Washington, DC
February 22, 2007
Soucrce:
U.S. Wheat Associates Wheat Letter
by Joe Sowers, U.S. Wheat
Associates Market Analyst
The “USDA Agricultural Projections to 2016” report released last
week forecasts a 22 percent increase in U.S. wheat exports by
2016/2017. This annual, long-term forecast for agricultural
supply and demand shows growth in both domestic and foreign
consumption of U.S. wheat leading to two percent more planted
wheat acres over current levels.
The Interagency Agricultural Projections Committee prepares the
report based on specific assumptions about macroeconomic
conditions, policy, weather and international developments. USW
cautions that things change and the projections should be
reviewed in that context.
As expected, the report projects rapidly expanding biofuels
production over the next few years in several countries. This is
likely to change price relationships among various agricultural
commodities, the report stated: “Increased demand for grain
(especially corn) used to produce ethanol increases the price of
corn relative to prices for other grains. Prices for other
grains also rise, buoyed by their feed value as a replacement
for corn, as well as reduced production due to acreage shifts
from crops competing with corn, such as soybeans.”
The report projects ethanol production in the U.S. to drive corn
acres up by 15 percent to nearly 83 million harvested acres. And
projections for Canada show increased demand for vegetable oils,
especially rapeseed oil for biodiesel production, and for
barley. In turn, the report notes, this will reduce wheat area
and lead to a slow trend down in Canadian wheat exports.
Lower wheat-to-corn price ratios during most of the projection
period enable wheat to compete effectively with corn for feed
use in a number of countries. The U.S. is also expected to use
28 percent more wheat in livestock feed. South Korea is
projected to substitute one million tons of feed wheat for corn
annually by 2016 while Europe should remain the world’s largest
user of feed wheat.
By 2016/2017, total world wheat trade is expected to increase by
31 MMT or 28 percent above current levels. The strongest demand
growth will likely come from Sub-Saharan Africa (5 MMT),
including Nigeria and South Africa, Brazil (1.6 MMT), Egypt (1.3
MMT), China (1.9 MMT) and South Korea (1.6 MMT).
The forecast also sees U.S. export volume growing by 5.4 MMT, or
22 percent from the 2006/2007 levels, while intensified foreign
competition drops U.S. world wheat trade market share from 23
percent in 2006/2007 to 22 percent in 2016/2017. ERS forecasts
an eight percent gain of three MMT in U.S. domestic wheat
consumption over the next decade, rebounding from a five MMT
decline since 2000/2001.
The entire report is posted on the Web at
http://www.usda.gov/oce/commodity/ag_baseline.htm. |
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