Normally the wheat marketing year (June 1 through May 31) price trend is set in late August and early September. If that is the case for the 2011/12 marketing year, the price trend is down, and prices would be expected to continue to decline.

Since April 25, 2011, Kansas City Board of Trade (KCBT) December wheat contract prices have been between $10.05 and $7.20. The December contract price peaked on April 25, 2011, at $10.05. The Dec. contract price remained between $9 and $10 until June 13. By July 1, the Dec. wheat contract price had declined to $7.22.

After July 1, the Dec. wheat contract price increased to $8.95, and then by the third week in September, the Dec. contract price was below $7.25. This was a roller coaster ride that took $2.80 off the market.

In April, 2011/12 wheat marketing production was expected to be less than 2011/12 consumption. United States wheat ending stocks were projected to decline from 839 million bushels in 2010/11 to 702 million bushels in 2011/12. World wheat ending stocks were projected to decline from 6.8 billion bushels to 6.7 billion bushels.

Since the May, 2011 USDA World Agricultural Supply and Demand Estimates, the U.S. wheat ending stocks estimate has been increased to 761 million bushels. The five-year average is 712 million bushels.

The world wheat ending stocks estimate has increased from 6.9 billion bushels to 7.2 billion. The five-year average of world ending stocks is 6.5 billion bushels. Both U.S. and World wheat ending stocks are projected to be above average.

The increase in world wheat ending stocks was mostly due to higher than expected production. The production increases were mostly in the wheat exporting countries of Russia, Kazakhstan, Ukraine, Canada, and the EU-27. Except for the EU-27, these countries have an advantage to sell wheat to the Eastern Asian and North African countries.

Reports indicate that Russia’s goal is to become a “Major Exporter” of wheat. The reports also indicate that Russia was selling export wheat from $0.75 to $1.25 below the world price.

About 89 percent of the world’s 2011/12 marketing year wheat has been harvested. Of the remaining 11 percent, Argentina and Australia have about 50 per cent, or about six percent of world wheat production.

Argentina is projected to harvest an average wheat crop. Australia is projected to harvest their third highest wheat crop in history. Both Argentina and Australia will be competitive in the wheat export market.

Meanwhile in Texas, Oklahoma, and Southern Kansas, a drought makes the odds of an average 2012 wheat crop relatively low. These odds are on top of Texas’s 52 million bushel (56 percent), Oklahoma’s 74.8 million bushel (69 percent), and Kansas’ 273 million bushel (82 percent) 2011 wheat crops.

Texas, Oklahoma, and Kansas’ 2011 wheat production was 133 million bushels below their five year average. This is 14 percent of average U.S. hard red winter wheat production. Lower production by these three states in 2011 and again in 2012 was and can easily be made up by production in other parts of the world.

Excess wheat exists in the world, and most of the excess is in countries that will export it. This is why wheat prices have declined and may continue to do so.

A bit of good news is that a major part of the price break was after the 2012 crop insurance wheat price was established at $8.62 per bushel.