Wheat Situation and Outlook Yearbook. Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, WHS-2004, March 2004. Contents Summary Little Change in U.S. Ending Stocks for 2004/05 Outlook for 2004/05 Winter Wheat Acreage Is Down U.S. Ending Stocks To Rise Slightly in 2004/05 Foreign Wheat Production Expected To Increase in 2004/05 Situation and Outlook for 2003/04 Prices Weaken As Ending Stocks Rise in 2003/04 World Wheat Production and Stocks Plummet in 2003/04, Trade Declines U.S. Wheat Exports To Rebound With Less Competition in 2003/04 Wheat by Class, 2003/04 Wheat Quality Good in 2003/04 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 Editor Martha Evans (202) 694-5118 Layout & Text Design Wynnice Pointer-Napper (202) 694-5130 Summary Little Change in U.S. Ending Stocks for 2004/05 Winter wheat seeded area for 2004 was reported by U.S. Department of Agriculture in January to total 43.5 million acres, down 1.5 million acres from 2003. Acreage declines are reported in the southern Great Plains, where during fall planting moisture supplies were low and new crop prices were more than $.50/bushel less than in the fall of 2002. With combined spring and durum plantings expected near year-ago levels, total wheat harvested area is projected down 2 million acres. With trend yields, projected production is down 217 million bushels from 2003. Total U.S. wheat disappearance in 2004/05 is expected to decline 171 million bushels, due primarily to lower exports. Thus, ending stocks are forecast slightly higher than a year earlier, and the season-average price received by producers is expected to be nearly unchanged from 2003/04. Wheat prices during the fall of 2003 were down from the previous year, but were high enough to encourage increased area in some countries. Elsewhere, high prices for competing crops reduced wheat area. Barring a repeat of unfavorable weather, such as happened in each of the last 2 years, global wheat production will increase in 2004/05 because of rebounding yields. World wheat use is likely to grow, with (1) population increases supporting more food use and (2) rebounding production in Russia, Ukraine, Eastern Europe, and the European Union (EU) encouraging increased feed use. Moreover, strong corn prices are expected to boost wheat feeding. Unless global yields are exceptionally good, world use will exceed production for a fifth straight year, further reducing stocks. In 2003/04, U.S. wheat production is estimated up 718 million bushels from 2002/03 as both area and yield rose. The U.S. yield is a record 44.2 bushels per acre, up 8.9 bushels from a year ago because of more favorable weather. Total disappearance of U.S. wheat in 2003/04 is projected to rise 377 million bushels from a year ago. Both domestic use and exports are up, 81 and 296 million bushels, respectively. Food use is projected down 18 million from a year earlier because of declining per capita consumption with changing dietary preferences and an improved flour extraction rate. Feed and residual use is projected to rise 99 million bushels year-to-year primarily because of the larger production. Exports are projected up because of reduced competition. U.S. ending stocks this marketing year are projected up 53 million bushels from last year. The season-average farm price in 2003/04 is forecast at $3.30-$3.40 per bushel, substantially below the average of $3.56 per bushel received last year. In 2003/04, foreign production (world minus United States) of wheat is down 38 million tons to 484 million, as production was devastated across most of Europe. World consumption is forecast down nearly 12 million tons from the previous year, but is still 41 million tons larger than production, dropping stocks to 125 million tons, the lowest level in 22 years. World wheat trade is declining due to (1) the reduced supply of low-quality wheat used for feeding, (2) larger crops in North Africa and Brazil, (3) high freight rates, and (4) stagnant food-aid shipments. Exports by Russia and Ukraine are plummeting, with Ukraine a net importer of wheat. In 2002/03, Ukraine was a net exporter of 5.8 million tons. Section 2 Outlook for 2004/05 PRIVATE Winter Wheat Acreage Is Down Winter wheat plantings are reported down 1.5 million acres from a year earlier and little change in spring wheat (including durum) plantings are expected from last year. The U.S. Department of Agriculture will release its first official forecast of the 2004 production on May 12, 2004. ------------------------------------------------------ Winter Wheat Planted Acres for Harvest in 2004 Down 3 Percent Winter wheat seeded area for 2004 is expected to total 43.5 million acres, down 1.5 million acres from 2003 according to Winter Wheat Seedings. Approximate class acreages are: hard red winter (HRW)--31.0 million; soft red winter (SRW)--8.3 million; and white winter--4.2 million. Seeding began last August and advanced ahead of the 5-year average pace throughout the fall. Nearly all of the U.S. acreage was seeded by December 1. Most remaining intended area is in the Southeast and California. Seeding should finish sometime in April in California. HRW wheat seeded area is down 1.2 million acres from 2003. Acreage declines were reported in the southern Great Plains States, where moisture supplies at planting and through the winter remained low. The Texas High Plains only received 54 percent of normal rainfall during August, September, and October. As of November 30, in Kansas, 65 percent of the topsoil moisture was rated short to very short, and 69 percent of the subsoil moisture fell into that category. Germination rates in Colorado and parts of Kansas were below normal as the crop headed into dormancy. Nebraska planted acreage is unchanged from 2003 where crop condition ratings at the end of November were only slightly better than a year earlier. Growers in the Dakotas and Montana seeded more winter wheat than a year ago even though moisture is also short there. Emergence problems and lack of snow cover left growers concerned about the winter-hardiness of the crop. SRW area is up slightly from last year. Several factors contributed to significant acreage increases in Missouri and Illinois, including record-high yields last year, good prices, and some disappointment with alternative crop yields. North Carolina growers also planted substantially more wheat this fall, rebounding from last year's well below normal level. Most remaining SRW States planted fewer acres than last year, most notably Ohio. White winter wheat seeded area is down 0.3 million acres from 2003. Dry conditions across the Pacific Northwest (Idaho, Oregon, and Washington) hampered emergence and in many cases resulted in less than ideal stands. Acreage is down in all three States largely due to the lack of soil moisture. Some early planted fields in Washington were reseeded due to crusting. Durum wheat seedings in Arizona and California for the 2004 harvest are estimated at 180,000 acres. This total is down 27 percent from their final 2003 acreage. Planting was ongoing in March in California's San Jaoquin and Imperial Valleys. No major problems with the crop have been reported. Winter Wheat Crop Conditions Less Favorable in Some Areas Compared With Last Year The 2004 winter wheat crop did not enter dormancy in the fall of 2003 in as good a condition as the 2003 crop. For the major winter wheat States for the week ending November 23, 50 percent of the 2004 winter wheat crop rated good to excellent and 19 percent was poor to very poor. A year ago, 61 percent of the 2003 crop rated good to excellent and only 8 percent rated poor to very poor. Crop conditions have sharply deteriorated in both Texas and Oklahoma, leading to crop conditions less favorable than a year ago. In the fall of 2003, in Oklahoma 14 percent of the crop was rated poor to very poor. By the end of February 2004, 23 percent of the Oklahoma crop was rated poor to very poor. At the same time a year ago, only 5 percent of the State’s crop was rated poor to very poor. Similarly for Texas, 25 percent of the crop was rated poor to very poor in the fall of 2003, but at the end of February 2004, 54 percent was rated poor to very poor. At the end of February 2003 only 12 percent of the Texas crop was rated poor to very poor. Crop conditions have also deteriorated in Kansas, but in some areas of the State conditions remain better than a year ago. As of late February, 40 percent of the Kansas crop was rated good to excellent and 32 percent was rated poor to very poor. At the end of February 2003, 29 percent of the Kansas wheat crop was rated good to excellent and 26 percent was rated poor to very poor. Spring Wheat Projected To Be Nearly the Same as 2003 Although alternative crops offer better returns than spring wheat in some areas of the Northern Plains, reseeding of abandoned winter wheat acres in South Dakota and Montana to spring wheat is expected to marginally increase other spring wheat area in 2004. Durum area is expected to decline slightly because competing crops offer better returns. Section 3 Outlook for 2004/05 U.S. Ending Stocks To Rise Slightly in 2004/05 Lower wheat area is expected, and wheat yields are anticipated to decline from last year's record levels. World wheat production will rebound with large gains expected in the crops of the European Union (EU) and the former Soviet Union (FSU). Increased competition will reduce U.S. wheat exports, and U.S. wheat stocks are expected to grow slightly. However, the 2004/05 wheat price is forecast to be nearly unchanged from this year. ------------------------------------------------------ The following supply and use projections for 2004/05 were released at the 2004 Agricultural Outlook Forum on February 20, 2004. The first official U.S., world, and country-specific supply and use projections for 2004/05 will be in the May 12 World Agricultural Supply and Demand Estimates (WASDE) report when the National Agricultural Statistics Service (NASS) publishes the first forecast of winter wheat production. Projections presented in this paper are based on the Winter Wheat Seeding report and analyses by members of the Interagency Commodity Estimates Committees for Wheat, Feed Grains, and Oilseeds. For 2004, Less Wheat Plantings, More Row Crops The outlook for 2004 features lower wheat plantings and larger soybean and corn area. Combined plantings of these three major field crops are forecast to rise 1.5 to 2 million acres from 2003. Smaller winter wheat plantings are due to unfavorable conditions at planting time last fall and low new crop prices (more than $.50/bushel below prices which prevailed at planting time in the fall of 2002). Wheat plantings are forecast at 60.5 million acres, down 1.2 million acres (2 percent) from 2003. Total wheat planted area is expected to be the fourth lowest since 1973. Estimated 2004 winter wheat seedings were released in January and are down 1.48 million acres from last year, with most of the decline in hard red winter (HRW). Soft red winter (SRW) plantings were up slightly from last year. White winter seedings were down 7 percent from last year, but make just a minor contribution to the fall in aggregate winter wheat seedings. Although alternative crops offer better returns than spring wheat in some areas of the Northern Plains, reseeding of abandoned winter wheat acres in South Dakota and Montana to spring wheat is expected to marginally increase other spring wheat area in 2004. Durum area is expected to decline slightly. Major questions about potential U.S. wheat production center on harvested acres and yields, especially given the current dry conditions in parts of the Plains, as well as cold weather and soggy soils in the eastern Cornbelt. A harvested area of 50.8 million acres is projected, down 2 million from 2003. The ratio of harvested-to-planted acres in 2004 is expected to be 84 percent, slightly less than the 10-year national average harvested-to-planted ratio. The projected yield for 2004 was derived from trend yields resulting in a projected production of 2,120 million bushels, down 217 million from 2003. Smaller production, although partially offset by larger carryin stocks, leaves 2004/05 supplies down 174 million bushels from a year earlier. Continued Decline in Per Capita Food Use of Wheat Projected Food use is expected to decline. Reductions in per capita wheat food consumption, due to changes in diets, and baking technology that has extended the shelf life of bakery products, will likely more than offset the effect of population growth. Feed and residual use, at 250 million bushels, is up modestly from the 225 million bushels expected in 2003/04. Lower wheat prices 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. In the Plains, which saw poor corn and sorghum crops in 2003, livestock operations will have to source corn for feeding from a greater distance than usual. U.S. Exports Expected To Fall With Renewed Competition Although world wheat trade is expected to increase in 2004/05, U.S. exports are expected to fall 200 million bushels below the 1,150 million forecast in 2003/04, which is the highest level of exports since 1995/96. Because drought and winter-kill sharply reduced production in the EU, Central Europe, and the FSU, U.S. wheat exports and the U.S. share of the world market surged in 2003/04. However, in 2004/05, the prospects for the regions’ winter wheat crop suggest a substantial recovery is expected in Europe and the FSU. As a consequence, in 2004/05 importers are expected to source more of their purchases of lower-priced wheat from Russia, Ukraine, and the EU. China’s Imports an Uncertainty As usual, imports by China are a source of uncertainty. In the March WASDE China's 2003 wheat crop was 86 million metric tons, down nearly 5 percent from the previous year. As of March 4, export commitments of old crop U.S. wheat to China were 51 million bushels (the largest since 1997). Even more unusual was the 54 million bushels of wheat sales that had already been booked for 'new' crop (2004/05). Total U.S. wheat disappearance in 2004/05 is expected to decline 171 million bushels, about 7 percent, but supplies are down slightly less, 164 million bushels (6 percent). Ending stocks are 551 million bushels, just 7 million bushels more than a year earlier. The ending stocks-to-use ratio of 25.2 percent is slightly larger than the 23.1 percent forecast for 2003/04 but below most levels seen since 1996/97. The season-average price received by producers is projected to be $3.35, unchanged from the midpoint of the price range for 2003/04. Section 4 Outlook for 2004/05 Foreign Wheat Production Expected To Increase in 2004/05 Wheat prices during the fall of 2003 were down compared with the previous year, but were still considered high enough to encourage plantings in some Northern Hemisphere countries. However, high prices for other crops have limited wheat area in some countries. Barring a repeat of unfavorable weather, such as happened in each of the last 2 years, global wheat production will increase in 2004/05 because of rebounding yields. World wheat use is likely to grow, with population increases supporting human consumption, and a recovery in production in Russia, Ukraine, Eastern Europe, and the EU encouraging feed use. Moreover, strong corn prices are expected to boost wheat feeding. Unless global yields are exceptionally good, world use will exceed production for a fifth straight year, further reducing stocks. Global Wheat Production Likely To Increase in 2004/05, Reversing the Recent Trend The U.S. Department of Agriculture will issue its first global and country-specific supply and use projections for 2004/05 on May 12. Winter wheat was planted in the Northern Hemisphere last fall, when global wheat prices were relatively high, but in many countries prices were down compared with the previous year. Several of the largest wheat-producing countries have producer prices that are not closely linked to world prices. Yields will depend on the weather during the coming months. Moreover, spring wheat in the Northern Hemisphere and all wheat in the Southern Hemisphere have not been planted, making assertions about them speculative. Global wheat production has declined for the last 6 years. Production is falling because 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. Even higher prices prevailed in the fall of 2002, and area expanded in several countries, but winter-kill and drought devastated wheat production from Russia across Europe, to the UK and Spain. Wheat prices in the fall of 2003 were generally lower than the previous year, while other crop prices, especially for oilseeds, were up. While winter wheat area planted in several important producing countries is reportedly down, in other countries area increased. World wheat production is expected to post a significant increase in 2004/05 if yields return to average or trend levels. The 2004/05 wheat crop is harvested first in South Asia, beginning in India in March, and soon after in Pakistan. Area in India is reportedly up, with good soil moisture following a generous monsoon. Growing conditions have been mostly favorable. The Government of India is forecasting a 75-million-ton crop, up from 65.1 in 2003/04. However, beginning wheat stocks are expected to be down 9 million tons to less than 7 million, so India’s wheat supplies may be up only slightly in 2004/05. Growing conditions have also been favorable in Pakistan, so a modest increase in production is expected. In China, the world’s largest wheat producing country, a Ministry of Agriculture survey indicated wheat area in 2004/05 will be down 2 percent. Producers are shifting to other crops because of higher returns, scarce water supplies, and the reduced role of government procurement. Last year’s wheat yields were somewhat below trend because of unfavorable weather. Yields in 2004/05 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 is likely to stagnate at a level significantly less than consumption. In the European Union (EU-15), COCERAL, the major grain trade lobby, has forecast 2004/05 wheat area up 5 percent, even though the reduced set aside was not announced until after most of the wheat had been planted. Durum plantings and production are expected to increase in France and Italy, but decline in Spain due to dryness. Except for the Iberian Peninsula, growing conditions to date in the EU-15 have been mostly favorable, and with normal weather, a sharp rebound from last year’s drought- devastated yields is expected. The EU-15 is expected to have a near-record or record-large wheat crop in 2004/05. Eastern Europe’s wheat production in 2004/05 will likely be larger than the drought and winter-killed crop of a year ago. However, wheat area planted is reported down in several countries, especially Romania, limiting the size of the production increase. But with much more favorable winter weather, less area is likely to be abandoned, boosting harvested area. In the former Soviet Union less winter wheat was planted in the fall of 2003, but winter conditions have been much more favorable than a year ago, so reduced abandonment is expected to result in increased area harvested in Russia and, particularly, Ukraine. Yields last year for both Ukraine and Russia were abysmal, so a return to average yields in these countries would imply a significant increase in production. However, it is not clear what 'normal' wheat yields are in Ukraine and Russia. Yields were good in 2001 and 2002 because weather was exceptionally favorable for growing wheat. Wheat production in Ukraine dropped from over 20 million tons in 2001 and 2002 to less than 4 million in 2003. Because of increased harvested area, and a return to 'normal' yields, Ukraine’s wheat production is expected to increase sharply, but still remain much lower than 20 million tons. The size of the 2004 wheat crops in Russia and Ukraine will determine their role in world trade and will be an important determinant of prices. Spring wheat, accounting for a significant portion of production in Russia, and all the production in Kazakhstan, has not yet been planted. Production prospects are generally favorable in North Africa, although parts of Morocco have suffered from dryness. The critical growing period for Northwest Africa's winter wheat occurs during March and April. Occasional spring rains will be crucial for the continued development of the crop. Planting and winter growing conditions across the Middle East were generally favorable this year. Much will hinge on timely rains. Spring wheat producers in the Northern Hemisphere and Southern Hemisphere producers have not yet planted wheat for harvest in 2004/05. This includes major exporters such as Canada, Australia, Argentina, and Kazakhstan. In Canada, 2004 wheat area planted is expected to decline slightly, with a drop in western red spring wheat partly offset by an increase in durum. Strong vegetable oil prices are expected to boost canola area at the expense of wheat. Winter wheat production in Ontario is also expected to drop from last year’s bumper crop. Canada’s wheat yield in 2003 was about equal to the 10-year average, and the trend in yields over time is fairly flat, so Canada’s wheat production is expected to be little changed in 2004/05. Australia had record wheat production in 2003/04, and another large crop is to be expected in 2004/05 unless drought intervenes. Returns to wheat production have been attractive compared with most alternatives, but the increase in freight rates and the strength of the Australian currency has kept wheat producers’ profits from expanding as much as U.S. dollar wheat price quotes would indicate. In 2004/05 there could be higher wheat plantings in Argentina because the returns to cropping for export (soybeans, wheat, and corn) have been good, and some dryness during planting a year ago limited area. However, the speed of the soybean harvest will be crucial for timely planting of double-cropped wheat. Since Argentina’s yields in 2003/04 were fairly good, any increase in 2004/05 production is likely to be modest. Increased wheat production prospects in India, the EU, Russia, Ukraine, and other countries are expected to be only partly offset by a reduction for the United States. Thus the declining trend in global production over the last 6 years is likely to be reversed in 2004/05, with a significant increase probable. Reduced Beginning Stocks To Limit Supplies in 2004/05 Global wheat stocks at the start of 2004/05 are forecast down 41 million tons from the previous year to 125 million tons. The largest stocks drop is expected in China, down almost 19 million tons, to 42 million. Over the course of the last 4 years, China is thought to have reduced wheat stocks by 60 percent. Large stocks were expensive for the government to maintain, and this reduction appears to be a move to a more market-oriented system. With stagnant production prospects in 2004/05, China’s wheat supplies are expected to be down sharply, leading to continued stock declines during 2004/05. India is also forecast to reduce wheat stocks by more than 50 percent in 2003/04, leaving 2004/05 beginning stocks down 9 million tons to 7 million. Even with increased production, India’s export prospects should be constrained. Combined beginning stocks of the major exporters (the United States, Canada, EU, Australia, and Argentina) are expected to decline 2 million tons. The decline in EU stocks is enough to more than offset modest increases for the United States and Australia. Declining U.S. production prospects are likely to be offset by increases in the EU, so wheat supplies in the major exporting countries in 2004/05 are likely to increase modestly. Wheat stocks in the former Soviet Union are forecast down 7 million tons to 13 million. The rebound in production is expected to be much larger than the drop in beginning stocks, leaving supplies up, but it is not clear by how much. World wheat production in 2004/05 could increase significantly if weather is normal during the growing season, but is very unlikely to increase enough to offset the 42-million-ton drop in beginning stocks. This means that world wheat supplies will continue to decline in 2004/05. Adverse weather could magnify the decline in wheat supplies. Production shortfalls could generate strong global price responses. Significant Global Wheat Consumption Growth Expected in 2004/05 In 2004/05, world wheat use is expected to grow significantly following the large decline in 2003/04. Population growth is slowly boosting food use, though 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. Wheat feed and residual use is expected to increase significantly in 2004/05. Increased production in regions that traditionally use wheat as a feed grain is expected to boost wheat disappearance in the former Soviet Union, Eastern Europe, and the EU. Moreover, the high price of feed grains, especially corn, is expected to encourage wheat feed use in many countries, including South Korea, Israel, the Philippines, and the United States. Wheat prices in 2004/05 are expected to remain at or near the same levels as in 2003/04, but corn prices are expected to increase. With increased projected global use, and reduced expected supplies, 2004/05 ending stocks will continue to decline. How much the projected decline in stocks will support market prices may depend on the size of China’s wheat imports. Section 5 Situation and Outlook for 2003/04 Prices Weaken As Ending Stocks Rise in 2003/04 U.S. wheat production rose in 2003/04 from last year because of increased area and record average yield. While exports have increased, domestic use has been sluggish. Supplies for 2003/04 are up more than total use, resulting in rising ending stocks and lower season-average prices received by farmers. ------------------------------------------------------- 2003/04 Overview: U.S. Wheat Supplies Are Up, Prices Down U.S. wheat production is estimated at 2,337 million bushels for 2003/04, up 718 million bushels from 2002/03 as both area and yield rose. Winter and other spring wheat production in 2003/04 rose 561 and 139 million bushels, respectively, from a year ago. Durum production was up 17 million bushels from last year. Beginning stocks were 286 million bushels less than a year earlier while imports are projected to be 2 million bushels below last year. Imports did not recover from last year’s low level because of the threat of tariffs (see below for tariff discussion.) Imports were sharply down in 2002 because of the 2002 drought that reduced Canadian production and exportable supplies. The net result is that, despite the much larger crop, the U.S. wheat supply in 2003/04 (June-May) is forecast to rise only 429 million bushels from a year ago. The estimated monthly average farm price rose from a low of $2.95 per bushel during July of the 2003/04 marketing year to $3.69 in December, a level that was $.37 below the year-earlier December price. Prices leveled off at $3.68 in January and February. A year ago in February, the monthly price was also $3.68. Prices are expected to remain firm in April and May unless export demand slips or improving weather indicates the potential for good yields for the 2004 crop. The season-average farm price in 2003/04 is forecast at $3.30-$3.40 per bushel, below the average of $3.56 per bushel received last year. Current prices are significantly above the recent annual low of $2.48 in 1999/2000, but still well below the record $4.55 in 1995/96. U.S. ending stocks in 2003/04 are projected to total 544 million bushels, 53 million more than last year, but substantially less than the previous 5 years. Favorable Weather Produces Record Yields for 2003/04 The U.S. yield was a record 44.2 bushels per acre, up 8.9 bushels from a year ago because of more favorable weather. The previous high was 43.2 bushels per acre in 1998. Significant acreage increases are reported in all major hard red winter (HRW) wheat States. Two major factors, higher prices at the time of seeding and the previous year’s drought, contributed to the larger acreage. Prices were strong in the fall of 2002, especially during September and October when most of the winter wheat was planted. The previous year’s drought left soil moisture supplies low. Wheat requires less moisture than many alternate crops in the major HRW States, making it a more appealing crop choice. Additionally, the drought left forage supplies limited, therefore many growers in the southern Great Plains planted wheat in hopes that enough moisture would be received to provide grazing. Acreage declines are noted in the Delta States, most Southeast States, and along the middle Atlantic Coast, due primarily to excessively wet conditions during the fall of 2002. Planted acreage increased significantly in Illinois, Indiana, Michigan, and Ohio, where seeding conditions were good. 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. Dry conditions prevailed across the Pacific Northwest (Idaho, Oregon, and Washington) during planting. Seeding progress was generally faster than average, however the dry soil conditions delayed emergence. Rising prices during planting also contributed to the larger acreage in the Pacific Northwest. By June, most of the growing regions in the six principal HRW States (Colorado, Kansas, Montana, Nebraska, Oklahoma, and Texas) had received adequate moisture, except in Texas where dry conditions caused deterioration of the crop in the spring. In Kansas, widespread rains Statewide during May helped to boost crop conditions in the central and eastern parts of the State. Soft red winter (SRW) wheat-producing States' yields were better than a year ago, except in the central Atlantic Coast States, where excessive moisture led to disease problems. Yields improved significantly from the previous year in Oregon and Washington, and slightly in Idaho, as precipitation during late April and early May was above average for most areas. Production Up in 2003 With Both Increased Harvested Area and Higher Yields All-wheat, 2003/04 planted area of 61.7 million acres was slightly higher (1.2 million acres) than 2002/03, the lowest planted area since 1972 when U.S. wheat producers planted only 54.9 million acres. In contrast, U.S. wheat farmers planted 88.3 million and 86.2 million acres in 1981 and 1982, respectively. U.S. wheat planted area has been trending down for years, in part because of lower returns relative to other crops. Increased planting flexibility under the 1996 Farm Act facilitated expansion of soybeans and corn into traditional wheat areas, especially the Plains States. Changes in rotations, particularly in the dryland Plains areas, have also contributed to the decline in wheat acres. For example, in Kansas, a typical wheat-fallow rotation is most commonly replaced by a rotation of wheat-grain sorghum-fallow, so that wheat is planted 1 year out of 3 years instead of 1 out of 2. Other crops, such as soybeans and corn, are also used in rotations. Also influencing planting decisions since the 1990s, and into the future, are concerns about widespread wheat disease problems in the Northern Plains, particularly scab (head blight) in North Dakota and Minnesota caused by the fungus Fusarium graminearum. Loss of wheat acreage to row crops on the Plains also reflects genetic improvements in corn and soybeans, producing varieties that could be planted farther west and north in the region, areas with drier conditions or shorter growing seasons. The pace of genetic improvement has been slower for wheat than for some other field crops, resulting in little growth in wheat yields and making wheat less competitive for cropland. Harvested area for 2003/04 was up significantly, more than planted area compared with 2002/03 because of a substantially higher harvested-to-planted ratio. The 2003/04 harvested-to- planted ratio was 85.6 percent, 10 percentage points higher than the 2002/03 ratio because of improved weather conditions. The harvested area for 2003/04 was 52.8 million acres, up 6.9 million acres from the previous year. By type, the 2003/04 winter wheat harvested area rose 6.8 million acres year-to-year with the largest increases in Kansas, Oklahoma, and Montana. Spring wheat harvested area (including durum) rose slightly year-to-year, only 0.1 million acres. The harvested area of other spring wheat was down slightly as a small increase in hard red spring (HRS) was more than offset by a decrease in white spring wheat. Durum harvested area was up 0.2 million acres. Timely spring rains caused winter wheat yields for 2003 to reach 46.7 bushels per acre, 8.2 bushels above 2002 yields. Most of the States on the Great Plains had improved winter wheat yields, as did the Central Corn Belt States of Missouri and Illinois. Winter wheat yields for 2003 along the eastern coast of the United States were significantly down from 2002. Spring wheat yields (including durum) for 2003 were 38.6 bushels per acre, 9.3 bushels above 2002 yields. Significant year-to-year yield improvement led to substantial production increases in North Dakota, Minnesota, and South Dakota. Total Use Rises in 2003/04 Total disappearance of U.S. wheat in 2003/04 is projected to rise 377 million bushels from a year ago, to 2,359 million bushels. Both domestic use and exports are forecast up, 81 and 296 million bushels, respectively. Exports are projected at 1,150 million bushels for 2003/04, up because of reduced competition in world markets. Food use is projected at 900 million bushels, down 18 million from a year earlier. The decrease is due partly to an improved extraction rate compared with the previous year and partly to declining per capita flour use and less wastage (see next section). Feed and residual use is projected to rise 99 million bushels year-to-year to 225 million in 2003/04 because of the larger crop. Seed use is projected at 84 million bushels. Calendar Year 2003 Per Capita Flour Consumption Down Per capita wheat flour use for calendar year 2003 is estimated at 135.7 pounds, down 0.8 pound from a year ago and down 10.6 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 1997 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. 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. 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 2003/04 The 2002 Farm Act extended USDA’s programs to assist farmers facing low market prices, including nonrecourse marketing assistance loans and loan deficiency payments (LDPs). The nonrecourse marketing assistance loans provide interim financing to eligible producers of wheat and other commodities. Producers pledge their wheat as collateral and obtain a loan equivalent to the loan rate established in their county by the Farm Service Agency of USDA. The loan proceeds are often used to cover short- term cash needs. As of March 10, 2004, outstanding loans for wheat totaled $248 million on 86 million bushels of the 2003 crop. For comparison, on March 11, 2003, outstanding loans were $292 million 102 million bushels of the 2002 crop. Two years ago, on March 4, 2002, wheat producers had outstanding loans on 182 million bushels of the 2001 crop. The total value of the 2001 crop loans was $508 million. The 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 may actually be lower than the loan rate (plus interest) if the posted county price (PCP), a proxy for the local price, falls below the local loan rate. 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 and other marketing factors. When a farmer repays the loan at a lower PCP, 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 on part or all of the crop in lieu of securing a loan. 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 LDP 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 10, 2004, producers had collected $87 million in LDPs covering 490 million bushels of the 2003 wheat crop. The average payment was 18 cents per bushel. For comparison, as of March 5, 2003, producers had collected $12 million in LDPs covering 79 million bushels of the 2002 wheat crop. The average payment was 15 cents per bushel. LDPs 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. ITC Rules Canadian HRS Wheat, But Not Durum Wheat, Injured U.S. Industry The United States International Trade Commission (ITC) determined that the U.S. wheat industry was materially injured by imports of HRS wheat from Canada. The U.S. Department of Commerce has determined the HRS imports were subsidized and sold in the United States at less than fair value. The Commission did not find injury with respect to imports of durum wheat from Canada. As a result of the Commission's affirmative determinations, the U.S. Department of Commerce has issued countervailing duty and antidumping duty orders on imports of HRS wheat from Canada. The Commerce Department set the duty for HRS wheat imports to include 5.29 percent to countervail subsidies and 8.87 percent to compensate for dumping the wheat in the U.S. market. As a result of the Commission's findings, no countervailing duty or antidumping duty orders were issued on imports of durum wheat from Canada. The Commission's public report Durum and Hard Red Spring Wheat from Canada (Investigation Nos. 701-TA-430A and 430B and 731-TA- 1019A and 1019B (Final), USITC Publication 3639, October 2003) contains the views of the Commission and information developed during the investigations. Copies may be obtained by calling 202-205-1809 or from the Office of the Secretary, 500 E Street SW, Washington, DC 20436. Requests may also be made by fax to 202-205-2104. Reference Sosland, Morton. Forces at Work Reducing Usage of Flour. World Grain. November 2002. Section 6 Situation and Outlook for 2003/04 World Wheat Production and Stocks Plummet in 2003/04, Trade Declines Global production in 2003/04 is estimated down 18 million tons to 548 million, while foreign production is down 38 million to 484 million, as production was devastated across most of Europe. World consumption is forecast down nearly 12 million tons from the previous year, but is still 4-million-tons larger than production, dropping forecast stocks to 125 million tons, the lowest level in 22 years. World wheat trade is expected to decline due to the reduced supply of low-quality wheat used for feeding, larger crops in North Africa and Brazil, high freight rates, and stagnant food aid shipments. Exports by Russia and Ukraine are plummeting, with Ukraine a net importer of wheat. 2003/04 World Wheat Production the Lowest Since 1995/96 World wheat production in 2003/04 is estimated at 548 million tons, down 18 million from the previous year’s relatively low level. Much of the decline was in Europe, with winter-kill and/or drought devastating wheat crops from Russia through Spain and the UK. Foreign production plummeted 38 million tons to 484 million. In China, wheat prices were low compared with other crops. But for most other countries wheat prices were quite high during the Northern Hemisphere winter wheat planting period (fall of 2002), which provided a strong incentive to plant wheat. However, as a large U.S. crop was confirmed, international prices declined during the planting period for spring and Southern Hemisphere crops (April-July 2003). Several major exporters, including the United States, Canada, and Australia, had 2003/04 production much larger than the previous year, keeping export prices in check. Unfavorable weather dropped production across Europe, China, and India. Both world wheat harvested area and yield declined from the previous year. Drought or winter-kill resulted in reduced area harvested for grain, as fields were hayed, grazed, or simply abandoned. In 2003/04, world wheat harvested area is forecast (this forecast is mostly history, with crops harvested in 2003) at the lowest since 1970/71. Global area was nearly 10 percent less than in 1996/97, when prices were record high. However, average world wheat yields in 2003/04 are forecast down only 3 percent from the 2001/02 record. EU production dropped 13 million tons to 90.5 million in 2003/04 due to unfavorable weather. The winter was severe in some eastern regions, but drought and high temperatures during the spring and summer did most of the damage. France was hard hit, with production down more than 8 million tons and area harvested off 16 percent. Wheat production in the former Soviet Union plummeted 36 million tons to 61 million. While growing conditions had been mostly favorable the previous 2 years, in 2003/04 problems compounded. Dryness at planting inhibited emergence in some areas during the fall of 2002. There was a severe cold spell with limited snow cover in December. However, most of the damage, especially in Ukraine, was done by snow crusting in the late winter and early spring. A few warm days caused the snow to melt on top, and when it refroze, it formed a sheet of ice over the snow that suffocated the plants beneath because the spring thaw was very late. A hot dry late spring and summer added to the litany of woe. Ukraine production dropped from 21 million tons for the previous 2 years to less than 4 million. The loss of over 80 percent of the crop in a country as large as Ukraine is a rare event. Russia’s winter wheat crop also suffered, but not as badly as in Ukraine. The spring wheat crop in Russia and Kazakhstan was fairly normal. Eastern Europe’s wheat production suffered from some of the same problems as in the former Soviet Union and in Western Europe. Wheat production dropped 10 million tons to less than 21 million, the lowest since 1965/66 and less than half the record wheat crop produced in 1990/91. Romania suffered from snow crusting like that in neighboring Ukraine. However, the hot dry spring did more damage in the rest of the region. China’s wheat production declined 4 million tons to 86 million because of reduced area. Prices were not high enough to keep wheat competitive with other more profitable crops, and irrigation supplies on the North China Plain were a constraint. Wheat yields in China increased in 2003/04 despite the increased adoption of higher quality, lower yielding varieties, and unfavorable weather in some regions. The average yield of 3.9 tons per hectare was 5 percent below the 1997/98 record. India’s wheat production dropped 7 million tons to 65 million in 2003/04. While area is estimated unchanged from the previous year, the poor 2002 monsoon left soil moisture and irrigation supplies limited. Average yields declined, producing the smallest wheat crop in 7 years. Several regions, including the Middle East, North Africa, and Australia had generally favorable weather for wheat production in 2003/04. Good rains across most of the Middle East, especially in the major producers, Iran and Turkey, boosted wheat production to a record 38 million tons, as area expanded and yields averaged more than 2 tons per hectare. Rains were also favorable across North Africa, producing record yields and the second largest wheat crop at 16 million tons. Australia also had a record crop, reaching 25 million tons as production rebounded from the previous year’s El Nino-induced drought. Canada and Argentina had good but not great conditions for wheat production. It was too dry in some areas and too wet in others. Canada’s production reached 23.5 million tons, up 7 million tons from the previous year when drought across the prairies was more extensive. In Canada and Argentina attractive prices for other crops limited area expansion. In Argentina planting conditions were too wet. In both countries, yields, though up compared with the previous year, were 14-percent below record levels. World Wheat Use To Drop in 2003/04 Global consumption is forecast at 589 million tons, down 2 percent from the previous year. After strong growth in 2002/03, world wheat disappearance is declining in 2003/04 because of a drop in feed use. Foreign non-feed (mostly food) use is forecast nearly unchanged at 461 million tons. This implies a decline in per capita consumption because population growth is close to 2 percent. Wheat food use has failed to keep pace with population growth for some decades. 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 of labor could be allowing a decline in caloric consumption as occurred in the United States early in the 20th century. Global feed use of wheat is expected to drop 11 million tons to 102 million in 2003/04. Foreign (world minus the United States) wheat feed and residual use is forecast down 14 million tons to less than 96 million. Reduced supplies of competitively priced, low-quality wheat from the EU, Eastern Europe, and the former Soviet Union are limiting wheat feed use across Europe and in countries that often import wheat for feeding such as South Korea, the Philippines, and Israel. Corn price increases compared with wheat prices have not been great enough to encourage significant wheat feeding, and even the U.S. increase may be due to the residual disappearance that is associated with a larger crop. EU wheat feed and residual use is forecast down only 2 million tons to 49 million in 2003/04. Reduced EU corn, barley, and wheat crops have combined with import quotas to restrict the supply of grains for feeding in the EU. With limited alternatives, EU grain prices have increased enough to move large quantities of wheat out of stocks and into feed channels. In contrast, wheat feed use in the former Soviet Union is forecast at only 17 million tons, down nearly 7 million tons. Another factor limiting wheat feed use was increased corn area that was planted on some of the winter-killed wheat area, boosting corn production in Russia and Ukraine. World Wheat Stocks Forecast To Drop 41 Million Tons in 2003/04, Lowest Since 1981/82 Global ending stocks are forecast at 125 million tons, down sharply from the previous year, and the lowest in over two decades. Foreign wheat stocks are expected to drop 43 million tons, with China, down nearly 19 million, accounting for less than half the drop. 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, but have been declining dramatically for the last 4 years. Recent increases have pushed wheat prices in China to an 8-year high, an indication supplies are tightening. While China is exporting record quantities of wheat in 2003/04, in the latter half of the year China has been importing. World wheat ending stocks, excluding both China and the United States, are a useful indicator of general market conditions that might influence U.S. exports. These 'rest-of-the-world' stocks are forecast to decline almost 24 million tons to 68 million in 2003/04. Though down sharply from the previous year, 'rest-of- the-world' stocks remain a bit larger than in 1995/96, when prices were higher. The largest wheat stocks in this group are held by India, the former Soviet Union, and the EU. These countries are all expected to reduce wheat stocks during 2003/04, but also are expected to increase production in 2004/05. With the stocks cushion in these countries at low levels, production problems could generate strong price responses. The ending stocks of the traditional major exporters (United States, Canada, Australia, EU, and Argentina) are forecast down 2 million tons to 35.5 million, but only EU stocks are expected to decline. The combined 2003/04 ending stocks of the United States, Canada, Australia, and Argentina are projected up 3.5 million tons to 27 million. Exports from these countries traditionally play a key role in determining world wheat prices by allowing the market to balance supply and demand. In 2002/03 this role was disturbed by simultaneous short crops in the United States, Canada, and Australia, combined with the emergence of Russia and Ukraine as massive wheat exporters. However, in 2003/04, with wheat exports from the Black Sea region much diminished, world wheat price discovery is once again centered in the United States, Canada, Australia, and Argentina. The increasing stocks in these major exporting countries have been crucial to keeping a lid on wheat prices during 2003/04. World Wheat Trade Expected To Decline in 2003/04 Global trade (July-June international trade year, excluding intra-EU trade) in 2003/04 is forecast at 101 million tons, down 7 million from the previous year and 3.5 million less than the 10-year average. Wheat trade is down mostly because of a 7- million-ton drop in wheat imports by the EU. In 2002/03 the EU was the world’s largest importer by a wide margin, reaching 12.5 million tons. Black Sea wheat poured into the EU in anticipation of quotas imposed at the beginning of calendar 2003. With quotas in place, 2003/04 imports were expected to drop, and the short crops in Eastern Europe and the former Soviet Union left some of those import quotas unfilled. Even with the sharp reduction, the EU is forecast to remain one of the world’s largest importers in 2003/04, as high quality imports have been strong. North Africa’s wheat imports in 2003/04 are expected to drop 5 million tons to less than 14 million because of their large crop. In the Middle East, the record wheat crop is expected to reduce imports 1 million tons to 10 million, as consumption stagnates. South Korea’s imports are forecast down almost 1 million tons because of reduced imports of wheat for feeding, with the Philippines also showing a decline for the same reason. U.S. imports are forecast down slightly at 2 million tons because of tariffs on the import of Canadian western red spring wheat. While Brazil’s large crop is expected to reduce imports 1 million tons in 2003/04, growth in imports by other Latin American countries is offsetting. Helping to maintain world trade are increased imports by Eastern Europe (up 4 million tons), especially Romania, and by the former Soviet Union (up 3 million), where Ukraine switched to a net importer. China is expected to increase wheat imports nearly 2 million tons. For most other markets, wheat imports are expected to stagnate or show slow growth. Section 7 Situation and Outlook for 2003/04 U.S. Wheat Exports Rebound With Less Competition in 2003/04 U.S. wheat exports are forecast to increase 9 million tons to 32 million in 2003/04 because of increased U.S. supplies and reduced competition from the European Union (EU) and the Black Sea region. There is stronger competition from Australia, Canada, and Argentina because of their increased production. The top markets for U.S. wheat exports are Egypt, Japan, Mexico, and Nigeria. Egypt, which bought much of its wheat elsewhere in 2002/03, returned to the United States as its largest source for imports. U.S. exports to the Western Hemisphere are increasing despite reduced purchases from Brazil and increased supplies in Canada and Argentina. U.S. 2003/04 Wheat Exports Forecast the Highest in 8 Years U.S. 2003/04 wheat exports are forecast at 32 million tons (1.15 million bushels for June-May), up 9 million tons. Export sales and shipments have been strong. Census data from July 2003 through January 2004 show U.S. wheat grain exports of 18.8 million tons, up 4.3 million tons from the previous year’s relatively slow pace. Also, grain inspections data for February 2003 were up 1.3 million from inspections a year earlier. Moreover, according to U.S. Export Sales, outstanding sales of 5.7 million tons were reported as of March 4, 2004, up 2.6 million from a year ago. Wheat sales and shipments during the final quarter of 2003/04 are expected to remain relatively strong compared with the sluggish year-ago pace. Competition from the Southern Hemisphere during the last months of 2003/04 may be a limiting factor for U.S. export prospects. Australia has harvested a record crop, and Argentina’s production and stocks are up compared with a year ago. However, increased storage capacity in Argentina, and relatively strong new crop futures prices may limit how aggressively Australia and Argentina market available supplies before the next U.S. crop comes to market. Several Major Customers Buying More U.S. Wheat Since 1993, the level of U.S. wheat exports ranged between 26 and 33 million tons, but in 2002/03 U.S. wheat exports dropped to less than 23 million tons, the lowest in over 30 years, as major customers, especially Egypt, turned to competitors for cheaper wheat. Over the years, the major markets for U.S. wheat have mostly remained 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 until last year, Egypt remained the largest market. In 2003/04, Egypt has returned to buy U.S. wheat in dramatic fashion. According to U.S. Export Sales, commitments (the sum of shipments and outstanding sales) to Egypt were 3.7 million tons, (as of March 4, 2004), more than 3.5 times as much as the previous year’s level. Egypt is once again the largest market for U.S. wheat exports by a wide margin. Egypt’s major alternative sources, the Black Sea region and EU, simply do not have the wheat available to compete. Also, foreign exchange has been especially tight in Egypt, and U.S. credit is a help. In most years, U.S. premium spring wheat and durum compete in the EU market with Canadian wheat. Purchases of U.S. spring wheat are up sharply. This year, with high grains prices, and limited supplies of medium-to-low quality wheat available from other sources, the EU has also purchased some soft red winter (SRW) wheat from the United States. As a result, U.S. export commitments to the EU are up 80 percent compared with a year ago. Japan was the largest purchaser of U.S. wheat in 2002/03, and although it is a very steady buyer, U.S. commitments to Japan are up from a year ago. Several Western Hemisphere wheat importers have been purchasing more wheat from the United States in 2003/04, though purchases by Brazil are down. U.S. commitments to Mexico are up 14 percent to 2.5 million tons, a record for this date. U.S. export commitments are also up to Peru, Cuba, Venezuela, and Chile. Nigeria, a key growth market in past years, reduced purchases from the United States in 2002/03, but this year commitments are at 2 million tons, up 16 percent, also a record for this date. However, commitments are down slightly to several Asian markets, including South Korea and the Philippines, likely because of competition from Australia. U.S. wheat sales to China have increased dramatically. At the beginning of March, U.S. commitments for 2003/04 (June-May) reached 1.4 million tons, compared with less than 0.1 million a year ago. Most of the commitments to China are outstanding sales, and a portion may not get shipped until 2004/05. An additional 1.5 million tons of outstanding sales is already on the books for 2004/05, which indicates that China is re-emerging as one of the top customers of U.S. wheat. Section 8 Wheat by Class in 2003/04 Wheat Quality Good in 2003/04 The quality of the 2003 crop is generally good. Production in 2003 of each class of wheat was above year-ago levels. Ending stocks of each class, except for durum, are forecast up year-to- year. ------------------------------------------------------ Hard Red Winter (HRW) Production Higher Than a Year Ago HRW wheat production for 2003/04 was up sharply in the Plains States as harvested area rose by 5.7 million acres from the year before to 25.4 million acres. HRW production for 2003/04 was 1,063 million bushels, 451 million bushels above 2002/03. The biggest year-to-year increase in production was 213 million bushels in Kansas. Dry conditions in many HRW areas during the late summer and fall of 2002 delayed planting and germination and slowed growth before winter. Some HRW regions experienced drought conditions throughout the winter and spring. However, subsequently many areas received adequate rainfall and mild temperatures during late spring. These conditions allowed for development of large, completely filled heads and record- to near-record yields in many areas. HRW wheat yields rebounded from last year's drought-stressed levels, except in Texas where conditions were dry again this year. HRW yields averaged 41.8 bushels per acre, 10.7 bushels higher than the 2002 crop. The U.S. Wheat Associates’ survey published in the Crop Quality Report 2003 found the overall protein percentage, at 12.0 (12- percent moisture basis), lower than the 2002 crop’s 13.4 and the 5-year average of 12.2 percent. The overall test weight of 60.4 pounds per bushel was higher than 2002’s 58.9 and the 5-year average of 59.6. The average moisture percentage of the crop was 11.7, higher than the previous year’s 11.2 and the 5-year average of 11.5. The 2002 HRW crop’s average falling number of 409 seconds was lower than the 425 seconds the year before, but higher than the 5-year average of 397 seconds. Projected HRW supplies in 2003/04 are 280 million bushels higher than a year earlier as the increased production more than offset the 175 million bushels lower beginning stocks. Total projected use at 1,038 million bushels is 251 million bushels higher than last year. Higher projected exports accounted for 211 million bushels of this increase. Total projected domestic use is up 40 million bushels because higher feed and residual use more than offsets a decrease in food use. The net result is to raise projected HRW ending stocks by 27 million bushels compared with a year ago. The projected ending stocks-to-use ratio is 21 percent, slightly below the previous year’s 24 percent, but substantially lower than the 45 percent in 2001/02. Hard Red Spring (HRS) Production Up Compared With a Year Ago Despite lower planted area than in 2002, harvested area for the 2003/04 crop was slightly higher, by 0.1 million acres, to 12.72 million. The average HRS yield was 39.3 bushels per acre, up 11.3 bushels from a year earlier. Production rose 146 million bushels to 500 million bushels. In 2003, the HRS wheat crop benefited from rapid planting and early-season rains that helped to produce average to well-above- average yields in many areas. In addition, a relatively dry summer limited disease. Finally, dry weather at harvest produced a high average vitreous kernel (DHV) and high average falling numbers. The U.S. Wheat Associates’ HRS survey published in Crop Quality Report 2003 includes the four States of Minnesota, North Dakota, South Dakota, and Montana. The survey found the 2003 HRS crop’s protein percentage to average 14.2 (12-percent moisture basis), which was lower than the previous year’s 15.1 and the 5-year average of 14.5. The 2003 crop’s average test weight of 60.9 pounds per bushel was higher than the previous year’s 59.3 pounds and the 5-year average of 59.7 pounds. The average falling number of 411 seconds was significantly higher than the previous year’s 321 seconds and the 5-year average of 360 seconds because of less sprouting. The average moisture percentage of 11.5 was lower than both last year’s 12.4 and the 5-year average of 11.8. Projected HRS supplies in 2003/04 are up 53 million bushels from a year earlier. Production was up 146 million bushels, more than offsetting smaller imports and beginning stocks that are 85 million bushels below a year earlier. Imports did not recover from the Canadian drought-reduced levels of a year ago because of the threat and then the imposition of a tariff (see page ? for discussion of the tariff). Total projected use, at 503 million bushels, is 40 million bushels higher than 2002/03. While projected exports are only slightly higher than a year earlier, domestic use is up 40 million mostly because of higher feed and residual use, up 37 million bushels. The feed and residual for HRS in 2002/03 was a negative 32 million bushels. (The feed and residual estimate is calculated to ensure that supply equals use. The estimate includes both feed use and a residual that accounts for errors, positive or negative, made in estimating the other variables.) The net result is that projected HRS ending stocks for 2003/04 are up by 12 million bushels. The projected ending stocks-to-use ratio is 31 percent, the same as last year, but significantly lower than the 44 percent for 2001/02. White Wheat Production Up White winter wheat production, nearly 90 percent of U.S. white wheat production, is up from a year earlier by 64 million bushels. Yields were up 2 bushels per acre and harvested acreage was up 1 million acres compared with 2002/03. In 2002, the Pacific Northwest experienced a dry fall. However, timely rains in the winter and spring helped wheat growth in most dryland farming areas in Oregon, Washington, and Idaho, raising yields, especially in Oregon and Washington. Importantly, increased acreage planted to hard white winter varieties in Colorado, Kansas, and Nebraska also contributed to the increase in white winter production. According to the Pacific Northwest harvest survey published by the U.S. Wheat Associates in its Crop Quality Report 2003, protein percentages of the soft white and club crops at 10.4 and 9.9 (12-percent moisture basis), respectively, are nearly the same as previous year’s 10.8 and 9.9 percent. The 5-year averages for the soft white and the club wheat crops are 10.3 and 9.6 percent, respectively. The 2003 test weights for the soft white and club wheat are 59.4 and 60.3 pounds per bushel, respectively, compared with 59.7 and 59.6 in 2002. The 5-year averages for the soft white and club wheats are 60.1 and 60.3 pounds. The 2003 soft white and club wheat moisture percentages are 9.0 and 8.0, respectively. These moisture percentages are lower than the year before at 9.4 and 9.0, respectively, and the 5-year averages of 9.4 and 8.8 percent. The 2003 soft white wheat crop’s falling number of 362 seconds is the same as last year, but higher than the 5-year average of 345 seconds. The 2003 club wheat falling number of 354 seconds is nearly the same as the year before’s 353 seconds, but higher than the 5-year average of 340 seconds. The projected 2003/04 total white wheat supplies are 56 million bushels higher than a year ago, mostly because of the increase in production compared with a year earlier. Total projected use is up 51 million bushels compared with 2002/03. Compared with a year ago, exports are up 37 million bushels and domestic use is up 15 million bushels. Domestic use is up because of both slightly higher food use and increased feed and residual use. Ending stocks are up 4 million bushels from a year earlier. The projected ending stocks-to-use ratio is 26 percent, lower than the 30 percent of the previous 2 years. Soft Red Winter (SRW) Production and Use Are Up Higher yields and harvested area raised production for 2003/04 by 47 million bushels from a year ago to 379 million. SRW wheat- producing States' yields were better than a year ago, except in the central Atlantic Coast States, where excessive moisture led to disease problems. SRW yields averaged 55.7 bushels per acre, 5.9 bushels above 2002. Harvested area was up 0.1 million acres to 6.8 million for 2003/04. Extensive rainfall from May through July in some areas delayed ripening and harvest, leading to higher moisture levels in the crop, sprout damage, and fusarium rust in some fields. According to the Midwestern harvest survey published by the U.S. Wheat Associates in its Crop Quality Report 2003, the average protein percentage in 2003 for SRW is 9.9 percent (12-percent moisture basis); lower than the 10.5 percent in 2002, and the 5-year average of 10.0 percent. The moisture percentage of the 2003 crop is 13.0, higher than the previous year’s 12.5, but lower than the 5-year average of 13.2 percent. Test weight for 2003 is 58.9 pounds per bushel, slightly lower compared with 59.2 in 2002. The 5-year average for SRW test weight is 58.6 pounds. The average 2003 falling number of 339 seconds is better than the 2002 crop’s 364 seconds and nearly the same as the 5-year average of 336 seconds. The projected 2003/04 SRW supplies are 33 million bushels higher than a year ago. Production is up 47 million bushels to 379 million, while beginning stocks are down 23 million bushels to 55 million. Imports are up 8 million bushels for 2003/04 to 22 million due to increased imports from Ontario. Total projected use is up 25 million bushels compared with last year as a 40- million-bushel increase in exports is partially offset by a 15- million-bushel decline in domestic use. Projected food use is down 12 million bushels and feed and residual use is down 2 million bushels. Ending stocks are projected up 8 million bushels to 63 million. The projected ending stocks-to-use ratio is 16 percent, 1 percent higher than a year ago. Durum Production and Use Up The projected 2003/04 durum supplies are 8 million bushels higher than a year ago because the 17-million-bushel increase in production was partially offset by 5 million bushels less beginning stocks and 4 million bushels less imports. Total projected use is up 9 million bushels from last year as exports rose 8 million bushels and domestic use is up 1 million bushels. The projected food use for 2003/04 is down 4 million bushels from a year ago. Feed and residual use of durum for 2002/03 was a negative 5 million bushels. But for 2003/04, feed and residual is forecast to be zero. Ending stocks, at 28 million bushels, are projected down by less than a million bushels year-to-year. The projected ending stocks-to-use ratio is 23 percent, slightly lower than a year earlier’s 25 percent. The Northern Great Plains produced about 76 percent of the total estimated U.S. durum production of 97 million bushels. The 2003 crop benefited from abundant early season moisture. Hot temperatures and little precipitation dominated the second half of the growing season reducing yields in some areas. In some areas, the drier weather reduced disease pressure. Excellent harvest conditions produced a low-moisture crop with good grading. The protein percentage of the 2003 durum crop grown on the Great Plains averaged 14.5 (12-percent moisture basis), greater than the 14.0 reported for the previous year’s crop according to the U.S. Wheat Associates in their Crop Quality Report 2003. The 5- year average for protein percentage is 14.1. The moisture percentage of the 2003 crop is 10.5, less than last year’s 12.0 percent and the 5-year average of 11.6. Average test weight for the 2003 crop is 61.0 pounds per bushel, greater than last year’s 59.9 and the 5-year average of 59.5. The average 2003 falling number of 391 seconds is higher than the 2002 crop’s 292 seconds. The 5-year average falling number is 296 seconds. California and Arizona accounted for 24 percent of the country’s durum production in 2003. This 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 Crop Quality Report 2003 reported that the 2003 crop’s protein percentage is 13.6, higher than last year’s 13.0 percent. The 2003 crop’s falling number at 950 seconds, is lower than the 2002 crop’s 1,195 seconds (export cargo survey). The 2002 crop’s test weight at 62.8 pounds per bushel is nearly the same as the 2002 crop’s 62.6 pounds. The 6.6 moisture percentage of the 2003 crop was also below the 2002 crop’s 6.9. Reference U.S. Wheat Associates. Crop Quality Report 2003.