The USDA projected U.S. winter wheat planted acres to be 44.25 million acres compared to 41.735 million acres last year and a five-year average of 43.2 million acres. Using the five-year average yield (44.3 bushels per acre) and harvest acres at 81 percent of planted acres; U.S winter wheat production is projected to be 1.59 billion bushels.
The 10-year average production is 1.59 billion bushels.
The USDA will not release the spring wheat planted acres projection until March 31. Spring wheat planted acres should be at least the five-year average of 19 million acres, harvested acres 93.4 percent and yield 33.7 bushels per acre.
Thus, spring wheat production is expected to be about 600 million bushels.
This implies that total 2003 U.S. wheat production is expected to be 2.19 billion bushels. Beginning wheat stocks are projected to be 420 million bushels. and with about 95 million bushels of imports, total 2003/04 U.S. wheat supplies are projected to be 2.71 billion bushels compared to the five-year average of 3.1 billion bushels.
U.S. wheat use has averaged 2.3 billion bushels over the last five years compared to 2.05 billion bushels during the 2002/03 marketing year. The reason 2002/03 wheat use is below average is because of lower exports and lower feed use.
Total wheat use during the 2003/04 marketing year is expected to be below average.
Using the 2.71 billion bushels of wheat supply estimate and 2.15 billion bushels use estimate, U.S. 2003/04 wheat-ending stocks are projected to be 560 million bushels. Ending stocks for the 2002/03 marketing year are projected to be 418 million bushels and the five-year average is 793 million bushels.
The five-year average wheat price of $2.77 may be used as a benchmark. Expected 2003/04 wheat-ending stocks of 560 million bushels are below the five-year average of 793 million bushels thus, 2003/04 wheat prices are expected to be above the $2.77 average.
Kansas City Board of Trade wheat contract price tends to support a $3.15 average annual price estimate. The KCBT July wheat contract price is $3.30.
Using a minus 35 cent basis indicates a $2.95 wheat price during June 2003.
The KCBT September 2003 contract price is about 2 cents less than the July contract, and the December contract price is about 6 cents higher. The average basis increase between mid-June and mid-November is about 16-cents per bushel.
This implies a November 2003 wheat price of $3.17.
Increasing ending stocks and weak demand raises red flags. In my opinion, wheat prices could easily be $2.80 during June and average $3 during the 2003 marketing year. For this to happen the KCBT July wheat contract just has to decline 15 to 20 cents and/or the basis has to be lower than expected.
It is educational to go back to early-June 2002. The USDA was projecting 2002/03 wheat-ending stocks to be 555 million bushels, down from a 619 million bushel estimate in May 2002.
The 2002/03 marketing year average price was projected to be $2.90 and the price in Texas and Oklahoma was about $2.70.
In the January 2003 report, the USDA estimated ending stocks to be 418 and the average price to be $3.65. Prices peaked at $4.80 in October and the current price is about $3.35.
This is mentioned to make the point that things have a tendency to change fast. The above is USDA's and my best guess about what will happen over the next year. However, a lot can happen to lower the 2003 U.S. and/or foreign wheat production.
With ending stocks projected to be 418 million bushels, lower production or increased demand would cause prices to be above expectations.
Even if production is above expectations and prices below, producers will have more wheat to sell at nearly the same price as in June 2002.
Dr. Anderson is an economist at Oklahoma State University in Stillwater. Readers may call 405-744-6082, or e-mail Anderso@okstate.edu.