Soft red winter wheat acreage forecast higher for 2006

Mother Nature was kinder to soft red winter wheat growers last fall. USDA says improved planting conditions allowed producers of soft red winter wheat, the type grown in the Southeastern states, to increase their plantings by 19 percent.

Acres of hard red winter and white winter wheat, the types grown in the Northern Plains, declined by about 1 percent, on the other hand. On balance, total U.S. winter wheat seeding is expected to have increased by 2 percent.

“Except for the weather-related rebound in soft red winter wheat, wheat area continues the long-term stagnant-to-declining trend,” says Ed Allen, international grains analyst with USDA's Economic Research Service. Allen gave the Grains and Oilseed Outlook at USDA's annual Agricultural Outlook Forum in Arlington, Va.

Allen told participants in the Grains and Oilseed session at the Forum that while total wheat area is expected to rise 2 percent to 58 million acres, wheat harvested acreage could decline by 1.4 million in 2006.

“This reflects a return to normal abandonment rates for most states and additional modest downward adjustment for Texas and Oklahoma to account for ongoing drought,” he said. “At 48.7 million acres, U.S. wheat harvested area would be the lowest since 2002, when drought devastated the Southern Plains.”

Allen said poor crop conditions continue to plague farmers in Texas and Oklahoma where the lack of moisture threatens to reduce yield prospects for spring-planted crops as well.

“The Texas crop conditions were lower than reported at any time since the current system was instituted in 1986,” he said. “Without timely rains, these states will have significantly higher-than-average abandonment and below-trend yields.”

USDA is forecasting total wheat production in 2006 to be down slightly from the previous year, but still around 2.1 billion bushels. A modest decline in harvested area is expected to be partly offset by a small increase in yield, returning to trend levels for all states but Texas and Oklahoma.

“Although current crop conditions are exceptionally poor in Texas and Oklahoma, there is only a weak correlation between early crop conditions and yields, as rains in late winter and spring are crucial,” says Allen. “The national average wheat yield in 2005 was slightly below-trend, so a return to trend for most states increases the national average.”

Beginning stocks of wheat for the 2006-07 marketing year are nearly unchanged from 2005-06, the USDA analyst said. But imports are expected to increase with no anti-dumping duties on spring wheat from Canada. Increased imports are expected to partly offset reduced production, leaving U.S. supplies down less than 1 percent in 2006-07.

Domestic wheat use is expected to increase slowly to 1.19 billion bushels in 2006-07. Flour production and use are forecast to increase slightly, but at a growth rate less than the population, so per capita flour use could decline, according to the analyst. Feed and residual use is also expected to remain unchanged, leaving total domestic use up slightly.

Grain companies are expected to ship less U.S. wheat as exports decline 2.5 percent to 975 million bushels in the face of intense competition.

“Improved quality in Canada is expected after two years of large, but poor-quality crops,” said Allen. “U.S. good-quality hard wheats are expected to face much stiffer competition in 2006-07. Increased competition from Australia is expected, especially in Iraq.”

He said soft wheats will continue to face tough selling by the European Union and Australia, but wheat area in Russia and the Ukraine is reportedly down, so soft red winter wheat may move into export channels with a smaller discount in 2006-07.

Developing countries are also expected to provide a growing demand base for world wheat trade.

The USDA analyst said the U.S. wheat industry is expected to end the 2006-07 marketing year (July-June) with stocks basically unchanged from 2005-06's 543 million bushels. The projected stocks-to-use ratio of 25 percent is similar to the 24.8 percent forecast for 2005-06.

“With the relatively stable stocks-to-use ratio, the season average farm price is projected unchanged at $3.40 per bushel for 2006-07,” says Allen.

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