USDA Outlook: Global wheat output forecast to reach 694.3 million tonnes in 2011/2012, up 0.3 million tonnes from previous estimate; global ending stocks revised down to 206.3 million tonnes, driven by 0.9 million-tonne stock reduction in U.S.

Andrew Rogers

WASHINGTON , April 12, 2012 (press release) – The following article is excerpted from the April Wheat Outlook published by the Economic Research Service of the USDA.

International Situation and Outlook Foreign Wheat Supplies Are Down Slightly

World wheat production for 2011/12 is projected up just 0.3 million tons to 694.3 million this month, while global supplies slightly decrease by 0.5 million tons, with a 0.8-million-ton reduction in world beginning stocks.

The wheat harvest in most countries was completed months ago, and this month’s revisions reflect new information received mostly from government agencies. The partly offsetting revisions in wheat production are for Syria, Pakistan, South Africa, Egypt, and Iran. In Syria, reports from procurement agencies and information about on-farm wheat stocks suggest a production increase of 0.6 million tons to 3.9 million. In Pakistan, where the wheat harvest was completed in April 2011, the wheat production estimate is up 0.2 million tons to 24.2 million. Wheat output is also up 0.1 million tons to 1.9 million in South Africa, where the final official estimate confirmed a record wheat yield. Partly offsetting are two 0.3-million-ton reductions in wheat production: for Egypt, where area harvested is estimated slightly lower, and for Iran as reported by the country’s Ministry of Agriculture (Iranian 2010/11 wheat output is also down 0.5 million tons). Changes smaller than 0.1-million ton in wheat production are made for Mexico, Chile, Japan, and Jordan.

The 2011/12 foreign (and global) wheat balance is tightened this month. Slightly lower wheat supplies (lower beginning stocks that are partly offset by a production increase) and higher feed and residual consumption leave projected world ending stocks for 2011/12 down 3.3 million tons.

Beginning stocks for 2011/12 are down 0.8 million tons this month. Stocks have been reduced for Iran, down 1.0 million tons with lower production in two consecutive years and higher 2010/11 feed use; and for Japan, Pakistan, and Uzbekistan a combined 0.5 million tons. Beginning stocks are projected higher for Jordan, Ethiopia, Kenya, Yemen, and Libya for a total of 0.7 million tons. Smaller (less than 0.1 million tons) changes in beginning stocks are made for Bangladesh, Colombia, Philippines, Saudi Arabia, South Africa, Turkey, and Uruguay.

Foreign Feed and Residual Use Increased Significantly

Foreign wheat consumption is projected up 2.0 million tons to 654.4 million this month. Foreign wheat feed and residual use for 2011/12 is expected to be higher by 5.9 million tons this month, while food, seed and industrial use (FSI) is reduced 3.9 million.

Several factors have been pushing 2011/12 foreign wheat feed and residual use up, almost 20 percent above previous highs reached in 2008/09-2009/10. The record wheat harvest of 2011/12 naturally led to greater wheat losses adding to residual use, while abnormally high precipitation in some large wheat-producing countries resulted in production of a higher share of lower quality wheat more suitable for feeding. Two good examples where feed and residual use is projected to increase sharply are Australia and Kazakhstan. Both countries had historically high wheat production in 2011/12 with abnormally high rainfalls that promoted record yields, but also resulted in big quantities of lower quality wheat that is more appropriate for feeding and is harder to store. In Australia, feed and residual use is projected up 1.5 million tons (or 50 percent), while in Kazakhstan it is expected to increased 2.1 million tons (or 110 percent) on the year.

Another reason foreign wheat feed use is expected to be record high is that income growth in a number of countries is driving meat consumption and livestock sector development at a time when wheat prices are unusually competitive vis-à-vis corn. Foreign wheat feeding is up 21 million tons, or nearly 20 percent, on the year, while foreign coarse grain feeding is up about 15 million tons, or less than 3 percent on the year. A striking example is China where wheat feeding is projected up 6.5 million tons (or 50 percent) on the year while corn feeding is projected up only 3.0 million tons (or 2 percent) on the year. Countries that are expected to follow similar wheat feed use patterns include: South Korea, where wheat feeding is projected up almost 30 percent on the year; Mexico, where wheat feeding is projected up 150 percent on the year; Egypt, where wheat feeding is projected up 13 percent on the year; and in a number of others.

This month, a review of domestic consumption estimates for India showed that the data series understated feed and residual use while overstating food consumption, and resulted in shifting wheat from food to feed use, leaving total domestic consumption and officially reported ending stocks unchanged. Assuming that at least 3 percent of Indian wheat supplies should end up as a residual loss, the wheat residual-use series for India is revised back to 1960/61 to better conform to the country’s rising wheat-production numbers. For 2011/12, Indian wheat feed and residual use is projected 2.9 million tons higher, and is fully offset by a reduction in the country’s FSI use. Changes for 1960/61-2010/11 are made accordingly.

In China, wheat feed consumption for 2011/12 is projected up 2.0 million tons this month as domestic prices continue to favor wheat feeding over corn, and China continues to expand its feed-wheat imports. Wheat feeding is also up 0.4 million tons in Saudi Arabia, where barley feeding is being partly replaced by wheat. Wheat feeding is up 0.3 million tons in Mexico, as corn and sorghum are in short supply there this year. The Government of Mexico also subsidizes the usage of higher quality wheat for feeding, creating a disincentive for the farmers to export their durum wheat. Smaller changes in wheat feeding are made for Colombia, Morocco, Philippines, Vietnam, and South Africa–all reflecting higher projected wheat imports.

In addition to the 2.9-million-ton reduction in Indian FSI that does not have any effect on the wheat balance, food use is projected down this month in Jordan, Libya, Mexico, Pakistan, Russia, and Uzbekistan. Partly offsetting are increases in South Africa, and Kenya. Slight (smaller than 0.1 million tons) FSI changes are made for Angola, Colombia, Japan, Morocco, and Philippines.

Ending Stocks Reduced

Foreign wheat ending stocks for 2011/12 are projected down 2.4 million tons to 184.7 million tons this month, while global ending stocks are down 3.3 million tons to 206.3 million, the difference being due to a 0.9-million-ton stock reduction in the United States.

Ending wheat stocks are revised down 1.5 million tons for China, reflecting higher wheat feeding partly offset by expanded imports prospects; for Iran, stocks are down 1.4 million tons because of lower beginning stocks, wheat output, and local marketing year imports. Stocks in Argentina, Canada and Brazil are down 0.5, 0.3, and 0.2 million tons, respectively, reflecting higher projected exports. For Japan, Saudi Arabia, and Turkey, ending wheat stocks are down 0.4 million tons each, because of a combination of lower supplies and higher wheat use for the first two countries. For Turkey the change mainly reflects lower imports. In Egypt and Uzbekistan, ending stocks are down 0.3 million tons each, because of lower wheat output in Egypt and a combination of lower supplies and higher projected exports partly offset by lower wheat use in Uzbekistan.

The largest increases for wheat ending stocks are in Ukraine, Syria, Jordan, and Uruguay, which are up 1.0, 0.6, 0.4, and 0.2 million tons, respectively, reflecting lower estimated exports for Ukraine and Uruguay, higher wheat supplies for Syria, and a combination of higher supplies and lower wheat use in Jordan. Smaller changes in ending stocks are made for a number of countries.

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