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WORLD WHEAT SITUATION AND OUTLOOK
Global trade of wheat during 1999/2000 is projected to be 101 million tons, up 6 million tons from 1998/99. Lower world production is expected largely due to smaller harvests in the United States, the European Union, and many importing countries. Low wheat prices of the past year contributed to the drop in planted area, while a higher EU set-aside rate and prospects for lower yields will likely result in a smaller crop. Wheat plantings in Canada are expected to be unchanged, as the increase in spring wheat varieties will likely offset the expected decline in durum. Average yields would result in little change in the crop size. It is anticipated that crops in Australia and Argentina will be slightly larger than the previous year's level because of an increase in both planted area and prospective yields. With only a few months until new crop harvests begin in the Northern Hemisphere (the United States, and the European Union), the biggest uncertainty remaining is weather. For the most part, weather has been mixed throughout the growing seasons, but the quality of these crops will depend on favorable weather conditions in the coming months. 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.
Imports in 1999/2000 are expected to be 5 million tons higher because of significantly smaller crops in Pakistan, China, most of the Middle East, and Morocco. This will be first time in three years that China will show a year-to-year increase in imports. Because of strong import demand in 1999/2000 it is anticipated that U.S., Canadian, and Australian wheat trade will increase, while EU exports will be unchanged.
While global stocks are projected 19 million tons lower in 1999/2000, less than half of this reduction is expected to occur in the major exporting countries, with the largest drop centered in the European Union. With EU exports forecast unchanged, stocks are being drawn down to support continued strong domestic wheat feeding. Despite a smaller crop, U.S. stocks are projected only 3 million tons below the previous year. Another 11 million ton stock decline is expected outside the major exporting countries, primarily China, Iran, and Eastern Europe.
Exporters
Production in the United States is initially forecast to decline more than 8 million tons in 1999/2000, primarily due to lower winter wheat plantings. Producers’ planting decisions were mostly influenced by the low prices of the past year and planting flexibility under Freedom to Farm. Despite lower production, abundant carryin stocks will result in large supplies and will provide the opportunity for more exports. U.S. exports are projected up 2.5 million tons, to 31.5 million tons, while ending stocks are forecast 3 million tons lower at 24 million tons.
Slightly lower area and prospects for average yields throughout the European Union are expected to shave the 1999/2000 crop by 9 million tons from the previous year’s record. Lower production coupled with slightly higher demand for domestic wheat feeding will draw down stocks and limit exports, which are forecast unchanged from the 1998/99 level (16 million tons).
Combined production levels in Argentina, Australia, and Canada are forecast to be nearly 3 million tons higher in 1999/2000. Concurrently, exports of these competitors are expected to rise 5 million tons. Preliminary forecasts show a 1 million ton larger crop in Argentina. Despite the larger crop, early season shipments in the July/June period will be constrained by limited old crop supplies. Exports are projected at 7 million tons, 500,000 tons below the 1998/99 level. The initial production forecast for Australia is 22 million tons, 1 million tons higher than the previous year. Canada’s production is forecast at 25 million tons, 600,000 tons above the 1998/99 level due to higher area devoted to spring wheat which more than offsets the decline in durum. Because of large carryin stocks, exports are projected to jump by 3 million tons, to 17 million tons.
Due to unusually good weather and projected high yields, India is expected to harvest a record crop in 1999/2000. India will likely move into an export position because of abundant government carryin stocks and strong new crop government procurement. In the last few weeks, the state-run Food Corporation has purchased around 13 million tons from farmers, the highest level of government procurement in the last 10 years. Because supplies will be abundant, government imports are unlikely, but small imports by private millers could occur if the existing gap between the internal and international prices continues.
Importers
North Africa
Lower planted area and unfavorable weather this season have reduced production prospects in Morocco. Imports are expected at 2.5 million tons, 700,000 tons above the previous year and only slightly below the record of 1997/989. However, ideal weather conditions in Algeria and Tunisia are expected to boost production in these two countries by over 25 percent and as a result, imports are projected to drop by a concurrent amount. Production in Egypt and Libya is expected to be unchanged and imports are forecast slightly higher to support the growing trend in utilization.
Asia
For the first time in three years, China will show a year-to-year increase in imports, which are forecast at 4 million tons in 1999/2000. Higher demand stems from prospects for a smaller crop (down 4 million tons to 106 million tons), due to lower-than-average yields caused by extreme dryness in the North China Plain.
Imports of wheat by Indonesia, Malaysia, Philippines, Thailand, are projected to remain flat in 1999/2000 due slow economic recovery from the currency crisis that plagued the area in late 1997. Demand in South Korea is expected to decline slightly in the coming year due lower supplies of feed quality wheat on the international market.
A smaller crop in Pakistan will likely pave the way for record wheat imports in 1999/2000. Imports are forecast at 4 million tons, 800,000 tons above the previous year. Typically, imports are controlled by the government, however, purchases by private flour millers could occur if the existing gap between domestic and international prices continues.
Middle East
Iran is expected to import 5.5 million tons of wheat (up 2.5 million tons from 1998/99 and the second largest level on record) to sustain consumption growth. The United Nations Oil-for-Food agreement with Iraq is expected to be maintained, anchoring imports at 2.5 million metric tons.
Former Soviet Union
Production in the former Soviet Union is forecast to rise over 8 million tons from last year’s record low harvest with most of the increase centered in Russia, Kazakhstan, and Ukraine. Regional imports are projected unchanged in the coming year as commercial imports by Russia are expected to be slightly higher due to some economic recovery after last summer’s currency devaluation. A modest decline in exports is expected as Russia’s early-season exports of feed quality wheat will be restricted due to continuation of announced U.S. and EU food aid shipments. Also, limited carryin stocks will reduce exportable supplies in Ukraine, which will partially offset higher exports by Kazakhstan.
Eastern Europe
Unlike the former Soviet Union, East European countries will likely be faced with lower production in 1999/2000, largely due to reductions in Hungary, Romania, and Poland. Smaller crops coupled with limited carry-in stocks will likely reduce exports of feed quality wheat in the coming year.
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