There is 205 percent more on-farm storage wheat than last year (280 million bushels vs. 92 million bushels). Total U.S. wheat stocks are over 1 billion bushels compared to 710 million bushels last year. Producers still own a lot of wheat.
The increase in wheat stocks, compared to last year (290 million bushels), is more than the combined average Oklahoma and Texas wheat crops. Indications are that the increase in 2008-2009 wheat marketing year wheat ending stocks will be about 34 percent of an average U.S. wheat crop.
On March 31, the USDA released the Prospective Plantings estimates. All wheat planted acres are projected to be 58.6 million aces compared to 63 million acres last year and a five-year average of 59.6 million acres. Hard red winter wheat planted acres are 30.9 million acres compared to 32.5 million last year and a five year average of 31.1 million acres.
Wheat prices for the 2009-2010 wheat marketing year will depend on production, exports, and foreign wheat production. The U.S. winter wheat crop (42.9 million acres) has been planted. What is uncertain are how many spring wheat acres will be planted, the percent of the total wheat planted acres that will be harvested, and the average yield.
The USDA projected that 15.7 million acres of spring wheat will be planted. Almost 50 percent of these acres are in North Dakota where flooding and snow are delaying planting. Reports indicate that some producers are preparing to replace spring wheat with another crop.
The single most useful price indicator is the stocks-to-use ratio (ending stocks divided by annual use). Another price indicator is ending stocks.
2008-2009 marketing year wheat ending stocks are projected to be 715 million bushels (USDA releases a new estimate on April 9). Ending stocks were 306 million bushels last year and a five-year average of 520 million bushels.
The stocks-to-use ratio is estimated to be 32 percent compared to 13 percent last year and a five-year average of 24 percent.
To create the production benchmark, assume that USDA’s planted acres estimate of 58.6 million is correct, that the percent acres harvested is the five-year average of 85.1, and that yield is the five-year average of 41.8 bushels per acre. In this case, 2009-2010 wheat marketing year production would be 2.085 billion bushels.
Total wheat supply for the 2009-2010 marketing year would be 2.9 billion bushels. Total supply is calculated by using 2.085 billion bushels production, 100 million bushels imported, and beginning stocks of 715 million bushels.
Total wheat use would include domestic use and exports. Domestic use has averaged 1.15 billion bushels, and exports have averaged 1.05 billion bushels. The five-year average wheat use is 2.2 billion bushel.
Ending stocks for the 2009-2010 wheat marketing year are estimated to be 700 million bushels, which is 2.9 billion bushels supply minus 2.2 billion bushels demand.
The 2009-2010 marketing year stocks-to-use ratio would be 32 percent (700 million bushels divided by 2.2 billion bushels). Neither ending stocks nor the stocks-to-use ratio are expected to change.
Benchmarks to watch are: wheat planted acres (58.6 million acres) — planted acres may decline but probably will not increase; percent harvested acres (85.1 percent); average yield (41.8) — it is a long time to harvest and anything can happen with yield; and exports (1.05 billion bushels) — if world wheat production is 23 billion bushels or more, U.S. exports may be closer to 950 million bushels than 1.05 billion.
Current estimates indicate that the 2009-2010 average annual wheat price will be in the $5.25 to $5.75 range. Currently the KCBT July wheat contract price and the Oklahoma/Texas basis for June 2009 delivery indicate a harvest price of about $5.20 ($6 KCBT July – $0.80).
The 2009-2010 marketing year price trend will depend on foreign wheat production during the August through December time period.