The U.S. winter wheat crop is nearly in the bin and is estimated to be 1.47 billion bushels compared to 1.71 billion bushels last year and a five-year average of 1.5 billion bushels. United States spring wheat will be harvested in August and September. Total U.S. wheat production is projected to be 2.06 billion bushels compared to 2.34 billion bushels last year and a five-year average of 2.09 billion bushels.
Since the U.S. winter wheat harvest started in late May, cash wheat prices have declined about 20 cents per bushel. At this writing, the price in central Oklahoma is $3.27 per bushel. There is a possibility that wheat prices may decline to near $3 by late August. Two determining factors will be U.S. corn and foreign wheat production.
During the last five years, wheat used for feed has averaged 220 million bushels per year. The USDA predicts that 200 bushels will be feed during the 2004/05 marketing year compared to 217 million bushels last year. Only 113 million bushels of wheat were feed during the 2002/03 marketing year.
Big corn crop
Corn production is projected to be a record 10.6 billion bushels. The five-year average is 9.6 billion bushels and 10.1 billion bushels were produced in 2003. Even through corn production is projected to increase 500 million bushels, corn ending stocks are projected to increase only 100 million bushels.
During the 2004/05 marketing year, corn prices are projected to average about 20 cents per bushel less than the estimated $2.83 average 2003/04 marketing year price. However since June 1, the Chicago Board of Trade September corn contract price has declined about $1. Corn used for feed is projected to be 50 million bushels higher than last year.
Foreign wheat production is projected to be about one billion bushels above the five-year average and 2 billion bushels higher than last year. Foreign wheat production is projected to be 19.91 billion bushels. The record production is 19.94 billion bushels, which was produced in 1997.
Higher foreign production more than offsets lower U.S. production. World wheat production is projected to be 22 billion bushels compared to 20.2 billion bushels last year. Even with higher production, world wheat ending stocks are projected to increase only 66 million bushels.
One problem with higher foreign wheat production is that much of the production is in exporting countries. Higher production is projected in the European Union, Argentina, Russia and most of the “not-traditional” exporters that export through Black Sea ports.
Canada's wheat production is projected to be the same as last year's 864 million bushels. Australia's wheat production is projected to be 882 million bushels compared to last year's 916 million bushel record crop and a five-year average of 780 million bushels.
Another factor impacting wheat prices is China. China's wheat production is projected to be 3.2 billion bushels compared to 3.18 billion bushels last year and a five-year average of 3.56 billion bushels. China is projected to import about 300 million bushels of wheat compared to 129 million bushels last year and only 15 million bushels during the 2002/03 marketing year.
Drop 20 cents
Given the relatively large foreign wheat crop, wheat prices may fall another 20 cents per bushel by late August. This implies that central Oklahoma and Texas panhandle wheat prices may fall to near $3.
Current expectations are for wheat prices to trend steady to lower and then increase into the fall and early winter. Wheat prices in central Oklahoma and the Texas panhandle are expected to reach $3.80 by Dec. 1.
The tendency is to overestimate large wheat crops and underestimate short crops. Foreign wheat production is projected to be large. Let's hope that it is overestimated. Right now, I would not bet on it.