Farm Progress

Not much change forecast for wheat price in 2004/05

March 11, 2004

3 Min Read

Major questions hover over the potential for production from the current U.S. wheat crop, but USDA analysts are forecasting a 2 million-acre decline from last year, for a harvested acreage of 50.8 million.

Prices received by producers are projected to be $3.35 per bushel, unchanged from the midpoint range for 2003/04, due primarily to lower exports.

Dry conditions in parts of the Plains, along with cold weather and soggy soils in the corn belt, are cited as question marks about the crop to be harvested this spring, according to a report from USDA's Interagency Commodity Estimates Committees presented at the annual Agricultural Outlook Forum at Arlington, Va.

“The ratio of harvested-to-planted acres in 2004 is expected to be 84 percent, slightly less than the 10-year national average ratio,” says William Tierney, commodity analyst for the World Agricultural Outlook Board, Office of the Chief Economist, USDA, who presented the report. “The assumed yield for 2004 results in a projected production of 2,120 million bushels, down over 215 million from 2003. Smaller production, though partially offset by larger carryin stocks, will leave 2004/05 supplies down 174 million bushels from a year earlier.”

Food use is expected to decline slightly, he says, as a result of reductions in per-capita wheat food consumption due to changes in diets and baking technology, and this will more than offset the effect of population growth.

Feed and residual use, at 250 million bushels, will be up “modestly” from the 225 million bushels in 2003/04.

“Lower wheat prices during harvest will promote its use for feeding,” Tierney says. “Hot and poultry producers 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 obtain corn for feeding from greater distances than usual.”

Although world wheat trade is expected to increase in 2004/05, he says U.S. exports are forecast to fall 200 million bushels below the 1,050 million forecast for 2003/04 — the highest level of exports since 1995/96.

“Because drought and winter kill sharply reduced production in the European Union, Central Europe, and the Former Soviet Union, U.S. wheat exports and world export market share increased in 2003/04,” Tierney notes. “But in 2004/05, a Foreign Agriculture Service evaluation of the prospects for the region's winter wheat crop suggests that a substantial recovery is expected in crops in Europe and the Former Soviet Union. As a result, many importers are expected to obtain more of their purchased from lower-priced wheat from Russia, Ukraine, and other minor exporters. Also, net wheat exports by the European Union are expected to rise.”

As usual, Tierney says, “Imports by China are a source of great uncertainty.” A February estimate indicated its 2003 crop would be reduced to 86 million metric tons, a drop of 5 percent from last year. “Recently, one government think tank in China pegged the 2004 crop at 83.4 million metric tons, which would be the smallest since 1983.”

As of Feb.5, export commitments of old crop U.S. wheat to China were 40 million bushels, the largest since 1997. “Even more unusual,” Tierney says, “was the 33 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 around 8 percent, but supplies are down slightly less, about 6 percent; thus, ending stocks, at 541 million bushels, will be slightly higher than a year earlier. The ending stocks-to-use ratio, 24.7 percent, is slightly larger than the 22.5 percent forecast for 2003/04, but below most levels since 1996.97.

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