Lower Forecast Wheat Crops in Canada, Australia, and EU Offset by Increases in Russia and Ukraine

Total Foreign Wheat Production Virtually Unchanged from Last Month 

Forecast wheat production in Russia is revised upward significantly to 48 million tons.  Ideal pre-harvest and harvest weather were observed throughout the Volga-Vyatka regions in central Russia, accounting for much of the increase.  This new forecast crop level marks the fifth consecutive year of growth in Russia’s annual wheat crop. 

USDA also made significant changes in other major wheat-exporting countries.  Forecast production in Canada and Australia are lowered year to year again this month as dryness persists in each country.  Canadian wheat production, now forecast at 15.4 million tons is the lowest since 1974.  USDA now forecasts lower production in the European Union (EU) than last month, but at 104 million tons, still higher than last year.  The increased crop in Russia is sufficient to counter these lower estimated crops and total foreign wheat production is now forecast at 526 million tons, virtually unchanged from last year and from last month’s estimates.  

The summer 2002 season closes with forecast Northern Hemisphere harvests generally expected at or below last year’s production levels.  Inclement weather was the summer’s lead story in field crop production with poor growing conditions in North America.  The United States and Canada recorded 25 year production lows, offset by better than expected results from Russia and Ukraine.  The weather was favorable in France and Germany throughout winter, spring, and early summer but wet weather in the late summer hurt wheat production in Germany.  Overall, the EU’s winter crop was larger than last year and was that region’s second largest in history.  Most of the wheat grown in the EU is winter wheat.  USDA’s forecast production levels are discussed in detailed production briefs below. 

Russia:  Harvest Reports Indicate Second Consecutive Bumper Wheat Crop

Russian wheat production for 2002/03 is estimated at 48.0 million tons, up 7.0 million or 16 percent from last month and up 1.1 million from last year.  Roughly 60 percent of the estimated total grain area of 48.1 million hectares was threshed as of September 2, and the harvest of winter grains is complete.  Output was high in the Southern District, which comprises a large part of the country’s prime winter wheat zone, due to a combination of increased sown area and high yield.  Yield was high in the Volga District also, despite persistent dryness during the growing season that caused concern among farmers in the region.  By early September, the harvest campaign had advanced into the spring wheat region of Western Siberia, where crop development has been delayed due to cool, wet weather. 

Ukraine:  Estimated Wheat Production Second Highest in Nine Years

Ukraine wheat production for 2002/03 is estimated at 21.0 million tons, up 3.5 million or 20 percent from last month, but down 0.3 million or 1 percent from last year.  The harvest is complete.  Reports from the Ministry of Agriculture indicate that yield was only 2 percent below last year’s outstanding crop.  High yields in western and central Ukraine compensated for lower yields in the south, where persistent dry weather from last fall through late spring hampered winter grain development.  Corn production is estimated at 3.0 million tons, unchanged from last month, but down 0.6 million or 17 percent from last year.  Excessive heat during mid-July, as the crop was advancing through the tasseling and silking stages, likely reduced yield potential. 

Wheat Production in the European Union Forecast to be Second Largest on Record

Wheat production in the European Union is forecast at 104.4 million tons in 2002, down nearly 3.3 million from last month, but up nearly 12.7 million from last year.  The 2002 wheat crop is now forecast to be the EU’s second largest in history, slightly below the 104.8 million tons produced in 2000.  Weather has been generally favorable in France, the largest wheat producer in the European Union.  French wheat production is forecast at 39.0 million tons, which would make it the second largest crop on record after the 39.8 million produced in 1998.  However, wet weather in August hurt yields in Germany, reducing production to 21.0 million tons.  Production in other EU member states, including the United Kingdom, Denmark, and Sweden, has been reduced this month mainly due to a decrease in harvested area, while maintaining above average yields.

Canada:  Record Wheat and Rapeseed Abandonment Reduces Production

Canadian wheat production is forecast at 15.4 million tons in 2002, down 2.6 million from last month, and down 5.2 million from last year.  Rapeseed production is forecast at 3.3 million tons in 2002, down 0.6 million from last month and down 1.6 million from last year.  A second consecutive year of dry weather during the critical late June to early August period has reduced wheat and rapeseed yields to levels well below average.  In addition to low yields, a survey conducted by Statistics Canada at the end of July indicated that area seeded to crops would be abandoned in record proportions.  The survey showed that 16 percent of the seeded wheat area would not be harvested for grain, resulting in an effective area of just over 8.9 million hectares.  For rapeseed, 18 percent of the seeded area will be abandoned, resulting in a harvested area of 3.2 million hectares.  For both wheat and rapeseed, the abandonment rates this year are dramatically higher than average, when it is unusual if more than 2 percent is not harvested.  Harvesting is now underway, although untimely rains have delayed progress in many parts of the prairie. 

India: 2002/03 Rice Production Forecast Decreased

India’s 2002/03 rice crop is forecast at 78.0 million tons, down 2.0 million or 3 percent from last month and down 13.6 million or 15 percent from last year.  Production is revised downward based on a reduction in estimated planted area and lower yield potential resulting from erratic monsoon rainfall.  Precipitation from mid-July to September remains below normal in most areas. Kharif rice comprises approximately 88 percent of India’s total crop and is highly dependent on monsoon rains.  The current forecast of 78.0  million tons is comprised of the kharif forecast of 68 million and a projected rabi forecast of 10 million. The Rabi crop is mostly irrigated and is grown in West Bengal, Andhra Pradesh, Tamil Nadu, and Karnataka.  The major surplus-producing areas of Punjab, Haryana, and western Uttar Pradesh are expect to produce significantly less this year as compared to last season due to a decline in planted area and low irrigation availability.  Prospects in the other major rice growing states vary from average to poor.

Attention Now Shifts to Summer Crop Production in the Southern Hemisphere

Dryness in Australia reduced forecast wheat, barley, cotton, and rapeseed production.  Winter crops were planted, emerged, and are now maturing having faced much dryer than normal weather.  In South America, Brazilian and Argentine producers will gain from higher world prices due to lower  U.S. soybean and corn crops.  In Argentina, a resolution to the terms for repaying of input loans that farmers owe to suppliers will allow for easier financing of field operations and will benefit high-input-requiring corn more than soybeans.  Higher world prices and lower exchange rates compared to last year should shore up South American farmers’ planting intentions for the September to January planting season.

Australia: 2002/03 Wheat Production Forecast Decreased

The 2002/03 Australian wheat crop is forecast at 15.0 million tons, down 5.0 million or 25 percent from last month and down 9.0 million or 38 percent from last year.  Area is forecast at 11.0 million hectares, down 0.5 million or 4 percent from last month and down 1.5 million or 12 percent from last year.  Area is lower this season due to dry conditions at planting.  Production is revised downward due to continued dryness.  Wheat growing areas of Queensland (QLD), New South Wales (NSW), and Victoria (VIC) have lost yield potential as a result of drought conditions.  In the 1995/96 Season, Australia produced 16.5 million tons.  Wheat areas of NSW, VIC, South Australia, and Western Australia received 40 to 60 percent of normal precipitation for the period June 1 to August 31.  As the crop enters the flowering stage during September, additional rainfall is needed to avoid further yield loss.

Australia:  Drought Reduction Partially Offset by Higher Cotton Prices

Australian cotton production for 2002/03 is estimated at 2.2 million bales, down 0.4 million or 15 percent from last month and down 31 percent from last year’s crop. During the past 6 months, 25 percent of the normal rainfall has fallen in northern New South Wales (NSW) with 58 percent of the normal rainfall occurring in east-central Queensland.  With these extreme drought conditions throughout the Australian cotton belt, irrigation allocations have been reduced sharply for cotton sowing operations, which should start in the next couple of weeks in central Queensland and extend southward a month later into NSW.  Australian irrigated area is estimated to fall by nearly 138,000 hectares from last year to 250,000 this year as water allocations are reduced.  With the current dry conditions throughout the cotton region, dry land area is forecast at 50,000 hectares, down from the 5-year average of 75,000 assuming normal rainfall in October and November.  Even in the face of these drought conditions and the strengthening Australian dollar, cotton area is supported by a higher Cotlook A-Index price, averaging 49.5 cents per pound so far this season through September 5, up 16 percent or nearly 7 cents over last year.  During the same time period, the Australian dollar strengthened in terms of the US dollar from 1.9475 to 1.8288.  The gain in cotton price has offset the stronger Australia dollar by about 8 cents per pound.

Argentine 2002/03 Soybean Production Forecast Up Due to Higher Yields

Soybean production in Argentina for 2002/03 is forecast at a record 31.0 million tons, up 1.0 million or 3 percent from last month and up 5 percent from last year’s output of 29.5 million.  Argentina’s economic situation was chaotic after the international loan default in December 2001.  The changes in export taxes, banking problems, and the currency devaluation (over 70 percent) have made decision-making for farmers difficult.  However, since July the currency has stabilized and prices for agricultural commodities have increased.  Larger expected returns for soybeans this season are expected to improve soybean management more than previously believed.  Soybeans in Argentina are planted starting in October, for first-crop soybeans, and finishing in January, for the second crop.  Soybean area is expected to increase year-to-year as farmers shift area from wheat and corn.  The decrease in wheat area, especially in central Argentina, will lead to a decrease in second-crop soybean area.  Farmers will opt to plant higher yielding first-crop soybeans instead.

Argentine 2002/03 Corn Production Forecast Up Due to Higher Area

Argentina’s 2002/03 corn production is estimated at 12.5 million tons, up 1.5 million from last month, or 14 percent, but down 13 percent from last season’s output of 14.4 million tons.  Economic conditions as noted above will affect corn production as well.  Corn planting in Argentina begins in early September and usually reaches 50 percent of completion by the end of October.  National corn yields are expected to be below average at 5.56 tons per hectare as farmers are still expected to limit their use of inputs.

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