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WORLD WHEAT SITUATION AND OUTLOOK
Global trade of wheat during 1998/99 is projected to be 98.7 million tons, relatively unchanged from 1997/98. Lower world production is expected largely due to smaller harvests in the United States, and Argentina, as low wheat prices of the past year have contributed to a drop in planted area. Planted area is also expected to drop in Canada, but a return to average yields will result in little change in the crop size. Wheat producers in the European Union have been more protected from the decline in global prices, therefore more area is expected to be devoted to wheat and the EU is set to harvest a record-breaking crop. It is anticipated that Australia’s production will be unchanged from the 1997/98 level. With only a few months until new crop harvests begin in the Northern Hemisphere (the United States, the European Union, and Canada), the biggest uncertainty remaining is weather. For the most part, weather has been favorable throughout the growing seasons, but the quality of these crops will depend on this pattern continuing. On the other hand, planting decisions for Southern Hemisphere (Argentina and Australia) crops are just beginning and weather conditions will play a critical role over the next seven or eight months.
Although imports in 1998/99 are expected to be little changed from the previous year, it is anticipated that U.S. and EU wheat trade will increase in 1998/99 due to less competition from Canada, Argentina and Australia. Both U.S. and EU stocks will be relatively unchanged while stocks in the other competitors are forecast to drop, especially in Canada. Global consumption is projected at record levels, and is expected to exceed production for the first time in three years. Lower production is forecast in Latin America, the former Soviet Union, China, and Eastern Europe, but is partially is offset by larger crops in North Africa, and the Middle East. Although the former Soviet Union and China are forecast to harvest smaller crops than the previous year, output in these two traditional importers will remain large and they are expected to be largely absent from the import market for the third year in a row.
Exporters
Production in the U.S. is initially forecast to decline nearly 5 million tons in 1998/99, primarily due to reduced area. Producers’ planting decisions were mostly influenced by the low prices of the past year and planting flexibility under Freedom to Farm. Despite lower production, large carry-in stocks will result in larger supplies and will provide the opportunity for more exports. U.S. exports are projected up 3 million tons, to 31 million tons. U.S. ending stocks are forecast largely unchanged at 20.9 million tons.
An increase in area and prospects for better than average yields throughout the European Union are expected to pave the way for record production in 1998/99. The 5 million ton crop increase, to 99.7 million tons, coupled with attractive internal prices will encourage more domestic wheat feeding and the EU Commission to adopt a more aggressive export program. Exports are projected to jump 2 million tons to 17.5 million tons leaving stocks relatively unchanged from the previous year.
Combined production levels in Argentina, Australia, and Canada are forecast to fall 3 million tons in 1998/99. Concurrently, exports of these competitors are expected to drop 5 million tons. Preliminary forecasts show a 2.7 million tons smaller crop in Argentina. Despite the smaller crop, shipments of remaining old crop supplies are expected to carry into the 1998/99 July/June year, leaving exports projected at 8.5 million tons, only 500,000 tons lower than the 1997/98 level. The initial production forecast for Australia is unchanged at 19 million tons. Despite a 10 percent drop in wheat plantings, Canada’s production is forecast at 24 million tons, only 300,000 tons below the 1997/98 level. However, exports are projected to drop 3.5 million tons, to 16.5 in 1998/99 due to severely depleted stock levels from the 1997/98 aggressive export campaign.
Importers
North Africa
Higher area devoted to wheat and timely rains during planting season are expected to boost production by almost 22 percent in Algeria, Morocco and Tunisia. Despite a higher crop, imports by the region are projected to decline by a meager 10 percent as consumption levels are maintained. Production in Egypt and Libya is expected to be unchanged and imports are forecast slightly higher to support the growing trend in utilization.
Asia
China is forecast to harvest a bumper crop at 118 million tons. With area down only slightly, prospects for near record yields put the new crop only 6 million tons below last year’s record level, but the second largest crop on record. Stocks are projected to climb to almost 38 million tons, keeping China largely absent from the international wheat market for the third year in a row.
Unusually good weather and projected record yields leave Pakistan and India on track to harvest bumper crops in 1998/99. Imports are projected down 1 million tons each, however this level of demand allows consumption to stay on par with population growth.
Imports of wheat by Indonesia, Malaysia, Philippines, Thailand, are projected to remain flat in 1998/99 due to the currency crisis that plagued the area in late 1997. Demand in South Korea is expected to pick up in the coming year due to a moderate increase in feed wheat use.
Middle East
Despite a projected 1 million tons crop increase, Iran is expected to import 5.5 million tons of wheat (up 1 million tons from 1996/97 and the second largest level on record) to sustain consumption growth. The United Nations Oil-for-Food agreement with Iraq is expected to be renewed, enabling imports to reach 3 million metric tons.
Former Soviet Union
Production in the former Soviet Union is forecast to fall over 7 million tons from last year’s bumper harvest with most of the decrease centered in Russia and Ukraine. Regional feed consumption continues to fall, however, steady imports of high quality wheat are expected.
Kazakhstan’s crop is expected to be slightly lower than the previous year; however exports to markets inside the region are expected to remain strong.
Eastern Europe
Like the former Soviet Union, East European countries will likely be faced with lower supplies in 1998/99, largely due to a 1.4 million ton reduction in Romania. However, the bumper harvest in 1997/98 resulted in a significant amount of carry-over that will likely keep exports of feed quality wheat competitive in the coming year.
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