USDA's latest supply-demand estimates indicate that wheat fundamentals are improving in the United States and the world, although slowly.
The best news is that for the third straight year, world consumption has outpaced production (by 17 million metric tons), which has had the effect of reducing the world's supply of wheat.
"We're significantly moving our ending stocks down," said Paul Dickerson, vice president of U.S. Wheat Associates. "The stocks-to-use ratio is getting down to historically low numbers. The main difference between now and five years ago, when we had a pretty good price spike, is that today we have a whole lot more U.S. stocks.
Dickerson says that these large supplies in the United States and other major wheat exporters are slowing price recovery.
In addition, there's been a major shift in the composition of world importers in the past five to 10 years, notes Dickerson. "We're seeing more private sector buyers than public sector buyers. The private sector is closely watching unit costs, so with prices being as weak as they have, those in the private sector have been hand-to-mouth buyers.
"If we have a catalyst that really rocks the market and if we could scare a lot of folks into coming into the market, that could kick up prices."
On Oct. 12, USDA estimated total 2000 U.S. wheat production at 2.239 billion bushels, down 63 million from the previous forecast and down 3 percent from 1999.
USDA also forecast larger imports than last year, smaller U.S. supply and higher domestic use. The latter was raised 25 million bushels from last month's figure because of larger-than-expected feed and residual use during the June-August quarter.
U.S. wheat ending stocks are currently projected at 888 million bushels, down 88 million from last month and the lowest since 1997-98. USDA forecast the season average price to farmers at between $2.35 and $2.75 per bushel, up 10 cents on the low end of the range from a month earlier.
USDA also made significant production changes for several U.S. competitors. Australia is forecast to produce 21 million tons of wheat, down 2 million from last month's projection and more than 3 million less than last year's record.
"Frankly, several people think that USDA was conservative estimating Australia's production at 21 million tons," Dickerson noted. "It could be under 20 million metric tons."
Preliminary harvest reports from Canada indicate lower-than-expected yields, dropping the production forecast by 500,000 tons to 25.5 million for 2000-01. Canada's wheat production is expected to decline by over a million tons from the previous year, despite a 5-percent increase in area. Canada's wheat export forecast declined in line with lower production.
Although the United States faces less competition from Australia and Canada this month, U.S. export prospects remain unchanged because of the modest pace of early-season sales.
World wheat consumption is expected to expand slowly in 2000-01, still, it's forecast to remain significantly larger than production, reducing global ending stocks by 17 million tons over the course of the year, to 111 million tons.
On Oct. 3, U.S. Wheat Associates provided a final update on the quality of the 2000 U.S. crop. The average test weight for hard red spring wheat was 60.4. That's higher than the 1999 average of 59.3. In contrast, the average test weight for the durum crop was 58.8, compared to 59.8 last year.
Meanwhile, as of Oct. 8, 50 percent of the winter wheat crop was seeded, up 16 percentage points from a week earlier, but below the five-year average. Fall planting conditions have improved very little in the Southern Plains, where drought conditions have persisted for several weeks. Winter wheat planting in this region is behind normal due to dry soil conditions.
Wheat had emerged on only 20 percent of the planted area, compared with the five-year average of 34 percent.