The expected June 2010 central Oklahoma and Texas Panhandle wheat price is $4.50. A pessimistic harvest price is $3.75 and an optimistic harvest price is $5.25. Pessimistic implies that there is a one in six chance (~17 percent) that the harvest price will be below $3.75 and a 17 percent chance that harvest prices will be above $5.25.
Market factors that will determine the harvest wheat price are wheat stocks, U.S. winter wheat production, U.S. spring wheat planted acres and condition, corn planted acres and condition, and projected 2010 marketing-year world wheat production.
There is an excess of wheat. United States wheat ending stocks (wheat in the bin on May 31) are projected to be 976 million bushels. Average annual U.S. wheat ending stocks are about 578 million bushels and average annual production is 2.14 billion bushels. At the beginning of harvest, about 46 percent of an average U.S. wheat crop will already be in storage.
World wheat ending stocks are projected to be 7.2 billion bushels compared to a five-year average of 5.6 billion bushels. Average annual world wheat production is 23.4 billion bushels. World wheat ending stocks are projected to be 31 percent of an average annual world wheat production.
The USDA estimated that 37.1 million acres of winter wheat was planted for the 2010 crop. The five-year average is 43.3 million acres. Using the five-year average winter wheat yield of 44 bushels and 81 percent of the planted acres harvested, 2010 winter wheat production would be 1.32 billion bushels. The five-year average is 1.54 billion bushels. Winter wheat production for 2009 was 1.52 billion bushels.
The five-year U.S. spring wheat production average is 600 million bushels. With a 6.2 million acres reduction in winter wheat planted, analysts predict that spring wheat planted acres will be higher than last year and will be about the five-year average of 13.3 million acres.
Using 13.3 million acres, the five-year average yield of 45 bushel per acre and 96 percent of the planted acres harvested, spring wheat production would be 575 million bushels.
Adding 100 million bushel for durum wheat production, total U.S. 2010 wheat production would be 2.0 billion bushels (1.32 + 0.58 + 0.1). Add 100 million bushels for 2010-2011 marketing-year wheat imports and the total U.S. wheat supply for the 2010-2011 marketing-year would be 2.1 billion bushels.
United States wheat use for the 2009-2010 wheat-marketing year is projected to be 2.0 billion bushels, and the five-year average 2.16 billion bushels. Using 2.16 billion bushel use and average production, 2010 marketing year wheat ending stocks are not expected to decline.
Some analysts predict that corn planted acres will be about 3 million acres higher than last year. Corn planted acres are expected to be about 89.5 million acres compared to a five-year average of 86.5 million.
With corn ending stocks projected to be over 1.7 billion bushels and about 89.5 million planted acres, corn prices are not expected to support wheat prices. Even if there some problems with corn planting, corn price would have a hard time increasing enough to support wheat prices in June.
India and Pakistan will essentially have their 2010 wheat harvested and China’s wheat harvest will be about 50 percent complete by June 1. Both India and China have above average wheat ending stocks. Below-average wheat production in these countries could support U.S. wheat prices in June, but not by very much.
The next wheat harvest that could have a major impact on U.S. wheat prices is the U.S. winter wheat crop. Higher wheat prices will not help U.S. wheat producers if they have very little wheat to sell.
Most producers would prefer an above-average wheat crop with a $4 price than a crop failure (that is what it would take in Oklahoma and Texas) with little or no wheat to sell and a $5-plus price.
One marketing strategy to consider in 2010-2011 is to sell one-third of the wheat crop (hope it is a big one) at harvest. Then hope for a poor wheat failure in other countries and sell the remaining two-thirds in the fall and winter at a higher price.