Demand Matches Gain in World Wheat Output

WASHINGTON - May 10/02 - STAT -- The USDA took its first hard look at market prospects for the 2002-03 season with today's outlook report and believes prices stand a chance of maintaining an average close to the 2001-02 season even though world production is expected to be sharply higher.

Projected 2002-03 global wheat production is up sharply from a year earlier, rising from 580.63 million metric tons (MT) to a projected 595.75 million MT, led by gains in the DU. If stocks finish the current marketing year at 163.15 million MT, total supply of wheat across the 2002-03 marketing campaign will be 758.9 million MT, a 1% increase over the season's supply, but 0.3% below the amount of wheat available across the 2000-01 season.

The USDA is optimistic consumption will rise to the challenge and expects usage to jump from a projected 587.,94 million MT this season to a 596.48 million MT in the coming marketing year, well ahead of the 590.52 consumed during the 2000-01 season. The net result is ending stocks will be little changed a year from now, though the stocks to use ratio will drop from an expected 27.75% this year to 27.23% for a two day decline in world ending stocks to 99.4 days supply.

                USDA World Wheat Supply-Demand Projections
===============================================================================
                      :           :   Total   :          :  Total   :  Ending
     Commodity        :   Output  :   Supply  : Trade 2- :   Use    :  Stocks
===============================================================================
Wheat                 :
      1999/00         :    585.93     762.02     134.99      591.42    170.60
      2000-01         :    583.88     760.98     102.78      590.52    170.46
      2001-02 (Est.)  :    580.63     751.10     107.11      587.94    163.15
      2002-03 (Proj.) :    595.75     758.90     105.87      596.48    162.42

Most of the increase in usage is expected to come from gains in domestic food and livestock feed consumption rates. Global trade in wheat is actually expected to decline from 107.11 million MT to 105.87 million as a massive decline in purchases by the European Union from eight to four million MT offsets a doubling in projected Chinese imports from 1.5 million to three million MT.

Looking at the situation in the United States, the USDA said the 2002-03 outlook for U.S. wheat is dominated by prospects for the smallest U.S. wheat exports in more than 30 years. Total production is projected down 4% from 2001-02 to 1,886 million bushels.

The survey-based forecast of winter wheat production is 4% below a year earlier due to lower area and yields. Using planting intentions and average harvested-to-planted ratios and yields results in lower spring wheat (including durum) production. The smaller crop and the smallest carryin stocks since 1998-99 drop total 2002-03 supplies almost 7% below a year earlier.

Projected 2002-03 use is down around 4% from a year earlier. Domestic use is up slightly due to expanding food use.

However, projected exports of 875 million bushels are down 100 million bushels from the 2001-02 forecast and would be the lowest since 610 million bushels in 1971-72. Reduced U.S. export prospects are due to smaller U.S. supplies, shrinking global imports, and intense competition.

Although total use is declining, it will exceed production plus imports and result in a further drop in U.S. ending stocks.

However, U.S. prices will receive little added support from the declining stocks due to the bleak export prospects. The projected price range for 2002-03 is $2.50 to $3.10 per bushel, compared with an estimated $2.78 for 2001-02.

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