by Joe Sowers, US Wheat Associates market analyst

USDA expects world wheat consumption to increase for the second year in a row, setting a new historic record. USDA pegs 2005/06 total world consumption at 614 MMT, 8 MMT higher than the previous year and 23 MMT above the 5-year average. The increase results from high availability and use of feed-quality wheat in the Former Soviet Union (FSU-12) and the European Union (EU-25).

USDA forecasts the FSU-12 and EU-25 will account for 98% of the increase in world wheat use in 2005/06, the majority of which will be used for animal feed. Feed will account for 4 of the 4.5 MMT increase in total use in the EU-25 and 3 of the 3.7 MMT increase in the FSU-12. Use of feed wheat, particularly in the EU-25 and FSU-12, varies widely based on the availability of lower quality wheat in the region. Increased production incentives for the EU-25’s new member states and beneficial weather in the FSU-12 will lead to good harvests this year.

Feed use in the FSU-12 and EU-25 (32 percent and 50 percent respectively) far exceeds the 18 percent world average and the 17 percent feed use rate in the U.S. Nonetheless, feed use in the FSU-12 has declined dramatically from the early 1990s when more wheat was destined for animal than human consumption. In 1990/91, 59 MMT out of a total 109 MMT went to feed use. With the break-up of the Soviet Union and subsequent decline in the livestock sector, feed use declined by 73 percent by the end of the decade. This year, total FSU-12 wheat use is forecast to reach 77 MMT, with only 24 MMT going to feed.

The EU-25 on the other hand, has steadily increased the percentage of wheat use destined for animal consumption. In 1990/91, the countries that make up the current EU-25 fed 42 percent of their total wheat use. Feeding is forecast to exceed 50 percent this year.

With rising populations, wheat food consumption in both the FSU-12 and EU-25 has increased since 1990/91. With the dissolution of the Soviet Union and the ensuing economic hardships, wheat food consumption in the FSU-12 dipped by as much as 10 percent during the mid-1990s, but has regained that loss with current food use 6 percent above 1990/91 levels. The EU-25 has increased food use levels by 25 percent over the same period.

U.S. total wheat use is forecast to decline moderately again this year. After reaching 38 MMT in 1998/99 (27 MMT food use, 11 MMT feed use), U.S. domestic wheat use has consistently declined. Wheat food consumption peaked in 2000/01 at 28 MMT and has declined about 1-2 percent in each of the ensuing years. Food use this year is forecast to reach 26 MMT, a 0.6 percent decline from 2004/05.