Oklahoma and Kansas wheat crop conditions are rated the lowest since 1996, and Texas wheat crop conditions are rated the lowest since 1989. Poor to very poor crop conditions do not guarantee below average yields. Poor conditions just increase the odds of below average yields.
Oklahoma's wheat crop is rated 19 percent good to excellent and 42 percent poor. This time last year, Oklahoma's wheat crop was rated 60 percent good and 11 percent poor. In 1996, Oklahoma's wheat yields were 19 bushels per acre compared to the five-year average (1991 -1995) of 28.5 bushels.
Kansas' wheat crop is rated 25 percent good and 40 percent poor. Last year the ratings were 53 percent good and 12 percent poor. The average yield in 1996 was 29 bushels compared to the five-year average (1991-1995) of 34.6 bushels per acre.
Texas wheat is rated 18 percent good and 56 percent poor compared to last year's 46 percent good and 18 percent poor. Texas' 2010 average wheat yield was 35 bushels per acre compared to 20 bushels per acre in 1989, which is the last time Texas ratings were this low.
At the 2011 USDA Outlook Forum, 2011 U.S. wheat production was projected to be 2.08 billion bushels. Production was based on 57 million planted acres, 47.5 million harvested acres and an average yield of 43.5 bushels per acre. Percent harvested acres were estimated to be 83.3 percent.
In 1996, the average yield for all U.S. wheat was 36.3 bushels per acre compared to a five-year average of 37.04 bushels per acre. The 1996 U.S. wheat average yield was two percent below the five-year average.
The current five-year average U.S. wheat yield is 43 bushels per acre. A two percent reduction would be 42.1 bushels per acre.
Using the USDA's estimated 47.5 million harvested acres and 42.1 bushels per acre, 2011 U.S. wheat production would be 2.0 billion bushels compared to USDA's estimated 2.08 billion bushels.
At the 2011 Outlook Forum, the USDA projected 2011/12 wheat marketing year ending stocks to be 663 million bushels. Subtracting 80 million bushels (2.08 billion bushels minus 2.0 billion) from USDA's 663 million bushels ending stocks estimate, 2011/12 marketing year ending stocks would be 583 million bushels. The five-year average is 643 million bushels.” The five-year average is 643 million bushels.
The International Grain Council projects 2011/12 world wheat marketing year production to be 24.7 billion bushels. At the Grain World Conference in Winnipeg, the Canadian Wheat Board projected 2011/12 world wheat production to be 24.0 billion bushels.
World wheat production in 2010/12 was 23.7 billion bushels, and the five year average is 23.7 billion bushels.
For the 2010/11 wheat marketing year, world wheat consumption is projected to be 24.4 billion bushels. The five-year average is 23.5 billion bushels. Higher prices should result in slightly lower wheat consumption in 2011/12, as compared to 2010/11.
The implication is that world wheat production is projected to be about the same as world wheat consumption. World wheat ending stocks are expected to remain about the same, or slightly lower, as currently projected for the 2010/11 marketing year.
The above analysis implies that USDA's 2011/12 average marketing year price projection of $7.50 is in line with expectations. The analysis also supports wheat prices at current levels.
At this writing and in the Oklahoma/Texas region, wheat may be forward contracted for between $7.79 in Hawkins, Texas to $8.29 in several locations in Oklahoma. Actual June 2011 wheat prices will depend on weather and final production.
United States wheat production averages nine percent of world production. The 2011/12 wheat marketing year price will be influenced more by foreign wheat production than U.S. wheat production.
The good news is that the next exportable wheat to be harvested is U.S. wheat. Prices should remain relatively strong through June and most of July 2011.