By Sept. 30, about 92 percent of the world’s 2009-2010 marketing year wheat production will have been harvested. This means that about 22.2 billion bushels of USDA’s 24.1 billion bushel world wheat production estimate is in the bin.

Wheat use for the 2009-2010 marketing year is projected to be 23.6 billion bushels. Cleanup of the spring wheat harvest and Southern Hemisphere wheat harvest only needs to produce 1.4 billion bushels to meet consumption needs (22.2 bb + 1.4 bb). The USDA projects that spring wheat cleanup and Southern Hemisphere production will be 1.9 billion bushels.

Argentina and Australia are projected to produce about 1.2 billion bushels. Argentina is projected to produce 349 million bushels compared to a five-year average of 536 million bushels. Australian wheat production is projected to be 845 million bushels compared to a five-year average 690 million bushels.

This is Argentina’s second below-average wheat crop in a row and there is speculation that Argentina may suspend wheat exports. The USDA projects Argentine 2009-2010 wheat exports to be 147 million bushels compared to a five-year average of 357 million bushels.

Australia is expected to export 570 million bushels compared to a five-year average of 450 million bushels.

Australia’s increase in exports (120 million bushels) offsets about half of Argentina’s decrease in exports (210 million bushels). Additional declines in Argentine exports could result in higher U.S. exports.

Wheat prices compared to other grain prices have not been following the same pattern. Relatively large corn price movements have had little impact on wheat prices. Wheat supply and demand rather than what happens to other grains will determine wheat price changes.

Wheat demand is relatively stable and the odds are that use will be near the 23.6 billion bushel estimate.

Wheat supply is about the only market factor that is unknown and that could have a big impact on prices. Because about 85 percent of the world’s wheat has been harvested, the impact of lower production is limited.

For wheat prices to increase 50 cents, either Argentina or Australia’s wheat production would have to be well below expectations. Argentina’s wheat production is already projected to be 35 percent below average. The tendency is to underestimate short crops and overestimate large crops.

One other factor that could impact prices is planting the 2010 winter wheat crop. If Argentina and Australia’s wheat production is less than current expectations and U.S. winter wheat planted acres are significantly less than last year, wheat prices could increase 50 cents.

The wheat market is signaling producers to plant less wheat than has been planted the last two years. Some producers have indicated that marginal acres will not be planted.

The expected central Oklahoma and Texas Panhandle June 2010 wheat price is about $4.75. The June 2010 price could be as low as $4.25 or as high as $5.50.

At this writing, the KCBT July 2010 wheat contract price is about $6.10. Using a minus 75 cent basis, the market is predicting about $5.35 for June 2010 delivered wheat.

World wheat ending stocks of 6.6 billion bushels (USDA’s prediction) or even 6.0 billion bushels (which would require 600 million bushel less production than is expected), will limit how high wheat prices can go. Wheat at $6 does not appear to be in the cards and is not expected to be for some time.