August 14, 2003

 

U.S. and World Wheat Economies Predicted to Improve

World demand for common and durum wheat through 2012 is expected to grow faster than world production resulting in gradual increases in prices, according to two agricultural economists at North Dakota State University.

“World trade volumes of both classes of wheat are expected to expand, but trade volume for durum wheat may grow faster than common wheat,” says Won Koo, a professor of agricultural economics at NDSU and director of the Center for Agricultural Policy and Trade Studies.

Demand for common wheat will grow the fastest in China and Tunisia while demand for durum will grow the fastest in Algeria, according to Koo and the study’s co-author, Richard Taylor, an NDSU research associate.

“Import demand for common and durum wheat is largely based on optimistic income growth that ranges from 2.5 to 6 percent annually in developing and developed countries,” Koo says. “If the predicted income growth is not realized, import demand could grow slower than predicted and estimated prices could be lower.”

The outlook projection is also based on an assumption that current farm and trade policies adopted by wheat exporting and importing countries will not change.

There will be fluctuations during the period. The higher prices levels experienced in 2002 due to weather conditions will not be maintained in the short term, Koo notes. He predicts that common and durum wheat prices will decline sharply in 2003 and then increase gradually.

U.S. durum exports are projected to increase 37.1 percent from 646 thousand metric tons in 2000-02 to 886 thousand metric tons in 2012. Common wheat exports are predicted to increase gradually from 22.8 million metric tons in 2000-02 to 25.9 million metric tons in 2012.

North Dakota produces approximately 80 percent of the durum and 60 percent of the hard red spring wheat produced in the United States.

Other findings from the study:

• Common wheat demand in Southeast Asian countries is predicted to grow for the 2002-2012 period. China has been a net exporter of wheat for the last two years but will become an importer in the future.

• The former Soviet Union will remain an exporter of common wheat. The region may substantially increase its domestic production of common wheat.

• Egypt, the largest importer of common wheat in the North African region, is predicted to increase its imports of common wheat. Import demand for common and durum wheat in other countries in the region is also expected to increase.

• Import demand for common wheat in Brazil, Venezuela and Mexico is expected to be strong during the 2002-2012 period. Import demand for durum wheat in Venezuela is also predicted to be strong during the forecasting period.

The Uruguay Round of GATT negotiations, which became effective in 1995, has affected trade flows of wheat from exporting countries to importing countries. Recent financial crises in several Asian countries such as South Korea, Thailand, Indonesia, and Taiwan, also have affected the world wheat market, Koo says. Import demand for wheat within those countries has been substantially reduced, resulting in depressed wheat prices in the world market. The average export prices of wheat at the Gulf ports decreased from $5.02 per bushel in 1996-97 to $3.30 per bushel in 2001-02 before increasing to $4.16 last year because of weather conditions in the United States, Canada and Australia.

###

Sources: Won Koo, (701) 231-7448, wkoo@ndsuext.nodak.edu
Richard Tayor, (701) 231-7990, staylor@ndsuext.nodak.edu
Editor: Rich Mattern, (701) 231-6136, richard.mattern@ndsu.nodak.edu