-million-ton decline in wheat production this season. Among the reasons for the decline is a projected 7-million-ton decrease in Russia's consumption, an even larger drop than last season. Projected feed use is lower as livestock inventories continue to fall. Also, financial constraints and a strong stance by Russia's legislature against imports from the West continue to limit the amount of importing possible by Russia. And the nearly 10-million-ton stock buildup of 1992/93 is enabling Russia to draw down stocks. The FSU is not showing the largest year-to-year decline in wheat imports in 1994/95, however. That may occur in Morocco, where weather improved dramatically in 1994, pushing production up 4 million tons to 5.5 million. This production gain is sending Morocco's imports plummeting from 2.5 million tons in 1993/94 to only a forecast 800,000 tons this year. However, dry weather for the 1995/96 crop may lead Morocco to buy wheat early and not wait until this summer when the size of its new crop is known. Weather in Algeria was mixed, between Tunisia's drought and Morocco's recovery. Algeria's forecast imports remain unchanged at 4 million tons in part because, faced with enormous political and economic pressures, Algeria hopes to avoid adding consumer complaints about rising food prices to its troubles. Imports are also projected to drop substantially in the Middle East. Middle Eastern imports are down from 10.3 million tons in 1993/94 to 9.2 million in 1994/95. Smaller imports in Iran, Israel, and Syria mainly reflect improved weather and production and offset increased imports in other Middle Eastern countries, including Turkey. Better weather conditions and larger outturn are also responsible for lower imports in 1994/95 in Eastern Europe. The region's imports are projected down 875,000 tons to 1.3 million and exports are projected up by a similar amount. Imports in the rest of Asia, excluding China, are projected down, mainly because of a sharp drop in imports of wheat for feeding in South Korea. South Korea's wheat imports are forecast at 4.3 million tons, compared with 5.7 million last season. The substantial decrease in world corn prices and the rise in wheat prices this year are making corn relatively more attractive to import for feeding, especially since the autumn. Other than in South Korea, however, wheat demand in Asia continues to maintain the steady slow growth of recent years. Mexico is another country with larger production and smaller imports this season. Mexican production increased in 1994/95 in part because changes under the PROCAMPO reforms last year made wheat prices stronger relative to corn. In addition, imports of wheat for feed likely fell with the drop in world corn prices. Mexico's imports are forecast down 425,000 tons to 1.4 million. Brazil's imports are forecast unchanged in 1994/95, despite continued strong growth in consumption after the introduction of a new economic program last July. Imports by the rest of Latin America also are forecast off fractionally in 1994/95, even though consumption in this region continues to grow. Exporter Market Shares Shifted in 1994/95 Availability of exportable supplies will play a major role in determining the source of 1994/95 exports as exporter market shares shift in response to drought in Australia. Australia has focused on maintaining selected markets. As a result, the United States, Canada, and Argentina have made gains in other markets where Australia is usually a major player. Among the largest exporters, only the EU is not expected to expand exports. Australia's drought-reduced production is down 47 percent from 1993/94 to 9 million tons, the lowest since 1982/83. Its share of the export market is expected to drop to only 7 percent as exports fall to 7.2 million tons. This compares with a market share of almost 13 percent and exports of 12.75 million tons last year. Australia is trying to maintain some share of the market in Asia, such as Japan, Korea, Malaysia, and Indonesia, and in the Middle East. Argentina's wheat harvest is estimated up 1.1 million tons to 10.5 million in 1994/95. Currently, Brazil's demand for imports from Argentina is mushrooming as its consumption again equals the previous record. Brazil's expected imports of 5.7 million tons, however, exceed anticipated Argentine availabilities. Argentina's exports are forecast at 5.6 million tons, 25 percent above last year's. And Argentina supplies Latin American markets other than Brazil, as well as exporting to China. Although Canada's wheat crop dropped an estimated 4 percent in 1994/95, exports are projected up 2.8 million tons to 21.5 million and Canada's export market share is expected to reach 22 percent, well above last year. At planting time canola and durum wheat were more attractively priced than spring wheat and barley, leading producers to shift area to canola and durum. A record durum wheat crop of 4.8 million tons was produced. The record crop, smaller exportable durum supplies in the EU, and strong import demand raised Canada's durum exports this season. Canada's exports of other wheat also are up, as stocks are drawn down to meet demand. Even though EU production rose just over 2 million tons this season, EU exports are forecast down 1.7 million tons. The main reason for the drop is high internal EU grain prices. This year the EU has been releasing intervention stocks into the domestic market in an attempt to bring internal prices more in line with intervention prices. While the EU has lately stepped up its export pace, the slow start will mean exports drop this year. The EU is expected to maintain strong exports this year in certain markets, including North and SubSaharan Africa and food aid to the FSU. U.S. Exports Climb in 1994/95 Despite the drop in U.S. wheat production this year, exports are projected to expand about 1.5 million tons to 35.5 million and the U.S. share of the export market is projected about 3 percentage points greater at 36 percent. As of February 16, U.S. export commitments for the 1994/95 June/May marketing year were about 1.5 million tons ahead of last year, according to the U.S. Export Sales Report. However, actual shipments were still fractionally behind last year's pace. Much of the growth is in U.S. exports to China, with shipments and sales both well ahead of last year's pace. Total commitments on February 16 were 3.9 million tons, of which 1.2 million were early season contracts and the remainder contracted in December and January. Some of the wheat recently contracted has already begun to be shipped, but most of it is still outstanding. The other large increase in U.S. exports this year is to Egypt. Commitments there on February 16 were 5.5 million tons, of which 4.4 million had been shipped. With Australia, a traditional major supplier, unable to supply its usual share of Egypt's market, the United States has captured most of the market. As of February 16, U.S. export commitments to the rest of Asia were running about 600,000 tons above the pace at the same time last year. Although South Korea, Pakistan, and the Philippines continued to be the largest destinations and sales there about the same as last year, the biggest gains are occurring in commitments to Bangladesh and Sri Lanka. Commitments to Sri Lanka are now about 175,000 tons above last year, while commitments to Bangladesh are up about 365,000 tons. Taiwan, Japan, the EU, and Other Western Europe all appear to be taking about the same quantity of U.S. exports as last year. U.S. export commitments to the Middle East also are about the same as last year, but destinations are shifting with Israel taking much less and Yemen much more. Commitments to Yemen on February 16 exceeded 900,000 tons, compared with only just over 600,000 tons at the same time last year. Commitments to Israel were down about 200,000 tons. The main decreases in U.S. export sales this year are occurring in Eastern Europe and the FSU. Commitments to the rest of Africa and Latin America are also well behind those of the same time last year, but these commitments exclude food aid. Only 61,000 tons were exported to Eastern Europe this year and no sales are outstanding. This compares with exports of 316,000 tons last year. Eastern Europe's imports are down because its production rose significantly. U.S. export commitments to the FSU as of February 2 were down more than 45 percent from the same time a year ago. Of the more than 800,000 tons committed to the FSU, more than 70 percent (450,000 tons) was committed to Uzbekistan and already entirely shipped. Of the remainder, 256,000 tons are committed to Russia, of which 177,000 were shipped before February 16 and 79,000 tons are outstanding, excluding food aid. As of January 20, none of the $6.5 million of GSM-102 credit guarantees allocated to Russia's private sector for wheat and flour imports had been used. Of the 428,000 tons of P.L.480 Title I wheat allocated to Russia under the Food for Progress Program earlier this season using funds from fiscal 1993, 371,600 tons have been registered for shipment. On February 14, USDA extended the deadline for Russia to buy P.L.480 wheat under this program from January 31 to February 28, with the delivery period extended to April 30. And on February 17, Russia purchased 189,998 tons of U.S. wheat under this program in addition to the 182,000 tons purchased earlier. Total P.L.480 Title I and Food for Progress allocations for wheat were reduced considerably this fiscal year. Countries with allocations either under Title I or Food for Progress include: Angola, Armenia, former Yugoslav Republic of Macedonia, Georgia, Guatemala, Jordan, Kyrgystan, Russia, Sri Lanka, Suriname, and Tajikistan. As of January 20, the most recent data, the sales to Russia were the only ones yet registered. But like Russia, a few of the other countries also made purchases during February. Under the GSM-102 and GSM-103 programs for fiscal 1995, of the total of approximately $850 million allocated for wheat, as of February 10 $295 million or 34 percent had been used. Fiscal 1995's largest allocations were to: Pakistan, the Andean region, Morocco, South Korea, Mexico, Egypt, and Brazil. An additional 12 countries received smaller allocations. By February 10, Tunisia had used virtually all of its allocation. Of the other countries, Mexico had used 69 percent of its allocation, Egypt 45 percent, Korea 50 percent, Pakistan 56 percent, and the Andean region about 11 percent. These seven buyers account for 75 percent of the total allocation and 81 percent of the amount used by February 10. Brazil, Morocco, and six of the other buyers so far used none of their allocations. The total EEP wheat quantity allocated to various countries in the July/June trade year 1994/95 is nearly 27 million tons of wheat and about 1.5 million tons of flour. By February 24, 57 percent of the wheat quantity, but only 20 percent of the flour allocation, had been used. Much of this year's use or lack of use of EEP allocations reflects the countries' import needs and capabilities. For example, with its record crop Morocco is importing much less wheat and thus making less use of EEP this year. And because the usual quantities of wheat from Australia aren't available this year, Egypt and Yemen are making heavier use of EEP allocations, including flour. As U.S. export prices rose, the EEP bonus continued plunging and in January 1995 averaged a 4-1/2 year low of just over $15 per ton, in sharp contrast to the $40-60 per ton bonuses between July 1993 and July 1994. Situation and Outlook for 1994/95 Strong Use Tightens U.S. Old Crop Supplies Total use of U.S. wheat in 1994/95 is forecast up 2 percent, exceeding 2.5 billion bushels for the first time in 7 years. Neither domestic use nor exports are projected to reach record or even near record levels, but both are well above the average of the previous 5 years. Exports Up, Domestic Use Declines Slightly U.S. wheat exports are projected at 1.3 billion bushels (35.4 million tons), up 6 percent from 1993/94 because of reduced competitor exports. Forecast exports are greater than 4 of the previous 5 years, but remain 27 percent below the 1981/82 record, when the USSR was a robust market. Exports for the first half of 1994/95 were slightly below a year ago, but sales have accelerated and exports are expected to increase in the second half. Domestic use in 1994/95 is forecast down 1 percent from a year earlier. Feed and residual use is expected to decline more than food and seed use increase. Food use is forecast up less than 1 percent in 1994/95, less than growth during the last 2 years and about at the population growth rate. Food use for the first 7 months of 1994/95 is up slightly. This contrasts with the strong growth of the last 2 years. However, in each of the last 2 years mill grind numbers were revised up in April, partly because the more complete annual survey revealed new milling capacity. Feed and residual use is forecast down, although it was up in the first half of 1994/95. A negative residual is expected in the second half of 1994/95 because ending stocks are forecast to be the lowest in the last 20 years. Quarterly Data Indicate Tightening Stocks U.S. wheat stocks on December 1 were 1,495 million bushels, down 6 percent from a year ago. This was less than the 1,527-million average expected by industry analysts. However, December 1, 1994, CCC inventory was lower than a year earlier because some food aid shipments had been made out of the Food Security Wheat Reserve, there was no longer any wheat in the FOR, and outstanding 9-month loans were down. Lower wheat stocks in government programs left uncommitted stocks down only 2 percent from those of the previous 2 years. The December stocks and estimates of September-November trade and food use indicate -32 million bushels of feed and residual use for the second quarter of the 1994/95 marketing year. In recent years the September-November residual has been negative even when wheat prices were low compared with corn prices. Since 1986/87, when the timing of the stocks report changed from October 1 to September 1, residual use for the second quarter of the marketing year has ranged from -21 million bushels to -88 million. Feed and residual use was 377 million bushels in the first quarter and -32 in the second, leaving feed and residual use for the first half of 1994/95 at 345 million. The annual forecast for feed and residual is 250 million bushels, implying that the second half will be -95 million. Since the timing of the stocks reports was revised in 1986, the second-half feed and residual has averaged -8 million bushels and ranged from -88 million in 1991/92 when ending stocks were very low, to 121 million in 1990/91, when low wheat prices compared with feed grains encouraged wheat feeding. In 1994/95, second-half feed and residual is expected to be more like 1991/92 because ending stocks are forecast to be even lower. U.S. Supply Forecast Down 2 Percent from a Year Earlier Reduced production and imports more than offset increased beginning stocks. Total U.S. wheat supplies are forecast below 3 billion bushels for the third time in 15 years. Although up from a year earlier, beginning stocks of 568 million bushels were the fourth lowest in 15 years. Imports are projected down because the large U.S. corn crop is reducing incentives for Canada to ship feed wheat south and a Memorandum of Understanding with Canada sets tariff-rate quotas on wheat imports. U.S. production in 1994 was 2.32 billion bushels, down 3 percent from a year earlier but the fifth largest in the last 10 years. Despite a 0-percent ARP for the second year in a row, planted area continued to decline. Wheat prices before and during the early planting of winter wheat (August-September 1993) were much lower than prices affecting the planting of spring wheat (March- April 1994). Moreover, excess moisture and flooding prevented some winter wheat from being planted. Average yields declined 2 percent as below trend HRW yields more than offset record SRW yields. U.S. Prices Respond to Tighter World Fundamentals Reduced U.S. supply and strong early season demand support increased U.S. prices in 1994/95. Also boosting prices are the reduced foreign production and tight competing exporters' supplies. The average farm price is heavily weighted by marketings early in the market year, so price developments over the last months of 1994/95 will change the season average price much less than price changes in earlier months. Wheat prices in 1994/95 reached a seasonal low in August, which is not uncommon, but rallied strongly earlier in the fall than a typical seasonal pattern would have indicated. Additional changes in the U.S. wheat supply and demand include area, yield, production and stocks revisions by NASS back to 1987. Import Developments Joint Commission on Grains Works To Find Long-term Solutions The objective of the commission is to help the U.S. and Canadian governments reach long-term solutions to existing problems in the grains sector. The commission is scheduled to report its preliminary findings and non-binding recommendations to both governments by June 12, 1995, and to conclude its work by September 11, 1995. The Joint Commission on Grains was established by a Memorandum of Understanding that included a "peace clause" for the 12-month period beginning September 12, 1994, and for the same period also established variable rate tariffs on wheat imports into the United States. Mission Statement Emphasizes Benefits of Trade In its first meeting the Joint Commission adopted the following mission statement: "Recognizing the significant benefits of the existing trade relationship, the Joint Commission will identify those aspects of our respective grain marketing and agricultural support systems that currently inhibit the future growth of those benefits. The Joint Commission will seek to improve the general understanding of the Canadian and U.S. policies and systems for cereal grains and products in order to achieve lasting solutions for the mutual benefit of farmers and the agri-industry in North America. The Joint Commission is committed to overcoming conflicts and obstacles to trade between the two countries and in third country markets and will recommend a course of action to our respective governments that will enhance the compatibility of the respective systems. For this endeavor to be successful, the Joint Commission will strive to transcend perceived national self interest and to more fully realize the spirit of existing trade agreements." In its second meeting, the Commissioners conducted an overview comparison on the marketing, distribution, and handling systems in both countries to provide a common understanding of how they operate. There was a careful review of regulatory systems relating to varieties, grading and inspection. Industry and producers on both sides of the border were called on to submit written briefs with special attention to: regulatory requirements, infrastructure, domestic programs, export programs (including border measures, export competition, export promotion), trade agreement provisions, and general economic programs. In its third meeting, the Commission reviewed the global economic outlook, and the domestic and export programs of both countries. In its fourth meeting, the Commission discussed the implications of the long-term outlook for world grain trade, and discussed areas of conflict identified during previous meetings, and began to identify issues that must be resolved to overcome trade conflicts. Among issues debated were differences in handling, storage, and transportation activities, the Export Enhancement Program, the Canadian Wheat Board, and domestic support programs in both countries. End-Use Certificate Program Announced The North American Free Trade Agreement Implementation Act required that end-use certificates be established for wheat imported into the United States from any foreign country that required end-use certificates as of April 8, 1994, for imports from the United States. Because Canada is the only country that imposed end-use certificates on U.S.-produced wheat, only Canadian-produced wheat will be affected by these regulations. The final rule requires U.S. importers of Canadian-produced wheat to store such wheat separately from other stocks so as to preserve its identity as Canadian-produced wheat until the wheat is either delivered to an end user or loaded onto a conveyance for export or delivery to an end user. Resale is permitted and the end use of the wheat is not restricted. Importers of Canadian-produced wheat are required to submit end- use certificates to the Consolidated Farm Service Agency's (CFSA) Kansas City Commodity Office within 10 workdays of when the wheat entered the United States. Importers and subsequent buyers of Canadian-produced wheat are to report each individual sale of the wheat within 10 working days from the date of sale. Exporters and end users of Canadian-produced wheat are to report on a quarterly basis, within 15 workdays following March 31, June 30, September 30, and December 31, the consumption and the manner in which the wheat was consumed. Durum Grain Imports Off to a Slow Start U.S. Customs is tasked with tracking wheat imports for imposition of different wheat tariffs provided for under the Memorandum of Understanding. However, Customs did not begin tracking wheat imports until October 24, 1994. So, Census trade data or other information will have to be used to determine imports from September 12 through October 24, 1994. Census import data can provide verification of the more timely Customs data. The USDA wheat import forecast is for a June/May marketing year, is based on Census data, and includes the wheat equivalent of flour and selected products (mostly pasta), as well as wheat seed and other wheat grain. The pace of imports in the first half of 1994/95 caused USDA in February to increase its import forecast to 90 million bushels. Durum grain imports are expected to accelerate as U.S. supplies tighten late in the marketing year. Wheat by Class Hard Red Winter Wheat Stocks Forecast Lowest in Over 20 Years USDA forecasts HRW ending stocks of 177 million bushels, barely larger than HRS at 175 million, and almost as low as the 170 million HRW stocks that occurred in 1973/74. HRW stocks have never been lower than HRS stocks, but 1994/95 will be close. Ending stocks of HRW, SRW, white wheat, and durum are all forecast to be at or near the lowest level in recent decades. Only HRS ending stocks are expected to be larger than in 2 of the previous 3 years. Steady Demand Nibbles Away HRW Supplies Supplies of HRW in 1994/95 are down because of lower production. HRW production dropped 9 percent despite a 12-percent increase in wheat production in Kansas, by far the largest HRW producing State. Winter wheat production dropped from the previous year by 37 percent in Montana, 36 percent in Texas, 24 percent in South Dakota, 19 percent in Colorado, and 9 percent in Oklahoma. Dryness hurt yields in all these States. Total HRW supply in 1994/95 is forecast down 6 percent from the previous year as part of the decline in production is offset by beginning stocks. HRW exports are forecast up slightly in 1994/95. As of February 16, HRW outstanding sales were up 51 million bushels from a year ago, but accumulated exports were almost offsetting--down 42 million bushels. At 490 million bushels, HRW exports are forecast 8 percent less than the average of the previous 10 years, but are higher than 6 of those 10 years. Some export contracts allow for switching between classes, so if exporters find it difficult to fulfill SRW export deliveries because of short supplies, some of the outstanding sales of SRW could end up becoming HRW. Domestic use of HRW is forecast down 5 percent in 1994/95, with some reductions expected in each category. Increased supplies and improved quality of HRS are likely to blunt U.S. millers' use of HRW for flour production, which is estimated to have increased significantly last year. Low feed grain prices compared to wheat prices likely limited feed use of HRW in the Southern Plains in 1994/95. Winter wheat seedings of HRW were reported down 1 percent. Tight supplies and nearly steady demand have boosted HRW prices in 1994/95. Moreover, HRW prices in 1994/95 have been stronger compared to prices for other classes than a year ago, when quality premiums boosted HRS farm prices. HRW prospects for 1995/96 depend on production prospects, and the weather most important for determining yields has not yet happened. However, planted area was reported down slightly, and beginning stocks are forecast down significantly. A return to trend or average yields would mean increased yields compared to last year. A mild fall and winter allowed more growth and grazing of wheat than is usual across most of the Southern Plains. HRW production prospects are relatively favorable except in the Texas Panhandle, which is too dry, and in Montana, where cold, dry conditions at planting resulted in even lower winter wheat seedings than a year earlier. Present carryin stocks forecasts imply that 1995 HRW production must increase about 50 million bushels or 5 percent to maintain HRW supplies at this year's 1.2 billion. HRS Supplies Up in 1994/95, But Use Forecast Up More HRS supplies in 1994/95 are forecast to reach 767 million bushels, up 2 percent from a year earlier and larger than 5 of the last 6 years. Production was nearly unchanged because dryness in the western growing areas and recurrent disease problems in the eastern Dakotas and Minnesota reduced area harvested and yields. Beginning stocks increased enough to more than offset a decline in projected imports. Imports may not be reduced by triggering higher tariffs under the Memorandum of Understanding with Canada, at least not before May 31, 1995, but lower shipments of feed wheat from Canada are expected. Exports are forecast to boost HRS use in 1994/95. Exports are projected at 310 million bushels, the third largest on record, and up 17 percent from a year earlier. As of February 16, HRS outstanding sales were up 18 percent but shipments to date were up only 9 percent. Sales and shipments to Japan and Bangladesh have increased while sales to Nigeria, Mexico, and Brazil have dropped. Domestic HRS use in 1994/95 is forecast to be about the same as a year earlier, as reduced feed and residual use, likely caused by lower feed wheat imports, is offset by increased food use. Protein premiums have dropped in 1994/95, and HRS has been more competitively priced. In 1994/95, HRS farm prices, as measured by the other spring wheat price in North Dakota, have been generally below the national average, whereas a year ago, only North Dakota had a significantly above average wheat farm price during October-April. Current price developments may influence HRS plantings for 1995. Spring wheat producers often purchase inputs and make plans during February and March that determine area planted in April. HRS prices in North Dakota are down from a year ago, but prices of competing crops, including sunflowers, barley, soybeans, and corn, have dropped even more. Durum prices have been stronger than HRS, and durum area is expected to increase. Although HRS area may be little changed in most States, area is likely to increase in Montana, where spring wheat is likely to be planted on much of the area that could not be planted to HRW last fall. Record Yields Boost SRW Supplies, Exports Up in 1994/95 SRW area planted for 1994 dropped to the lowest in 7 years, as flooding interrupted seedings, especially in Illinois and Missouri. However, a record U.S. average SRW yield of 51 bushels per acre boosted production and supplies by 8 percent. As usual, prices for SRW were lower than for other classes of wheat early in the marketing year. The low prices attracted export customers. Exports are forecast up 17 percent. As of February 16, outstanding export sales were up 81 percent from a year ago, and accumulated export shipments were up 21 percent. However, ending stocks of SRW are forecast at near minimal levels. If SRW supplies are not readily available, some of the outstanding sales may get switched to other wheat classes. Domestic use is forecast down fractionally, mostly because increased wheat prices compared to feed grain prices will likely reduce feed and residual use. Record yields for the last crop, strong export demand for SRW, higher prices than a year earlier, and lower prices for competing feed grains and oilseeds encouraged increased seedings of SRW for 1995 production. Seedings are up 7 percent, but Missouri only showed a small increase from last year's flood-reduced level. White Wheat Stocks Forecast Lowest Since 1974/75 U.S. white wheat production declined in 1994, as yields failed to match the previous year's record. Imports of white wheat grain, flour, and the noodle products considered to be white wheat (on a grain equivalent basis) are forecast up about 25 percent in 1994/95. White winter wheat from Ontario is not subject to the tariff-rate quotas of the Memorandum of Understanding with Canada. Although up sharply, white wheat imports are expected to be only about 3 percent of U.S. 1994/95 white wheat supplies. Foreign demand and prices for white wheat increased as the drought in Australia unfolded. Increased prices encouraged some white wheat customers to shift to other classes. Exports are forecast down 4 percent. As of February 16, outstanding export sales were down 34 percent but accumulated exports were up 4 percent. Exports for the rest of the year are expected to be limited by low stocks and high prices. Exacerbating high prices caused by the Australian drought, a drought during the fall of 1994 in the Pacific Northwest disrupted seeding and emergence of nonirrigated white winter wheat. Although winter rains replenished depleted irrigation supplies and improved soil moisture, as of February 19, 12 percent of the nonirrigated wheat in Washington was rated in poor or very poor condition. Despite high prices, the drought caused white winter wheat seedings to decline 3 percent. However, much of the unplanted area and some of the wheat in very poor or poor condition may be seeded or overseeded with white spring wheat. Durum Prices Remain High, Stocks Low Durum production in 1994 rebounded from the disease-ridden crop of 1993. However, lower beginning stocks and reduced imports leave forecast supplies for 1994/95 virtually the same as the previous year. December 1 stocks indicate that durum stocks midway through the year are significantly below a year earlier. This would imply an important adjustment in demand in the second half of 1994/95. Exports in 1994/95 are expected to fall 35 percent to the lowest level since 1988/89 when drought reduced supplies. Domestic use may increase because there may not be as large a negative feed and residual. However, tight durum supplies may limit durum mill grind in the second half of 1994/95 and during the summer of 1995, before the durum harvest in the Northern Plains. For the second year in a row, the desert durum crop will be an important source of durum supplies to keep mills running in the summer, and prices will likely carry a premium. Desert durum producers indicated they expected to increase area for 1995 by 6 percent. Durum stocks on December 1 were 65 million bushels, down from 77 million a year earlier, confirming tight supplies. The December 1 stocks are a measure of supplies for the rest of the year. The reported durum trade (from several sources) and mill grind by the Bureau of the Census, and the stocks and production reported by USDA permit the construction of a quarterly durum supply and demand (table 10). Durum ending stocks are forecast to be about the same as the very tight situation of a year earlier. Durum prices have remained at a premium to other wheat prices for the second straight year. Supplies remain relatively tight both in the United States and rest of the world. Canada planted a record durum area, but stocks are not expected to be burdensome. Strong U.S. and world durum prices are likely to cause U.S. producers to plant more durum in 1995. List of Tables Text Tables The Wheat Situation at a Glance 1. EEP Allocations and use, July 1994-June 1995 2. Wheat supply, disappearance, and stocks, June-May 3. Wheat tariff quotas 4. U.S. wheat imports 5. HRW supply and demand 6. HRS supply and demand 7. SRW supply and demand 8. White wheat supply and demand 9. Durum Supply and demand 10. Durum: Quarterly supply and disappearance Appendix 1. Wheat: Marketing year supply, disappearance, area, and price, 1988/89- 1994/95 2. Wheat: Area, yield, and production by major States, 1986-94 3. Wheat: Estimated acreage, yield, and production, 1965-94 4. Wheat classes: Production, 1950-94 5. Wheat classes: Acreage, percentage breakdown by State 1992-94 6. Wheat classes: Estimated acreage, yield, and production, 1981-95 7. Wheat: Marketing year supply and disappearance, 1960/61-1994/95 8. Wheat: Quarterly supply and disappearance, 1979/80-1994/95 9. Wheat: Farm prices, support prices, and ending stocks, 1950/51-1994/95 10. Wheat: Status of price support loans on specified dates, 1978/79-1994/95 11. Wheat classes: Marketing year supply and disappearance, 1977/78-1994/95 12. U.S. wheat exports: Grain, flour, and products, by month, 1973/74-1994/95 13. U.S. wheat imports: Grain, flour and products, by month, 1983/84-1994/95 14. Wheat farm programs and participation 1976-94 15. World wheat production, consumption, trade, and ending stocks, 1960/61- 1994/95 16. Wheat production, trade, and ending stocks, world and United States, 1965-94 17. Wheat: Production and exports, major foreign exporters, and total foreign, 1966-94 18. Wheat and wheat flour: World trade, production, stocks, and use, 1988/89- 1994/95 19. Wheat farm prices for leading classes in U.S. regions, 1980/81-1994/95 20. Wheat cash prices for leading classes at major markets, 1953/54-1994/95 21. Domestic and foreign wheat prices, 1981-1994 22. Wheat flour: Supply and disappearance, United States, 1960-94 23. Wheat and flour price relationships at milling centers, annual and by periods, 1984/85-1994/95 24. U.S. wheat production: Cash costs and returns, United states, 1980-95 25. U.S. wheat production: Economic costs and returns 26. On-farm receipts of major crops, United States, 1983-95 27. Schedule of wheat base acres released from expiring CRP contracts 28. Wheat: supply and disappearance, United States, 1910/11-1994/95 29. Quarterly government stocks activity for wheat, 1990/91-1994/95 30. U.S. wheat exports: By selected programs 31. Rye: Supply disappearance, area, and price, 1985/86-1994/95 32. Rye: Production by major states, 1985-1994 33. Former Soviet Union wheat: Supply and disappearance, 1960/61-1994/95 34. China's wheat: Supply and disappearance, 1960/61-1994/95 35. European Community wheat: Supply and disappearance, 1960/61-1994/95 36. Canada's wheat: Supply and disappearance, 1960/61-1994/95 37. Australia's wheat: Supply and disappearance, 1960/61-1994/95 38. Argentina's wheat: Supply and disappearance, 1960/61-1994/95