Wheat: U.S. supply forecast down, use little changed – 1991-1992 wheat production

U.S. supply forecast down, use little changed – 1991-1992 wheat production – U.S. Dept. of Agriculture, Economic Research Service report

While U.S. supply in 1991/92 is forecast down 11 percent, use is expected to show little change from 1990/91. Due to the drop in production, supply is down despite sharply higher beginning stocks. Use is projected down 3 percent, as reduced feed and residual use more than offsets expected increases in all other demand categories.

Beginning Stocks Up 62 percent

Stocks on June 1, 1991, were 866 million bushels, around 330 million above a year earlier. The increase in 1991 beginning stocks is roughly half the 700-million-bushel decline in forecast 1991 production. Moreover, the increase in stocks was mostly available to the market and not tied up in programs, so the stocks provided a significant cushion to assure orderly supplies, despite reduced production. Outstanding 9-month wheat loans plus wheat in the Farmer Owned Reserve (FOR) totaled 231 million bushels, up from 147 million a year earlier. As of August 13, 72 million bushels of 1990 wheat were in the FOR, with additional transfers expected. With market prices well above the $2.04 loan rate, it is expected that almost all 9-month loans will be redeemed or moved into the FOR, with little wheat forfeited to the CCC. Under new FOR rules, wheat can be redeemed from the FOR at any time, so if prices rally, FOR wheat can be moved into the market. CCC inventory increased to 163 million bushels, which includes 147 million bushels in the Food Security Reserve. Imports are projected up 11 percent to 40 million bushels. The projected imports include the wheat equivalent of certain wheat products, especially pasta. Total 1991/92 imports are projected to increase at closer to the rate of increase in pasta imports. A significant portion of last year’s increase in grain imports came from soft white wheat grown in Ontario. A much smaller Ontario crop will probably mean less imports of this class of wheat in 1991/92. However, the 1991/92 initial payment to farmers by the Canadian Wheat Board will be only Can$95 per ton (less than $2.20 per bushel), making Canadian spring wheat potentially very price competitive in the U.S. market.

Domestic Use Projected Down 8 Percent

Modest increases in food and seed use will be more than offset by lower feed and residual. Food use in 1991/92 is expected to continue increasing at a faster rate than population growth, but more in line with long term trends than the 6 percent growth posted in 1990/91. Seed use is projected to rise in 1991/92 because of the drop in the ARP to 5 percent. Feed and residual use is projected at 350 million bushels, down from a record 492 in 1990/91. Although down significantly from last year, the forecast use would still be the fifth largest feed and residual use on record. Wheat prices have remained close enough to corn prices to encourage widespread use of wheat for feed during the summer of 1991 (see special article). However, as the marketing year progresses, wheat prices are expected to increase enough to slow feed use dramatically.

COPYRIGHT 1991 U.S. Department of Agriculture

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