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Analysts Forecast Strong World Wheat Market in 1989

November 30, 1988

WASHINGTON (AP) _ Government and private analysts said today the outlook for world wheat markets looks strong next year and offers U.S. producers a good opportunity to make gains.

More land worldwide is expected to be devoted to wheat production in 1989 because of strong crop prices and government incentives, including easing of land-idling restrictions for farmers in the United States, said Bruce R. Weber, an economist with the Agricultural Stabilization and Conservation Service.

In prepared remarks for delivery at today’s session of the USDA Agricultural Outlook Conference, Weber forecast that total harvested areas for wheat could rise 5 percent to 6 percent above 1988 levels to 230 million to 232 million hectares worldwide. A hectare is a metric measure equalling nearly 2 1/2 acres.

″If the recent upward trend in yields continue, the world should easily harvest a 1989 wheat crop in excess of 500 million (metric) tons,″ said Weber. ″How favorable the growing season is will dictate how close the crop comes to the record 530 million harvest of 1986.″

Weber noted that recent wheat use globally has exceeded 530 million metric tons, which has caused stocks worldwide to decline. Because production is likely to fall below wheat utilization, Weber said ″this sets the stage for another strong year for world wheat trade.″

USDA’s World Agricultural Outlook Board projects that U.S. wheat and flour exports will decline in volume in fiscal year 1989 to 40.2 million metric tons from 41.5 million but the value will rise to $5.9 billion from $4.6 billion in 1988. A metric ton is 1.1 tons.

Richard Gady, vice president of economic research for ConAgra Inc., recommended that the government respond to world wheat demand by lowering from 10 percent to 5 percent the acreage reduction requirements for U.S. farmers to participate in the wheat program in 1989. That would permit expanded U.S. production.

He also urged aggressive use of the Export Enhancement Program, under which the government subsidizes grain sales to offset competition from the European Community and other suppliers.

″It appears that the wheat market is in a cyclically stronger period as world surpluses have been reduced and the demand environment is improved,″ said Gady. ″This should provide U.S. producers an opportunity to put productive acres back to work and expect a reasonable return.″

U.S. corn plantings in 1989 could rise by 8 million to 10 million acres because of government program changes and next year’s crop could fall between 7.7 billion to 8.3 billion bushels, according to David B. Hull, an ASCS economist. This year’s crop was 4.67 billion bushels, down 34 percent because of the drought.

Hull said he expected barley and oat crops to increase more than 75 percent next year and be about double 1988 amounts. Grain sorghum production should return to normal next year, he said. This year’s grain sorghum crop was 546 million bushels, down about 26 percent from 1987.

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