The U.S. winter wheat harvest is underway and early projections indicate another sizable crop is coming out of the fields. With U.S. carryover stocks for all wheat up nearly 45 percent from a year ago, prices have seen downward pressure in recent weeks. As a result, U.S. wheat is once again very competitively priced with other origins.

USDA’s latest projections place 2010/11 winter wheat production at 1.5 billion bushels, a three percent decline from 2009/10. This reduction is due mainly to what USDA expects to be a 30 percent drop in soft red winter (SRW) production compared to 2009/10. The outlook for HRW and winter white wheat is much different, however, with USDA projecting larger crops for both classes.

USDA expects increased harvested area and greater yields to offset an 11 percent decrease in HRW planted acreage. The largest production increases are expected in Texas, where the crop is expected to double, and Oklahoma, where USDA’s forecast calls for a 67 percent increase from last year’s crop. USDA currently pegs the HRW crop at 979 million bushels, which would be an increase of 40 million bushels from last year and eight percent above the five-year average. Winter white wheat production is pegged at 219 million bushels, an increase of nine percent from 2009/10. Crop conditions are also up from last year with 66 percent of the winter wheat crop rated in either good or excellent condition, compared to 44 percent a year ago.

HRW FOB values prices ran well above other origins for much 2009/10 marketing year. In fact, HRW FOB values out of the Gulf were nearly 40 percent greater than Russian wheat prices in June 2009. That situation has changed dramatically, however. In the latest Egyptian GASC tender on May 28, 2010, 11 percent protein HRW was offered at $179.50 per metric ton FOB, only one dollar more than a winning Russian bid of $178.50 per metric ton. Commercial traders indicate that HRW FOB values have fallen even further in the past week to approximately $160 per metric ton, a level not seen since September 2005.

The latest USDA commercial sales data indicate buyers are taking advantage of lower HRW prices. New crop sales for all wheat are 20 percent above last year’s pace, with HRW accounting for 37 percent of these sales. HRW on its own is 35 percent ahead of HRW sales at the same time last year. As harvest progresses in the upcoming weeks, we should continue to see excellent buying opportunities for our customers.